The festive period is one of fun in the sun, spending time with family and friends, and taking a quick break from the 9-5. Unfortunately for many of us, while we’re having a great time jingling bells and singing carols, the credit card is putting in overtime, working extra hours that come back to bite in the new year.
Plenty of Australians are fans of using credit cards, and with over 35 billion dollars owing, all earning interest for the lenders. We all know who can really sit back and enjoy the Christmas period without a single financial worry.
Common Pitfalls of Balance Transfers
Once any credit card debt has sat a few months interest rates could begin to be a real problem. Rates can be as high as 23.5%, not something that is sustainable on a significant amount. Balance transfer offers can start to look very attractive, but they might not be the quick fix you’ve been hoping for.
If looking for a balance transfer offer for a new credit card, there are a few things to think about. Always check the reversion rate for a new card, although the 0% for a few months looks great, if the interest rate then springs up to 20% it’ll be a nasty hit to take. Additionally, it’s common for any new purchases on the card to be charged at the reversionary rate – so if this is high the debt can easily spiral out of control. Another fee to watch out for is a transfer fee, although the interest rate might be $0, if the transfer fee is 3%, they’ll be a cost of $30 for every thousand you transfer.
The Problem with Credit
The problem with credit cards is that it doesn’t make money feel real. They’re just numbers on paper; you swipe the card and take the commodity, not feeling like there was any real value exchange. Once a balance transfer is complete and the 0% interest rate is in place, it’s all too easy to get a new card and keep spending. Not paying debt always catches up, and bites hard when it does, making it difficult to get out of debt.
With all credit cards and borrowing, it’s good to remember that the lenders are always going to make money and they certainly aren’t giving you money to spend out of the goodness of their hearts. It always has to be paid back, often with plenty of interest.