Credit card Guides

Lifetime balance transfer credit cards

By Emma Lunn editorial@consumerchoices.co.uk

If you’re constantly shifting credit card debts around, you might be better off getting a lifetime balance transfer credit card…(Updated 4/12/09)

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If you’re carrying round a large debt, you could find yourself caught in a vicious circle of balance transfers and their attached fees. While lifetime balance transfer cards won’t let you escape your interest payments altogether, they do offer a long-term alternative.

Balance transfer fees now apply to almost all cards carrying 0% interest on balance transfers. As well as this cost - which is likely to be 3% of the balance - there’s the hassle involved in trying to remember to switch to a new card every six to 12 months.

This practice has another drawback too; because you get a complete break from interest payments you’re less likely to be worrying about your credit card debt and many people get to the end of their promotional period without having cleared their balance.

If this sounds like you, the best course of action is to find a good lifetime balance transfer card and pay your debt off at the lowest rate possible.

What are lifetime balance transfer credit cards?

Lifetime balance transfer cards offer really very low APR on balance transfers - with typical rates between 7 and 9% APR.

This means that you could get yourself a better rate than an unsecured loan, so they’re also a good way to get credit. Bear in mind though, that as low as the interest might be, you still want to avoid paying as much as possible so try to clear your debt as quickly as you can.

How much will I save?

The average UK credit card carries a debt of £4,500 according to money education charity CreditAction, and the standard rate of APR on credit cards is 17.32%. But what does this actually mean for you?

The table below compares our current best buy lifetime balance transfer card against the current best buy 0% interest card and a standard credit card with an average interest rate.

Using the UK’s average credit card debt, it works out how long it would take to pay this £4,500 debt off at the minimum 3% amount each month - and how much interest you would have paid at the end of it all.

However, it doesn’t take into account the 2.98% transfer fee on the Virgin credit card (www.virginmoney.com) which would cost you £134.10.

	Halifax Easy Rate credit card	Virgin Money credit card	Average credit card
Interest rate on transfer of £4,500	8.9%	0% for 16 months (then 16.6%)	17.2%
Total interest you pay on a balance of £4,500	£1,358	£2,696	£3,416
Number of years to pay off £4,500 by repaying 3% of the balance each month	14 years & 6 months	17 years & 6 months	18 years & 9 months

Who do they work for?

Finding a new credit card every six to 12 months is a pain that you don’t want so these cards are great if you have a large debt on your credit card and do not want to be constantly moving your balance to a new card after each 0% offer ends.

They are especially good if you have a large credit card debt and won’t be able to pay off the full amount before the end of a 0% balance transfer deal.

If you can manage to pay your balance off within the time period offered, you’ll be able to clear your debt at as little as 8.9%.

But be warned

These cards shouldn’t be used for everyday spending. Because of the way that payments against your credit card are tiered, you will always pay the “cheapest” debts off first.

This means that if you have transferred a balance, and then use your card for more spending - even if your card offers 0% on purchases for 12 months - any payments you make to your card will go against your balance transfer, not your new spending.

Then, once your purchases offer has expired, you’ll be charged the much higher, standard rate on all the things you’ve bought.

Is a lifetime transfer card for you?

If you’ve been hoarding a massive debt for some time, either paying large amounts of interest on it or continually moving it from one interest free card to the next, then a lifetime balance transfer card could be the move you need to finally clear your debt.

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