If recent interest rate hikes have hit you hard, then shop-around for a new credit card deal that could actually lower the interest rate you pay to below the 15.5% prime rate, says www.justmoney.co.za, South Africa's guide to money.
Nedbank is offering consumers a low interest rate of 11.90% for 12 months when they transfer their existing credit card and store card balances to a Nedbank credit card, whilst American Express will only charge 9.90% for the first six months for balance transfers to its credit card.
But Paul Beadle, managing director of www.justmoney.co.za, warns that although the deals offer great value, consumers should read the small print first. He explains: "The interest rates are very low, but only apply to the balance transferred from an existing credit card or store card. New purchases will be charged at the standard debit interest rate, which could be much higher than other credit cards in the marketplace."
www.justmoney.co.za has found the following balance transfer deals:
Nedbank Credit Card Balance Transfer - An interest rate of only 11.90% for 12 months for balance transfers. The deal is available to existing Nedbank customers moving a balance from a non-Nedbank product, or for first time Nedbank applicants.
Why Justmoney.co.za likes it - As it's 10% lower than normal Nedbank credit card rates, this is a cost effective way of consolidating your other credit and store card debts and paying them off over a 12 month period.
Watch out for - The low rate only applies to balance transfers, so new purchases will attract the normal rate of the Nedbank card you choose, which could be as high as 23.90%.
If you spend more on the credit card, because the balance you transferred will be paid off first, the interest on your new purchases at the higher rate will quickly add up, so this could become expensive. Also beware of the early payment penalty fee if you pay off the balance you transferred before the 12 month period ends.
Click here to find out more information and apply
American Express Balance Transfer - A super low 9.90% is charged for the first six months on balances transferred from other credit cards.
Why Justmoney.co.za likes it - It's the lowest interest rate around, so if you've got a debt you know you can pay off over six months, this could make sense.
Watch out for - Again the low rate only applies to balance transfers; new purchases will be charged at 22.90%, a good 2% higher than some other cards. American Express also charges an annual fee of R230 and you need to be earning R10,000 a month to qualify for the card.
As with the Nedbank offer, if you do not make your minimum monthly repayments, the special offer rate will be dropped and you will pay the standard rate. And if you still have an outstanding balance after six months, you will again revert to the standard rate.
Click here to find out more information and apply
Beadle says that balance transfers work best when people just use the lower rate card to pay off existing debts, without spending any more on the new card. However, if people then have a second credit card for day-to-day spending, they must manage both cards carefully to ensure their debts do not accumulate and spiral out of control.
These special deals are becoming more popular as companies look for new ways of winning customers. But Beadle warns that people who are struggling to pay their existing credit card bills should not look at them as a quick financial fix.
He says: "The application criteria for these products will be very strict, so people that are over-indebted or are in arrears with other credit cards or loans will not qualify. Also, if people take out these deals and are late with their payments, the credit card companies will withdraw the offer rate and switch to the more expensive standard rate."
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