While you'll be hard-pressed to find a lifetime balance transfer credit card in Australia today, there are other long-term debt consolidation options available to you.
If we rewind to 2010 or earlier, one could find balance transfer for life offers at banks such as Citi, Suncorp and Bank of Queensland. They allowed you to transfer your balance over and pay a lower rate of interest on it until you paid it off. Today, these deals have largely gone the way of the dinosaur.
Even if you can’t get access to a lifetime balance transfer offer, there are still many reasons to compare balance transfer deals if you’re trying to pay off some credit card debt. If you're looking to repay your balance transfer over an extended period, a long-term balance transfer credit card could be your next best bet. Some card providers offer deals which last as long as 36 months. If you repay your balance within the promotional period, you could stand to repay your debt faster without the cost of high interest.
Continue on to discover how a long-term balance transfer could help you consolidate your debt burden.
No longer offered in the market
Balance transfer for life credit cards are no longer in the Australian market. This page now compares other long-term debt consolidation alternatives that can help repay your debts.
Balance Transfer Credit Cards Comparison
While you can no longer apply for a lifetime balance transfer credit card, a balance transfer credit card (especially one with a longer promotional period) can be an effective way to repay your debt. Compare your options to find the right for you.
How you can use a long-term balance transfer instead of a lifetime balance transfer credit card
Balance transfers for life allowed you to shift a debt from a higher interest card to a lower interest card. Rather than having a number of months to pay off this balance at the lower rate – like what happens today, you’d be able to pay your balance off at this rate until it’s paid.
While lifetime balance transfer credit cards are no longer available, long-term balance transfer credit cards are an alternative that can provide you with enough time to repay your debt. At the time of writing, a number of Australian credit card providers offer long-term credit cards with promotional periods of 12, 24 and 36 months.
How can I save on interest and repay my debt faster with a long-term balance transfer credit card?
Tracy has a balance of $10,000 on her credit card and is paying an interest rate of 20% p.a. She’s making minimum repayments of 2.5% each month, meaning at this rate it’ll take her almost 30 years to pay off, and cost her close to $30,000. Tracy wants to get rid of her debt for good, but she’s getting married, and so wants to put her extra cash away for six months before she starts paying her balance off. She’s been scouring the net for a lifetime balance transfer deal with no luck.
If Tracy instead applied for a long-term balance transfer deal of 2.5% p.a. for 15 months on a card which reverted to an interest rate around the 13% p.a. mark, she’d be able to pay the minimum monthly payment for the first six months and still have nine months left over to get down to debt-paying business.
At the end of six months of paying a minimum repayment of 2.5%, she’d be down to a balance of $8,701, and would have paid $116 in interest. The minimum monthly repayment would be hovering around the $220 – 250 mark.
If she then bumped her repayments up to $500 a month once her wedding and honeymoon was over, she’d pay off the debt in 1 year and 7 months, pay approximately $400 in interest and fees (depending on the annual fee of the card).
As seen from this example, even without a lifetime balance transfer offer, Tracy could work on paying off her debt in a much shorter time and save herself thousands in interest and fees.
How to compare long-term balance transfer credit cards
- Balance transfer period. The low or 0% balance transfer offer will only be in place for an allotted period. While long-term balance transfer credit cards provide you with more time to repay your debt, it's important to calculate whether you can repay your entire debt before the end of the promotional period to avoid collecting interest to get the full value of the card.
- Revert rate. The low balance transfer rate will only be in place for the length of the promotional period, so you should confirm what the revert rate is before applying for the card. If you're unable to repay your balance by the time the introductory offer expires, your remaining debt will begin to collect the revert rate. So it's important to understand what you could stand to pay if you fail to repay your debt within that period.
- Fees. You'll want to make sure the savings outweigh the cost of the card, so make sure to compare and rates and fees while comparing cards. Some common costs to look out for include the one-off balance transfer fee (usually 1% or 2% of the balance amount) that might be charged at the time of transfer, annual fees and the interest you'll be paying on purchases. However, if you're dedicated to repaying your balance, you shouldn't be using the card for purchases.
- Extra features. If you're determined to repay your balance by the end of the promotional period, you shouldn't be using the card for more than consolidating your debt. However, if you plan to use the card for emergency purchases or after you've repaid your debt, you might want to consider other features such as interest-free days on purchases, rewards programs or complimentary insurances.
Mistakes to avoid with long-term balance transfer credit cards
- Using the card for purchases. The purpose of a balance transfer credit card is to consolidate your debt, so you might want to consider getting a card with a low interest rate on purchases if you need a card for emergencies. Then you can leave your balance transfer card at home, prevent spending temptations and repay your balance.
- Forgetting your financial situation. Long-term balance transfers can be a good way to repay your balance over a longer period, but they can also provide you with a false sense of security. Don't forget that you'll need to meet minimum repayments (at the very least) each month and it's important to pay these on time to consolidate your debt as fast as possible.
- Procrastinating. Request a balance transfer at the time of application to ensure you can take advantage of the full promotional period. To ensure this process goes smoothly, make sure you meet the eligibility criteria and have the required documents on hand before applying.
- Only paying the minimum repayment. You'll be required to pay a minimum repayment, but you'll most likely need to pay more than this to repay your entire balance before the end of the promotional period. Calculate how much you'll need to pay each month to pay off your debt by the end of the introductory offer before applying for the card to ensure it's the right one for you. Creating a budget will also help you keep your repayments in line and will help you achieve your goal faster.