Australians have become credit junkies. We are spending money that we don't have at an incredible rate, with the average person owing about $2400 on a credit card.

Enter zero-interest or low-rate offers, which are designed to entice the debt ridden to transfer their debt onto a new card with a period of zero or low interest.

There are now three companies ANZ, GE Money and HSBC that offer zero interest on balance transfers for the first six months, while a number of other companies, including Virgin Money, Citibank and BankWest, offer rates of between 3.99 and 6.9 per cent.

If you are struggling to pay off a gigantic credit card debt, these cards can give a temporary reprieve from your debt burden. But beware: there are pitfalls for the uninitiated.

Do your homework

InfoChoice general manager Denis Orrock says you have to thoroughly research the offer. Know the "revert rate" on balance transfers, which is the rate of interest charged when the low-rate or the interest-free period ends, and the rate of interest charged for additional purchases, known as the "purchase rate" (see table).

For example, once the six-month interest-free period on HSBC's card is over, any of the balance that remains incurs 15.49 per cent interest, considerably higher than the other two cards with zero initial interest. GE Money charges 10.99 per cent and ANZ charges 11.75 per cent.

However, HSBC's rate on new purchases is slightly lower than its competitors 10.49 per cent as opposed to 10.99 per cent with GE Money and 11.75 per cent with ANZ.

Citibank has the highest "purchase rate", which is 18.5 per cent, but charges 6.9 per cent for the life of the balance transfer.

As such, this card might suit you if you don't intend making new purchases and know repaying your outstanding debt will take longer than six months.
Orrock says it's also important to know how repayments are calculated. Some cards apply them to the balance transfer first, which means until you repay the original debt, you will pay interest on any additional purchases. Others have complex formulas that apportion some to the balance and some to the new spending.

Don't forget fees, either.

Catherine Wolthuizen, financial services policy director of the Australian Consumers' Association, says that if both the fees and the revert rate are high, and you don't pay off the balance during the interest-free period, you may not be better off in the long term.

"These are only really good for people who have the discipline and means to pay off their debt in a short period of time. If they don't then they may be better off just looking for a card with a low rate that doesn't have an interest-free period."

She also warns that the minimum payment charged by some institutions means you will never be able to pay off your debt.

It's just like a diet

Carolyn Bond from the Consumer Credit Legal Service says if you were to view your money management like a diet, the balance transfer card is a fat-free product.

"It's like the fat-free product that once you actually read the label you find out it may not have fat but is loaded with sugar," she says.

"I think what these products do is make the person feel comfortable about the debt, which really isn't such a good thing. If you are in debt you should feel concerned enough to make sure that you are knuckling down and paying it off."

But just like those New Year's resolutions to eat better and do more exercise, a resolution to change your money management can sound a lot easier than it actually is.

You're giving yourself the best chance of success, says Orrock, if you cut up your existing credit cards and vow never to use the new one.
"There is absolutely no point in transferring your balance to a low-rate or zero-interest card if you are going to keep spending money on your existing credit card.

"All, in fact, you are doing is giving yourself more room to get into further debt."

Making a balance transfer

· Make sure you are aware of the balance revert rate and the new purchase rate.
· Check how repayments are calculated so you aren't inadvertently paying more interest than you had bargained for during the low rate or interest-free period.
· Consider the fees, along with the revert and purchase rates, to determine whether you are actually getting a better deal.
· Make sure that you cancel your existing credit cards, once you have transferred the balance to another credit card, to ensure you don't build another debt.
· A balance transfer credit card should be one step in a larger plan to change spending habits and get debt under control.