Credit card debt is such a debilitating and wide reaching condition that if you are struggling with a large balance on a high interest credit card you can be certain you are not alone. We all have the best intentions to repay our purchases but through personal crisis, work emergency or financial neglect, credit card debt can get the best of you.
Once that credit card balance has risen and risen, or worse – there is more than one of them – it can seem impossible that you will ever be debt free. That is why in 2011 a new type of balance transfer credit card is going to help you out – with 12 months to repay the balances on all of your outstanding credit cards, at a much lower interest rate.
An 12 month balance transfer credit card offers the longest transfer period currently available in Australia and with this unique extended repayment period you once again have a fighting chance to repay your balance in full. A long 12 month balance transfer period is unlike those tempting 0% balance transfer offers which are whipped away with a matter of months before you’ve had a chance to get ahead.
Instead, you are able to make your new low interest balance transfer credit card repayments a part of your routine and budget, without having to make significant changes to your spending habits or your finances. At the same time, you know that at the end of your 12 month balance transfer period, you will once again be debt free.
Featured Balance Transfer Credit Card
The St George Vertigo offers a great balance transfer deal, combined with a low rate on purchases. If you are looking to transfer your existing credit card balance, the St George Vertigo is a great card to consider applying for.
- $55 annual fee
- 13.24% p.a. on purchases
- 0.99% p.a. for 12 months on balance transfers
- Cash Advance Rate of 21.49% p.a.
- 55 days interest free
12 Month Balance Transfer Credit Card Comparison:
| Interest Rate (p.a.) | Balance Transfer Rate (p.a.) | Annual fee | Cash Advance Rate (p.a.) | ||
|---|---|---|---|---|---|
 St George Vertigo |
13.24% | 0.99% for 12 months | $55 | 21.49% |
  |
 Bank of Melbourne Vertigo Credit Card |
13.24% | 0.99% for 12 months | $55 | 21.49% |
|
 NAB Gold Card |
19.74% | 1% for 12 months | $90 | 21.74% |
|
 Citibank Clear Platinum Card |
0% for 6 months (reverts to 11.99% ) | 0% for 6 months | $99 | 0% for 6 months thereafter reverts to 21.74% |
|
 Bankwest Breeze MasterCard |
10.99% | 4.99% for 12 months | $69 | 21.99% |
|
 Virgin Flyer Credit Card |
20.99% | 1.9% for 12 months | $99 | 20.99% |
|
 Citibank Rewards Credit Card – Platinum Card |
20.99% | 0.9% for 9 months | $199 | 21.74% |
|
What is an 12 Month Balance Transfer Offer?
An 12 month balance transfer offer allows you to transfer the balance from another provider’s credit card, to the balance transfer credit card. You will then be charged a lower interest rate on your 12 month balance transfer credit card than on your old standard card, and the balance on your old high interest card is now paid to zero.
You will also be able to transfer balances from more than one credit card or store card up to the limit approved on your 12 month balance transfer credit card. You then make repayments to your new balance transfer credit card as normal each month, while also paying any annual and transaction fees from your new balance transfer card.
If you’re wondering how much you can save by transferring your high interest credit card balances to an 12 month balance transfer credit card, consider a situation where you have two high interest credit cards, each with a $3,000 balance.
Card 1 charges you 16% interest on your $3,000 balance and that makes your minimum monthly repayment approximately $140. If you pay just the minimum and don’t make any new purchases on your card, you will pay off your balance in 26 repayments – more than two years. Over that time you will have pay more than $556 in interest.
Your $3,000 balance on card 2 is being charged an even higher 18% interest which makes your minimum monthly repayments around $150. Making the minimum repayments and not making any new purchases, you will pay off the balance in two years, and you will have paid $593 in interest.
Currently, to clear your $6,000 worth of credit card debt will cost you $1,149.
If you transfer that $6,000 to an 12 month balance transfer credit card offer charging just 5% interest and make a monthly repayment of $350 – just $60 more per month than you are paying on your high interest cards – you can be debt free in just 12 months. During that time you will have paid just $238 in interest which is a saving of six months and more than $900 which can translate into a holiday or a special treat for you and your family as a reward.
How to Choose the Best 12 Month Balance Transfer Offer
To make sure you can truly benefit from an 12 month balance transfer offer, you need to choose the one which is best for your circumstances now, and your credit needs in the future. Therefore, make sure you compare:
- The annual fee. A credit card annual fee is typically charged at the beginning of the year when you first sign up. It is charged to your account as a purchase which must be repaid, on top of your transferred balance. Plus, even if you plan to close your account after the 12 month balance transfer period, remember that you will have paid the annual fee twice.
- The balance transfer fee. In some cases you will be charged a fee to transfer the balances from your standard credit cards to an 12 month balance transfer credit card. This could be a flat fee, usually around $50, or could be a percentage of the balance so make sure you compare the costs of a balance transfer card before applying.
- The revert rate. If you are unable to repay your transferred balance within the 12 month term, the remainder of the balance will be charged the revert rate. This is often the cash advance rate of the credit card, and is worth comparing if you don’t think you can repay your balance in full.
- The transfer window. Most balance transfer credit cards will allow you to make the transfer in the application, but if you don’t make sure you are aware of the window of time during which you can be eligible for a transfer. Not only can missing the transfer window jeopardise your balance transfer offer, the later you transfer your balance, the less time you have in your 12 month balance transfer term.
- The credit card features. If you are planning to close the account of your standard credit cards once the balance is cleared, you may want to consider keeping your 12 month balance transfer credit card for everyday use after the balance is repaid. In this case you should compare the purchase interest rate which will be applied to new purchases, as well as the other features of the card. Make sure you look for a long interest free period, and decide whether you want additional card holders, a rewards program or priority service.
How to use an 12 Month Balance Transfer Credit Card
Using a balance transfer credit card is not entirely like managing a normal credit card account. You first need to make sure you transfer your balances within the balance transfer window to be eligible for the 12 month balance transfer offer, and get the most out of the time available.
You will also need to make sure you budget to repay the balance within 12 months, so work out what your repayments need to be based on your balance amounts, to be repaid to zero within the term. This means you can avoid the higher cash advance revert rate of the card, and start afresh with a zero balance.
Over an 12 month period a lot can happen to your finances – emergencies can arise and circumstances can change. Therefore, it can be best to budget to repay your transferred balance sooner than 12 months in case you need to divert funds to an emergency expense during your balance transfer period. At the same time it is important to adjust your spending and budget to make your balance transfer card repayments a priority, because you can jeopardise your low balance transfer interest rate if you default on a payment.
Finally, make sure you don’t spend on your 12 month balance transfer credit card until you have repaid your transferred balances in full. This is because most balance transfer credit card providers apply a hierarchy of repayments, where the oldest purchases are repaid first. This means that if you make a purchase on your balance transfer card, your repayments will continue to repay your transferred balance, leaving your new balance accruing the purchase rate (or ash advance rate!) until your oldest balance is repaid in full.
Compare 12 month balance transfer credit card offers now.
Posted on Friday, January 7th, 2011 at 10:55 am
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