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