0% Balance Transfers & 0% Purchases Credit Card
Guide to 0% Balance Transfer & Purchases Credit Cards
0% Purchase & Balance Transfer Credit Card
The Citibank Clear Platinum Credit Card has a special offer of a very low rate on both balance transfers and purchases. The ideal credit card for Australians who are looking for a low interest rate combined with Platinum Visa privileges.
- $49 p.a. annual fee for the first year ($99 p.a. thereafter) annual fee
- 0% p.a. for 6 months (reverts to 11.99% p.a.) on purchases. 12.99% p.a. from 1 October, 2013 on purchases
- 0% p.a. for 6 months on balance transfers
- Cash Advance Rate of 0% p.a. for 6 months (reverts to 21.74% p.a.)
- 55 days interest free
- Minimum Income Requirement of $35,000 p.a.
0% Balance Transfers & Purchases Credit Cards Comparison
Table of Contents
- Compare 0% balance transfer & purchases credit cards
- Which is the best 0% balance transfer & purchases credit card?
- How do 0% balance transfer & purchases credit cards work?
- How to compare 0% balance transfers & purchases credit cards
- How to use a 0% balance transfers & purchases credit card
How Do 0% Balance Transfer And Purchase Rate Credit Cards Work?
The purpose of a 0% balance transfer and purchases credit card is to make paying off an existing credit card debt easier, and also allow for interest-free purchases to be made on the same card. This is a time-limited offer, by the way. For the sake of argument, we will assume that the offer periods for the 0% balance transfer and the 0% purchases are both six months, and that they run concurrently. If that is the case, then this is a great product, because there will be no conflict of interest – literally – with this card.
To understand what this all means, we need to look at what can happen when the 0% offer is only on balance transfers, and also what can happen if the two offers exist on the same card, but the purchases offer is for a shorter period of time.
The stand-alone 0% balance transfer trap:
You will probably be offered a six month deal on a 0% balance transfer credit card. Finding a longer period would be fantastic. This allows for you to transfer a balance from another credit card where the interest rate is perhaps 15%, and enjoy six months at 0% instead. This frees up any interest charges to be directed towards the actual debt, meaning you can pay it off sooner. The problem with these cards is if customers think that they are okay to also spend on. The reason this should be taboo is because of something called …
The adverse order of payments:
You may also see this referred to as the “payment hierarchy” or the “allocation of payments”. It is a little unfair to call this a trap, because the existence of this system will be found in the Terms & Conditions of any credit card. It would not be legally enforceable if it were not. Therefore credit card providers are not hiding it from you, they are just not spelling it out in neon letters.
It works this way: the debts on your credit card will be paid off in a certain order, namely the cheapest first. Purchases on your card may appear to be included in the overall balance figure, but they are actually treated differently to the portion of your balance made up by the debt you transferred from another card. If your purchases are at the regular APR, and your balance transfer is at 0%, then every cent of your repayments will go to pay off your balance transfer first. This leaves your purchases to accrue interest at whatever the regular rate is, which may be as high as 20%. In this way, your provider is giving with one hand, and taking back with the other.
The same problem can therefore occur where a 0% balance transfer deal and a 0% purchases deal are offered on the same card, but for different periods.
Ultimately, if you get caught out by this, it’s your fault for not reading the fine print.
The joy of a 0% balance transfer and purchases credit card:
To reiterate: always provided the two parts of this offer are for the same length of time, a 0% balance transfer and purchases credit card is a great deal to snap up. The adverse order of payments won’t affect you because both the transferred amount and the purchases you make will be at 0% for an equal amount of time. Once the offer expires, they both revert to the regular rate, and nothing is left “trapped” accruing interest that is untouched by your repayments. Obviously, when the offer period does come to an end, new purchases will also not louse things up because these will be made at the same interest level as the existing debt.
How long can I get on this?
Australia is lagging behind other parts of the world on 0% deals. Whilst the UK is offering up to sixteen months on 0% balance transfers, you will be lucky to find more than six. Having said that, the combination of a 0% balance transfer and purchases at 0% effectively doubles the benefits you enjoy, because you’re getting two offers in one.
When the honeymoon is over:
Then the interest rate reverts to normal. At this point, you should ideally have cleared your entire balance so you can know you have just enjoyed a six month interest-free loan, thank you very much, Mr Credit Card Provider.
If a balance remains, you have the option of grabbing another 0% deal if one exists, and doing it all over again. However, this is called being a credit card “tart” and does your credit rating no favours.
Watch out for:
- Balance transfer fees: Check to see if a fee is charged to make your transfer.
- The regular APR: As just mentioned, it could be higher than average to later offset the great 0% deal you just enjoyed
- Cash transactions: Never a good idea on any credit card, and extremely unlikely to be covered by any 0% deal.
- Different length offer periods: Already detailed.
- Annual fee: Check this is not too much higher than average. A little may be okay for the benefits you’re gaining from your 0% balance transfer and purchases.
How to compare 0% Balance Transfer And Purchases Credit Cards
It is very important that you compare 0% balance transfer and purchases credit cards, because they can hold some nasty surprises if you just assume that one deal is the same as another. This may well not be the case. One 0% balance transfer and purchases credit card may save you money, whilst another could actually end up costing you some.
We’ll examine the main features of these cards, what you should be looking for, and why you must understand how certain factors can work against each other.
Key comparisons to make with a 0% balance transfer and purchases card:
Thinking that all such cards with this title are the same is like thinking two cars are identical because they have the same badge. You need to know such things as what engine the vehicle has, what the fuel economy is like, and its insurance group. Is it the basic model of the fully-loaded version? To compare 0% balance transfer and 0% purchases credit cards without verifying this point is to entirely miss the point.
The length of the offer period
Where these two offers sit together in one card, you must verify that they are both for the same period of time. This is the most important factor, and here’s why: according to the “adverse order of payments”, aka “the allocation of payments”, aka “the payment hierarchy”, the debts on your credit card will be paid off cheapest first. That means the higher interest debts are left to accrue interest unassailed by repayments you make until the lower interest debts are completely paid off. If your credit card balance is made up of a 0% balance transfer and several purchases at 20%, your purchases will be the ones hanging in there. It’s standard practice, so unless you see a banner headline proclaiming otherwise, you should take it as read.
If you are thinking that a 0% balance transfer for six months and a 0% rate on purchases for three months is only marginally less appealing, you will need to do your sums first. You will have to be pretty certain how your spending will pan out over the three months, and whether your transferred balance will be paid off in full after six months. If you know you are only going to spend a couple of hundred dollars in three months, then the interest on the unpaid part of that amount in the following three months before your balance transfer deal ends probably won’t bust your finances. However, if you’ve spent several thousands of dollars during your offer period, then it can make a difference.
Clearly, you should also be searching for the longest offer period on the market, unless something else about the deal causes concern. You will be lucky to find longer than six months on a dual deal like this, in fact you will be lucky to find more than six months on a 0% balance transfer deal on its own.
The regular rate of interest once the deal ends
Another crucial issue when you compare 0% balance transfer and purchases cards is to check what rate of interest you will be faced with when the introductory offer runs out. You may have made your balance transfer from a card with a 15% rate of interest. If so, 0% for six months on your new card will have looked great. However, what if you have failed to shift your balance in that six months due to unforeseen circumstances or plain bad planning? If the interest rate on your new card is 20%, which it could be as a trade-off for the original deal, then you are going to be worse off than before. Yes, but what about all that interest you haven’t been paying the previous six months? You’ve saved there, haven’t you? Probably, but maybe not by very much when you also take into account …
The balance transfer fee
That headline figure of 0% should not distract you from taking into account any fee that may be charged by your new provider to make the transfer in the first place. If your provider does charge a fee, you really must be clearing your debt within the 0% period to make the whole process truly worthwhile. Check the fine print to see if a fee is payable or not.
The cash transaction interest rate
Stick to your debit card for these. These will almost certainly be charged at a rate even higher than the regular APR, which will then sit trapped behind your lower debt, accruing interest, and not just until the 0% deal ends. As the cash withdrawals will be higher than the regular rate for purchases, they will be subject to the adverse order of payments, thus it will only be when they are the only things left on your card that they will be reduced by your repayments.
The other ticking clock
Your offer period is not the only time-restriction imposed on this deal. Check when you compare 0% balance transfer and purchases cards just how long you are allowed to instigate a balance transfer once you have your card. It may be as short as thirty days, then the chance is lost. And remember that thirty days is a sixth of your total 0% offer period, so make the most of your new card by making your transfer on the designated page in the application form.
How To Use 0% Balance Transfer And Purchase Rate Credit Cards
Your 0% balance transfer and purchases credit card will be a huge boon during its initial offer period, but only if you make effective use of it. Here are the main dos and don’ts of using this particular credit card:
The Dos of 0% balance transfer and purchases cards:
Make your balance transfer quickly
Your introductory period may last six months, but your opportunity to make your transfer is also limited, possibly to the first thirty days after your card is activated. Otherwise the promotional rate will be lost. Besides which, the longer you leave it the less time you will enjoy avoiding any interest. The best way to ensure you take full advantage is to transfer your balance during your card application.
Understand how to make the transfer
As mentioned already, the simplest and best way is whilst making your application, where there will be a dedicated page for this purpose. Otherwise you can use the online facility as soon as you receive your card, or use telephone banking, or even take the old-fashioned route and use the paper forms that will arrive with your card.
Make your purchases as soon as feasible
Remember the purchases part of your 0% balance transfer and purchases credit card. Whilst you should not hurry out and buy the first item you see just to get it at zero percent, you should make any necessary purchases early on to enjoy the full period at 0%. It is likely you will have applied for this card knowing certain essential purchases were looming, so get your card as close as possible to the time they need to be made.
Pay off your balance in good time
If your deal is for six months, that’s not an awful lot of time. Make sure you are budgeting like mad to ensure the balance on your 0% balance transfer and 0% purchases credit card is paid off in full before the offer period expires. You will be charged the regular rate of interest on any unpaid balance, which could be as high as 20%. However, don’t rush to pay it off, or the whole point of your 0% balance transfer and purchases card will be lost. Use your interest-free months to keep your money earning interest in your own account.
Don’t think this can become a habit
Making one 0% balance transfer after another to avoid paying your debts will be noted in your credit history. Your credit rating will drop, and although you may never be actually defaulting on your debts, credit card providers will soon not welcome future applications from you. You struck lucky with your 0% balance transfer and purchases credit card; use it wisely or the opportunity might not come again.
Don’t make any cash transactions on your 0% balance transfer and purchases card
Cash transactions are never included in 0% promotional offers. Stick to your debit card for these. These will be charged at a rate even higher than the regular APR, which, according to the adverse order of payments, means they will not be paid off by one single cent until any debts at lower rates are completely cleared – this means everything else on your card at 0% or the regular APR.
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0% p.a. for 6 months
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