Why Should I Avoid Cash Transactions On A 0% Balance Transfer Credit Card?
Posted November 14th, 2009
and last modified April 29th, 2010
Best Balance Transfer & Purchase Card
The St.George Vertigo MasterCard is the ideal card if you want to pay off an existing balance while being able to make purchases at the same time. This is because it features an introductory offer on both purchases and balance transfers for the first 6 months. This means your purchases will not attract a high interest rate but a low introductory rate for the first 6 months
- $55 annual fee
- 12.49% p.a. on purchases
- 2.99% p.a. for 6 months on balance transfers
- Cash Advance Rate of 21.24%
- Also enjoy instant discounts & benefits with St.George Instant Benefits Program
Click here to read the St George Vertigo terms and conditions
If you are about to take a 0% balance transfer credit card, or you have one and are considering making a cash transaction on it, think again.
There’s a clue in the title. This particular credit card is for 0% balance transfers. That doesn’t mean you can’t do other things on the card, but it does mean it’s not advisable.
If you make a balance transfer for six months at 0%, that’s six months when you don’t have to pay any interest on your debt. That’s exactly how it should be. So leave it at that. Lock the card away in a drawer until the offer period expires.
There are two main reasons why you should not make any cash transactions on your card:
- Any repayments that are made on your 0% balance transfer card will go towards the 0% debt, and any other debts – whether purchases or cash transactions at a higher rate of interest – will not be paid down by a single cent until the transferred amount has gone.
- Cash transactions are bad enough at the best of times, with their higher than normal interest charges and fees.
The first point refers to the “adverse order of payments” rule. You won’t see this in any banner headline, but it means your debts are always paid off in order of the cheapest first. That leaves your debts at the higher interest charges making money for the credit card provider. So whilst your balance transfer is sitting pretty at 0% for six months, your purchases and cash transactions are sitting untouched, eating into the savings you thought you were making on your balance transfer.
The seconds point is about the higher than normal interest rates on cash transactions. These are usually around 20%, and they do not benefit from any interest-free days you may enjoy with purchases. Your regular APR may range from 11% to 20%, but your cash transactions are always going to be around 20%. It’s a message from your credit card provider that making these transactions should be the reserve of your debit card instead, so if you do go ahead and make them on your credit card, then on your own head be it.
You should also bear in mind that cash transactions will normally attract a cash-handling fee as well, only making it worse. This does not just mean using an ATM, but also getting cashback at a store, buying foreign currency or traveller’s cheques, or making any gambling transactions on your card. All of these will create a debt that will sit accruing interest at the 20% mark until the 0% balance transfer has been paid off in full.
Related posts:
- Mistakes to avoid when doing a Balance Transfer
- How To Avoid Balance Transfer Pitfalls
- Why Do I Have To Pay A Balance Transfer Fee? Can I Avoid Paying It?
- Save Cash with lower monthly credit card repayments using a Balance Transfer Credit Card
- Credit Card Balance Transfer: 9 Important Facts on Balance Transfers
- Can You Transfer Multiple Credit Cards with a Balance Transfer?
- Can I Transfer Multiple Credit Cards Onto A Balance Transfer Credit Card?
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Editor's Choice: Our Top Credit Cards
| Credit Card | Card Details | Interest Rate (p.a.) | Cash Advance Rate (p.a.) | Balance Transfer Rate (p.a.) | Annual fee | Interest free days (up to) | |
|---|---|---|---|---|---|---|---|
 HSBC Credit Card |  Editor's Choice:0% for 6 months Balance Transfer & No Annual Fee Featuring a $0 annual fee for life, and 0% p.a. balance transfer for 6 months, the HSBC Credit Card was voted the Best Transactor Credit Card for 2010. | 16.99% | 20.75% | 0% for 6 months | $0 | 55 |   |
 Suncorp Clear Options Standard Visa Card | A great 12 month balance transfer offer, combined with a low annual fee and a good interest rate on purchases. | 12.24% | 17.99% | 1.9% for 12 months | $39 | 0 | |
December 3rd, 2009 at 3:01 pm
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