Balance Transfers: The Pro And Cons

Best Balance Transfer Card

You won’t find many cons about the Citibank Clear Platinum Visa. It is a rare breed of platinum card featuring an interest free balance transfer offer for the first 6 months which is perfect for doing a short term balance transfer on. It also has a low annual fee and comes with a range of complimentary insurances

• $49 first year (Save $50) annual fee
• 11.49% p.a. on purchases
• 0% p.a. for 6 months on balance transfers
• Cash Advance Rate of 21.24%
• Minimum Income Requirement of $50,000 p.a.
• Minimum income requirement of $50,000p.a

Click here to read the Citibank Clear Platinum Visa Card terms and conditions

If you have a credit card debt, you should look at balance transfer pros and cons before definitely deciding to go ahead with a transfer to another credit card. There are different types of balance transfer available, and there are many circumstances that may be affecting an individual. It is impossible to properly assess the pros and cons of a balance transfer without knowing the specifics of each case. However, these are some of the more general balance transfer pros and cons you should look out for:

The pros:

Lower interest rate

You get to reduce the rate of interest applicable to the debt you currently have. This percentage rate may now be in the mid to high teens, but it is possible to bring that down as low as zero percent. This will depend on how much debt you have to transfer and how long you think it will take to completely clear. 0% deals are usually for six months, deals for a year are around 2% to 5%, and offers that cover the debt until it is paid off range from around 5% to 9%.

Better budgeting

If you approach this sensibly, you will be able to plan your debt repayment more efficiently because you will find that you are better off each month because of the reduced interest payments. This should allow you to pay your debt off more quickly.

Less panic

Reduced or zero rates of interest take some pressure off you, especially if you have a large debt burden that you can now spread over a long time by using a lifetime balance transfer credit card.

The cons:

False optimism

Instigating a balance transfer can make some people relax too much. Knowing that the debt is not being hammered so hard by interest can cause them to lose some focus and actually work against their efforts to clear their debt.

Extra spending

The extra money in your pocket from the reduced or zero interest may make some people think they can start spending again, when they should actually be directing their extra resources towards clearing their debt faster.

Creating a precedent

With 0% balance transfers in particular, the ability to shift your debt to a zero rate of interest can be both a balance transfer pro and con. On the downside, it can foster the idea that this is the way to handle debt on an ongoing basis. This could mean that some people don’t really bother with attacking their debt any more, instead they simply ready themselves for the time when they have to move it on again. The problem here is that credit card providers frown on this repeat behaviour and will eventually refuse a new application. Then you are stuck with whatever regular interest rate your last credit card imposes.

• Comparison of Top 10 Credit Card Offers

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