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Juggle debts easily with balance transfer cards

By Mozo 01 August 2011 4:55pmBalance transfers, Credit cards, DebtTag: > > > > > > > >

We all want to erase our debt and to live in a hypothetical nirvana called “Debt-free-land,” but what should we do when our credit card debts run out of control? One solution is the balance transfer credit card, which allows you to carry over your existing debt onto a credit card that charges a lower ongoing interest rate.

If you want to start your journey to being debt-free, you’ve got to pick a way of getting there. With the help of our award-wining health check tool, we’ve taken the average $3000 credit card balance to compare a standard “big four” bank credit card* against some of the best balance transfer deals currently available. You can beat the banks, but it means picking a card based on how quickly you can pay back the debt.

1. Taking the bus

The longest and most expensive route to Debt-free-land is choosing the minimum monthly repayment option. Say you pay $60 in monthly repayments, it would take you at least 9 years to pay off a $3000 credit card balance if you use a standard “big bank” card and cost you $4004 in interest and fees. But if you are still keen on paying minimal repayments, the Australian Defence Credit Union Low Rate Visa Credit Card is a great option. With a 4.99% introductory balance transfer interest rate for 9 months and a 10.99% ongoing rate, you could save a whopping $2900 in interest and fees compared to a standard “big bank” card. Alternatives such as the Bankwest lite and Aussie Mastercard are similarly competitive. While debt-freedom is undoubtedly going to take longer with minimal monthly repayments, using any of our nominated options will save you at least $2872 in fees and interest compared to a standard credit card.

2. Get behind the wheel

If you can afford to make slightly higher monthly repayments – say $200, you could reach “Debt-free-land” in one or two years. We recommend NAB’s low fee card, for its low 0.99% introductory balance transfer rate for 9 months. You could pay off a $3000 debt in 15 months and save $429 in interest and fees with this card. The Coles Group Source card and Aussie Mastercard are also worth a look when you browse the balance transfer card showroom. By switching from a standard bank credit card to one of these, you’re looking to save at least $409 in fees and interest.

3. Jet-setting, first class

You’ll be holidaying at Debt-free-land in no time if you want to get rid of your debt fast and can afford to make big payments – say $1000 a month, There are a number of cards charging no annual fees and 0% on balance transfers. The Virgin Flyer Credit Card offers 0% for 9 months but the Coles Group Source Card and BoQ Low Rate card are also worth checking out. You’ll pay no interest at all, saving $153 compared to a standard card and clear your debt in 3 months.

 

Have a question about Balance Transfer Credit Cards? Get answers about all things finance-y on Mozo Answers.

*Standard card assumes card attracting 20% p.a interest and $50 annual fee.

 

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Virgin Money Returns

By Yash Murthy 28 July 2010 2:20pmbanking, competition, Credit cards, Savings accountsTag: > > > > > >

Richard Branson was in Sydney yesterday, bearing the news that Virgin Money is relaunching its consumer banking arm. Earmarked by Branson as “classic Virgin territory” due to the domination of the Big 4 in the marketplace, Virgin Money has declared its intentions, in alliance with Citibank, to make a ‘fair profit’ on the back of “simple and fairly priced products”. The first cabs off the rank in this quest to take on the Big 4 are in the credit card and savings account market.

Virgin Saver
The Virgin Saver is Virgin’s online savings account, a no fees account with a variable introductory rate of 6.75% for 4 months that falls back to 5.35%. These numbers put it right up there with the top 5 standard and promotional savings account rates in the market and it’s a great product, particularly as it lacks the deposit and withdrawal conditions held by some products.

Virgin No Annual Fee Credit Card
The Virgin No Annual Fee Credit Card is Virgin’s ‘no frills’ card. No annual fee and no rewards of any note. It comes with an introductory offer of 2.9% on balance transfers for six months and an ongoing purchase rate of 16.95%. Whilst promoted as “simple and fairly priced”, there are only 44 interest-free days and the card features the sneaky trick we’ve previously highlighted of reverting the balance transfer to the much higher cash advance rate of 20.99% as well.

If you plan on carrying a debt, using our credit card comparison table one can see that there are other low rate and low fee cards that could save you over $500 over 3 years on an average balance of $3000, taking into account the interest and fee costs. However, if you plan on paying off your balance in full each month, this card will cost you nothing, and is well worth picking up for those who enjoy things like the choice of card colour and Virgin’s customer service.

Virgin Flyer Credit Card
The real headline grabber here is the last product on the list, the Virgin Flyer Card, its Platinum frequent flyer card. And it’s a bit of a Jekyll and Hyde proposition.

What Virgin is hoping will sell this product is the flight rewards. The biggest selling point is that four times a year, you’ll get 2 for 1 flights on Virgin Blue. It’s a great feature that’s sure to appeal to many. Factor in the best earn rate for velocity points without getting an Amex, for the first $1,500 monthly spend anyway, and it’s a very good rewards card. Using our credit card Rewards Revealer, at the Australian average spend of $14000, it’s the clear leader once you factor in the free flights. For the high rollers looking for a Platinum Card, those spending $50,000 a year would only derive more value from the Citibank Emirates Platinum card, taking annual fees and free flights into account.

It must be noted however, that as a day-to-day credit card, it’s a pricey option. The rates’ conspicuous absence from Virgin’s release is a signpost to the card’s steep nature. With a rate of 20.99% for both purchases and cash advances and a balance transfer rate of 6.9% for 6 months that reverts to 20.99%, it’s one of the most expensive cards on the market. Throw in the interest free period of only 44 days and you can definitely say it’s not a card to accumulate debt on.

The Verdict
The Virgin Saver looks a winner, particularly given its simplicity. The No Annual Fee card is a good basic card for those who pay off their balance in full each month, but there are better options for those who like to rack up a debt. Again, the Virgin Flyer card also isn’t one for the debt accumulators, however it makes up for it with an excellent flight rewards program. With home loans yesterday stated to be in their sights, it’ll be interesting to see where Virgin goes next.

Compare all savings accounts and rewards credit cards at mozo.com.au

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