This article is designed to provide you with that sober second thought. While balance transfers can be amazing things, the truth of the matter is that there are balance transfer deals that are terrible and should be avoided. There are people that try to cash in on the good reputation of balance transfers to con people out of their money and there are also people that love balance transfers enough that they will go and sign up for anything no matter how bad the deal looks on paper because they believe that balance transfers have some mystical property. The truth of the matter is that they don’t and some of the reasons below are good reasons to avoid balance transfers because they are bad.
High Interest
We would all love to believe that balance transfers are going to help us eliminate our debt within a period of six months but for some people this belief is really not something that is particularly rational. After all, balance transfer credit cards will have high interest after the introductory period expires for the most part and for this reason you might be stuck in a worse position if something happens and you are unable to pay off a significant portion of your balance before the end of the introductory period.
Unless you have a super stable source of income and the disposable income to pay an amount more than twice your current balance, you should assume that the payment of the balance in full is going to spill over into the period of time when the full force of the normal interest rate on the credit card is brought to bear. With that in mind, some credit cards will disqualify themselves from consideration because of a high normal interest rate. These can be classified as bad balance transfer deals and you should avoid them if at all possible. Balance transfer deals with bad normal interest rates attached should be a last resort and nothing more.
Poor Introductory Offer
Another time when balance transfers can be referred to as bad is when they do not come with a particularly impressive interest rate introductory offer. For example, a balance transfer might come with an introductory offer of 6.0% APR for six months. This type of offer is very poor because for the most part it’s not even half of what a normal low interest credit card would charge. You need to save more than half of the interest for the deal to be worth it in terms of the hassle of the transfer and getting a new credit card and since there are plenty of cards out there that have better offers, this type of balance transfer could be classified as bad.
No Security
Sometimes a really good balance transfer credit card will come from a very poor company that has no fraud protection and no security whatsoever. While that should not disqualify the credit card, it should give you pause and make you research the company before you do anything. Australian credit card markets are filled with credit card companies that have scammed unsuspecting people with poor credit and if you do get scammed in this way, your poor credit may present a hurdle to you getting some kind of restitution. The Australian market actually has fewer incidents reported than any other developed market, but it is still something you should be wary of if you ever encounter it.
Conclusion
As you can see, there are a number of cases in which balance transfers can be bad. As a well-informed member of the Australian credit card market, you should now know that balance transfers are not a mystical force, but rather a tactic that can be very effective if used in situations where the tactic is actually beneficial. The three situations listed above are not situations that fit under that purview.
Mike Jarocki is a financial writer and webmaster of http://www.balancetransfercreditcard.com.au, which compares the latest and balance transfer credit card offers from leading Australian financial providers.