Saving by Balance Transfer

Abaddon on 25/07/2014 - 10:24

I've been looking at Balance Transfer offers to try and reduce some quite substantial credit card debt. The debt is large enough that it's going to take me some years to pay it off. Lets say $30000 at ~12.99% interest

I've found this offer:
http://www.citibank.com.au/cardsoffer/offers/DM_DDP692DC.htm

Citibank Platinum, 3.9% interest for the life of balance transferred. Which on the face of it seems pretty good.

Things which concern me:

  • $250 a year fee
  • The fact that transferred balances are repaid first followed by everything else at a rate of 20.99%

The problem I see is that the annual fees will add up, and those plus the interest on the balance transfer will compound at 20.99%

Any thoughts, or better options anyone has seen?

Financial

Comments

  • [Deactivated] on 25/07/2014 - 10:32

    Try looking into this also…
    http://citibank.com.au/loansale.htm

    "The fact that transferred balances are repaid first followed by everything else at a rate of 20.99%"
    If you are struggling with credit card debt - cease further spending on credit cards at all and this will not be a problem.

    • Abaddon on 25/07/2014 - 13:40

      Yeah, I was never planning on spending on the card. But $250 a year plus the interest from the balance transfer will all be at 20.99%.

      I just need to work out how much that will add up to vs an alternate card with a higher balance transfer rate but lower interest on the interest

  • No on 25/07/2014 - 10:35

    Are you sure that the transferred balances are repaid first?

    I'm pretty sure that legally repayments have to go to the highest interest occurring debt first.

    http://www.bankingreforms.gov.au/content/Content.aspx?doc=fu…

    • Abaddon on 25/07/2014 - 13:37

      I thought that as well, but not according to the terms on the linked page:

      1. The 3.9% p.a. interest rate applies only to balances transferred with this offer for the life of the balance. Transferred balances are repaid first. At the end of the balance transfer offer period your interest rate will revert to the Cash Advance Platinum card interest rate currently 20.99% p.a. The Platinum Card current standard variable rate is 20.49% p.a. on retail purchases. Interest rates are variable subject to change and Citibank's Credit Criteria. Interest rates last updated 15/12/09.
    • conan2000 on 25/07/2014 - 13:38

      You are correct, but somehow Citibank are still doing this, I had it happen to me, but I only spent about $30 and only had 2 months until I cleared my interest free balance transfer. So it wasn't worth complaining.

      I would suggest having a look at this site: http://www.infochoice.com.au/banking/credit-card/comparison/ there are multiple cards that have 0% for up to 16 months with much smaller fees than the Citibank one mentioned above. You'd be better taking one of those and then doing it again with another provider before the interest free period expires.

      • Abaddon on 25/07/2014 - 14:44

        Unfortunately the card I am wanting to transfer from is an ANZ car, so the longest I can get is 14 months.

        • conan2000 on 25/07/2014 - 22:26

          That's not far off, and the same principle applies anyway. Just do the same again in 14 months. I personally do this all the time. As long as the balance transfer is lower than my mortgage (but preferably 0%), then I'm better off!

  • Islund on 25/07/2014 - 13:52

    ANZ have a few zero interest long term balance transfer options on Visa - I am on one myself and the minimum payment is 2% of the balance. Towards the end of the perios I just transfer to another banks MasterCard and at the end of that period to another banks Visa.

    All the while I am not spending any money on those cards = just paying off the original debt which is not compounding.

  • ifuggedxyz on 25/07/2014 - 14:19

    This one is a much better offer: https://www.ozbargain.com.au/node/151314

    • Abaddon on 25/07/2014 - 14:47

      Thanks for that, yeah I looked at that one. Problem is I don't think I'll be able to pay it off within 2 years. I guess I could go for it and then apply for something else before it runs out.

      The concern is that at that stage I will have too much credit available to me and nobody will give me another card to move it to.

      • conan2000 on 25/07/2014 - 22:28

        Just make sure to close off any older cards. And make sure not to miss any payments! Obviously it will depend on a range of circumstances whether they will give you a card or not, but they are two basic things you can do to minimise your chances of getting declined.

      • [Deactivated] on 28/07/2014 - 12:02

        "too much credit available to me"

        You can close off cards and decrease limits at anytime you know.

        • Abaddon on 28/07/2014 - 18:02

          You talked me into it :)

          Then I found out I'm ineligible since I already have an existing Ready Credit account.

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