Banks lure consumers with balance transfer cards Page 1 of 2
MEDIA RELEASE
19 January 2010
Banks lure consumers with balance transfer cards
mozo.com.au outlines key tactics for tackling credit card debt
Australia’s banks are luring consumers with high credit card debt into special low rate credit
card balance transfer offers but analysis by financial comparison website mozo.com.au
reveals the most important factor for consumers looking to tackle credit card debt is not the
interest rate, but the speed in which they intend to pay off the balance.
Using an average credit card balance of $3,000 (based on Reserve Bank data), and
comparing this with a standard ‘Big Four’ Bank credit card, mozo.com.au used its award-
winning* health check tool to run three common repayment scenarios to see which
current balance transfer deals offered consumers the best savings.
The results were surprisingly varied.
Scenario 1 – Making the monthly minimum repayment
If you only make the minimum monthly repayment, to repay the debt on a standard big bank
card it will take you eight years and cost over $4,000 in interest and fees. Consumers are
best to go with a balance transfer card with a low rate for the life of the balance transfer
such as the CUA Rewards, IMB Rewards and Community CPS Rewards Cards. Though
these cards feature higher interest rates than other balance transfer offers they don’t have
the nasty sting of reverting to a regular credit card rate after the introductory term is up. With
an interest rate of 4.9% these cards would save consumers well over $3,000 in interest and
repay their debt 4 years faster compared to the standard bank credit card.
Scenario 2 – Paying off the balance over a year or two
If you are planning on making payments of around $200 per month it will take 18 months
on the standard card at a cost of $650 to repay the debt. If you fall into this category a
low rate card such as the BankWest Zero card is the best bet with a low 1.99% rate for
12 months and no annual fee. The next best offers are from ANZ and Suncorp which
both have offers of 2.9% for 12 months. If you switched from a standard bank credit card
to one of these offers you could save almost $600 in fees and interest.
Scenario 3 – Paying it off fast
This is really the only time that a 0% for 6 months offer may be the best option. If you
want to get rid of your debt within 6 months there are a number of cards with a low 6
month balance transfer offer and no annual fee in the first year. The Coles Group Source
Card offers 0% for 6 months, but the next best are the BankWest Zero card and ANZ
First card. If you pay off your debt in the introductory period you’ll pay next to nothing in
interest or fees.
Rohan Gamble, managing director of mozo said: “We are urging Australians to firstly
think about their ability to repay their debt before choosing a new credit card. Too often
they are lured into special deals and find themselves repaying sky-high interest rates
once the introductory period ends.”
Banks lure consumers with balance transfer cards Page 2 of 2
Key tactics for tackling credit card debt:
1.
Choose a card based on how quickly you can repay the debt.
2.
Don’t use balance transfer cards for new purchases until you have paid off the old
balance.
3.
Check interest rates on unpaid balance transfers. Many balance transfer cards
revert to higher ‘cash advance’ rates once the introductory period ends.
4.
Check annual fees. Some cards have a high annual fee which can negate the
benefit of transferring the balance in the first place.
5.
Shop around. Use credit card comparison sites such as mozo.com.au to compare
all credit card offers.
-
-
ends –
Balance transfer cards compared to standard credit cards
Scenario 1 – $60 monthly repayment
Card
Balance transfer offer
Annual fee
Cost
Savings
CUA Rewards
4.90% until repaid
$45 - silver
$587
$3,571
IMB Rewards
4.90% until repaid
$55 - silver
$637
$3,521
Community CPS -
rewards card
4.90% until repaid
$85 - Gold
$787
$3,371
Standard card^
$4,158
Scenario 2 – $200 monthly repayment
Card
Balance transfer offer
Annual fee
Cost
Savings
BankWest Zero
1.99% for 12 months, then 15.99%
$0
$56
$595
ANZ First
2.9% for 12 months, then 18.24%
$0 in yr 1
then $30
$108
$543
Suncorp Standard
2.9% for 12 months, then 17.49%
$39
$155
$496
Standard card^
$651
Scenario 3 – $600 monthly repayment
Card
Balance transfer offer
Annual fee
Cost
Savings
Coles Source
0% for 6 months, then 18.99%
$0
$0
$245
BankWest Zero
1.99% for 12 months, then 15.99%
$0
$15
$230
ANZ First
2.9 for 12 months, then 18.24%
$0 in yr 1
$22
$223
Standard card^
$245
^Standard card costs assume an existing card attracting 18.74%pa interest and $89 annual fee.
cards/health-check
For more information, or to arrange an interview, please contact:
Kylie Moss, Mozo Communications Director
P (02) 9037 4372 M 0430 302 424
E kylie.moss@mozo.com.au
About Mozo.com.au
Mozo is an online comparison service that launched in October 2008 to help Australians
navigate the money maze. Mozo lets consumers easily compare the interest rates, fees
and features of hundreds of different credit cards, loans and savings products. Mozo has
also developed Australia’s first customer rating system for banking products, featuring
over 20,000 reviews from banking customers around Australia. Mozo is independently
owned and our product data is 100 per cent objective.
NEWS 
