Sydney, New South Wales, Australia (PRWEB) January 12, 2013
Worried consumers kicked off the annual “credit card pilgrimage” two months earlier than usual. The rush for balance transfer cards that normally hits a peak after the January retail sales, swung into action two months earlier, according to Roland B Bleyer, founder of finance comparison site http://www.creditcard.com.au/?
“The chance to cut their credit card interest rate to zero is a powerful magnet for consumers. If it were not for the current state of the economy and the underlying market sentiment we wouldn’t normally see the frenzy of credit balance transfer activity that occurred in November and December,” said Bleyer.
“The phenomenon of the annual ‘credit card pilgrimage’ usually explodes in early January and continues right through to after Australia Day (26 January) when consumers inevitably react to the high level of debt they piled on over Christmas and the Boxing Day and New Year retail sales. They stampede for the chance to get a zero interest rate on existing debt so more of their payments apply to the principal balance. That helps them pay down the Christmas and January sales debt faster while saving money on interest. For example, a $3,000 debt balance transferred for a zero interest free period of nine months could save a consumer $382.50 in interest. The figures may vary a little depending on what factors such as facilities and fees may apply.”
He noted that each January and February creditcard.com.au receives a ratio of nine to one applications for balance transfer cards against every other credit card application. “Now for the first time we saw that same proportion in the weeks before Christmas. Our customers are asking why they should pay interest to banks and credit unions when right now there are great deals that allow them to pay no interest for many months and concentrate on paying off the debt balance.”
Why did the pilgrimage start earlier than usual? Bleyer said that credit card providers were playing their part in the major shift.
“There is a major battle for customers going on out there. Banks are hoping to lure their competitor’s customers with balance transfer deals. They will be very happy if the consumers they have won over then fails to pay down the credit balance before the zero interest rate timeframe expires.
“That is the Catch 22 for consumers. On the one hand why would they pay interest to the banks if they can avoid it. Consumers welcome the interest free breathing space the balance transfer credit card will give them over the holiday period and far into 2013.
”However, it can be a fool’s paradise,” Bleyer warned. “Nothing will be achieved if consumers don’t put a plan in place to pay down the interest balance before the rate swings back to a level that could be more than 20%”.