Long Term Balance Transfer Credit Cards – Know If This Works For You

March 23rd, 2011

Credit card debt comes in a variety of flavors.

For some, it’s simply carrying a balance for a few months on an uncharacteristically large purchase. For others, it’s something quite a bit more serious. In the case where your credit card debt has become so large that the interest you are paying is almost too much to keep up with, perhaps its time for a balance transfer.

What is it?

A balance transfer is simply that- transferring the balance from one credit card to another. Typically, this is done for the short term, for example, when you have a moderate amount of debt that you could get under control within a few months if you could just stop paying interest, the very common 0% promotional balance transfer credit cards are a great decision for this situation.

Within those few months of the promotional period, your balance will accrue no interest and you can get ahead on that debt. However, in the case where your credit card debt is simply too large to pay off in that short a period of time, a long term balance transfer credit card is in order.

The Difference

The difference between the short and long term balance transfer credit cards is simple- the long term version does not carry a promotional period. Rather than offer a 0% period for a few months, instead, at the onset of the card, it maintains a much lower interest rate than a standard credit card.

These cards are not meant for purchasing but rather to transfer balances and pay them off. They continue to earn interest, but in the long run, will cost you a lot less as they will be charging you less interest each month.

Time

The best part about the long term credit card is the length of time you have to pay it off. In a way, your time is indefinite.

Because a short term balance transfer promotion has an end date, for all intents and purposes, you have to shoot to have the balance paid off before that end date. If not, the interest rate sky rockets from 0% and you are right back where you started.

On the converse, with a long term balance transfer credit card, the interest rate will remain the same for the duration of the life of the card. This way, you can count on a reliable low interest rate and get that debt paid off.

The only caveat to this strategy is that credit card habits must be altered if this is to work. If you keep spending money as if you are not in debt, you’ll never get ahead. They key to success is to simply pay the debt off without adding to it.

	Interest Rate (p.a.)	Balance Transfer Rate (p.a.)	Annual fee	Cash Advance Rate (p.a.)
Citibank Clear Platinum Card	11.99%	0% for 12 months with 3% handling fee	$99	21.74%
HSBC Credit Card	17.99%	0% for 8 months with 2% handling fee	$0	21.99%
ANZ Platinum Credit Card	0% for 6 months (reverts to 19.39% )	0% for 6 months	$0 annual fee for the first year ($87 thereafter)	20.99%
Bankwest Breeze MasterCard	0% for 6 months (reverts to 10.99% )	4.99% for 9 months	$49	21.99%