All Topics / Finance / Balance transfer on Credit Cards

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  • Profile photo of kong71286kong71286
    Participant
    @kong71286
    Join Date: 2009
    Post Count: 261

    Hi,

    Does anyone know much about credit cards and how balance transfer work?

    I've noticed that there are quite a lot of credit cards with low introductory rates, and balance transfers

    http://www.infochoice.com.au/

    E.g. Citibank Clear Platinum Card
    0% balance transfer for first 6 months
    0% introductory rate for first 6 months
    Purchase rate 11.49%
    Cash advance rate 20.99%
    55 days interest free
    $99 annual fee

    • What I'm curious about, is whether you can use 2 credit cards, and interchange the balances when the low rates are almost over e.g. after 6months?
    • Are there any restrictions to what you can transfer? i.e. can you only transfer balances of purchases, or can you transfer balances owed from cash advance?
    • Are there any fees for transferring balances?

    Any comments and explanations on the above is appreciated =)

    Regards,

    Kong

    Profile photo of laurentlaurent
    Member
    @laurent
    Join Date: 2010
    Post Count: 17

    Well,

    I am not an expert but I have my own opinion and will try to help you answer some questions…

    Balance transfer will work for the all balance of the credit card(S) you want to transfer, no matter what was the initial purpose ( purchases/cash advances).

    I have used that a lot to help me out in emergencies ( urgent reno or even  investment purchase).

    My broker doesn't like it at all when I call in for debt consolidation later on as my borrowing capacity gets affected.
    I believe it cuts your borrowing capacity by $ 25000 for every $ 5000 C.C Credit limit.( Don't quote me on this but check it out)

    You have to remember NOT to use the new C.C even if you have some redraw available because then your minimum repayment will jump up the roof as you will be charged high interest on the purchase or cash advance .

    An extra repayment won't help as all repayments will go towards the balance transfer  FIRST before knocking down any  purchase/cash advance .

    Balance transfer used well is good to reduce your debts and can increase your cash flow .

    I used it a few times speculating on Capital growth I'll create through reno and then would consolidate at the end of the 6 months term.That is because the Banks would say no initially.

    It is a risky business and wouldn't advise anyone to do the same, it worked for me but everyone circonstances are different.

    I don't believe there is any fees for balanve transfer .

    You pay for the Credit card annual fee + rates.
    The minimum repayment is usually  around 2.5 % of the balance

    I hope that helped.

    It is

    Profile photo of Ally11Ally11
    Participant
    @ally11
    Join Date: 2010
    Post Count: 4

    Hi Kong,

    I think that citibank do a balance transfer that is 4.9% for the life of the balance. I know this is higher interest rate but the catch I see with the extemely low percentage is that when the time runs out your balance then becomes a cash advance and they charge the 20.9%. The 4.9% rate doesn't change so you can just keep chipping away at it instead of it chipping away at you when the time period is up and repayments get huge again.

    Good Luck

    Cheers

    Ally11

    Profile photo of kong71286kong71286
    Participant
    @kong71286
    Join Date: 2009
    Post Count: 261

    ===============
    To Laurent
    ===============

    Thanks, that helped a lot =)

    ===============
    To Ally 11
    ===============

    Yes.. I was thinking of getting a $20,000-$50,000 cash advance on one credit card, and then transferring it to a new Suncorp Clear Platinum card, which charges 3.9% pa for life of the balance. However there is a clause in the contract, which states "The 3.9% p.a. balance transfer interest rate will not be valid for transfers from other Citigroup or Suncorp Credit Cards", so I will need to do further research on which credit cards to go for. Furthermore Laurent stated there is a minimum repayment of 2.5% of the balance, so I will need to factor this into my decision of how much cash advance to go for

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,213

    I've done a $20k cash advance before and then immediately transferred the balance to one of those idscount credit cards. It works ok as long as you factor in the cost of the cash advance and make sure you pay if off right at expiry.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
    http://structuring.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

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