Enjoy a credit card holiday

To help reduce credit card balances, many people turn to balance transfer credit cards.

While these cards can help you reduce your debt, they do tend to catch people out from time to time by fineprint terms and conditions.

In this article, we’ll flag some common pitfalls and discuss the right way to use these cards so you can take a holiday from debt and be one step closer to financial freedom. 

The pitfalls

First things first: let’s discuss some of the ways that you can ensure a balance transfer credit card doesn’t cost you money. They are a product, after all.

1. Try not use the card until you’ve paid it off

It’s important to note this isn’t your new personal spending account! In fact, try not to use it at all. That’s because the card promotion most likely only relates to the balance transfer and any new purchases will come attached with high-interest rates and increase the amount you owe. What you don’t want to do is continue spending money on the new card which will ensure you pay more interest and extend the time it takes to pay off the card.

2. Don’t set and forget

Many balance transfer credit cards have a promotional period. But once that’s up high-interest rates can kick in. So make sure you don’t think the job is done once you’ve transferred the balance, be proactive in paying it off! Interest rate can jump up to cash advance rates which are as high as 20%+ per annum charged daily.

3. Read (and understand!) the Terms and Conditions

It’s important to double check a number of details in the fine print, including the interest rate after the promotion, hidden fees and charges, and when the balance transfer start date officially begins so you can pinpoint the exact promotion end date.

Using balance transfer credit cards to your advantage

Now that you know what to look out for, it’s time to discuss some measures you can put in place to ensure you make the most of these cards in three easy steps.

1. Do your homework

There are plenty of options out there. The important thing is to pick a card that’s right for your situation. If it’s going to take you a while to pay off the card, pick one with a low interest rate. If you think you can get it done quite quickly, pick one with a generous interest-free promotional period, which will normally be between 6 and 18 months.

2. Cancel your old credit card

As soon as the balance has been transferred cancel your old card so that the temptation to spend on it is gone for good! Freeing up funds on one card is NOT an invitation to spend more. A balance transfer is an opportunity to pay off your debt quicker, so use it for that purpose. It is easy in the age of ‘Tap n Go’ to lose track of spending, so keep the card at home or cut it up straight away to avoid spending.

3. Create a clear financial plan to pay it off

Work out how long you have to pay the debt off, and then make sure you break it down into manageable payments each pay cycle. After you pay your mortgage/rent and household bills for the month, you may decide that your credit card bill is the next expense you pay.Try to work out that payments will be made before the promotional period ends.

As always if you require any assistance in this area and you need to prepare a plan with some help or require guidance on options and the best strategy for you, please call our Oran Park office on (02) 9188 1547 OR email

DON’T BUY THINGS YOU CAN’T AFFORD WITH MONEY YOU DON’T HAVE. Always have this in your mind when going for a purchase on your credit card.

Check out some further tips to manage your credit card spending:

At RP Wealth Management, we offer a wide variety of services throughout the Sydney Metropolitan areas including: Macarthur, Sydney CBD, Parramatta, Penrith, Liverpool, Campbelltown and Oran Park.


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Ronald Pratap

Principal Financial Planner at RP Wealth Management | Financial Planning l SMSF I Insurance l Property Advisory. Our purpose is to provide our clients with sound advice and direction to assist with their financial affairs and help them make the best choices in achieving what is important to them.


Level 2
351 Oran Park Drive
Oran Park N.S.W 2570

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