Lifetime balance transfers are ideal for those who expect it to take more than a year to pay off a hefty balance.
0% balance transfer deals don’t last forever, and some users prefer not to move debts from one card to another every year or so in order to get the good deals. Shockingly, half of all balance transfer users don’t transfer to a new card simply because of the inconvenience.
This means they end up paying a hefty rate of interest – typically three times as much as you would pay on a lifetime deal!
If you worry you may get caught in this trap, you could well be better off with a lifetime balance transfer card that charges a constant low (and flat) interest rate to save the annual transfer hassle. This low interest rate applies for the entire lifetime of the card – so until you pay off your debts.
It is usually cheaper to borrow on a lifetime balance card than to increase the size of your mortgage or take out a personal loan. Also, as lifetime balance cards come with fixed rates, you are protected against any rate rises in the future.
So you have found a card with a low, fixed rate of interest for the lifetime of the card – great! But remember to be careful. New expenditure is very likely to attract a high interest rate, much higher than the lifetime balance one.
This is due to negative payment hierarchy; your new debt will sit in the background gathering plenty of interest until the original transferred balance has been paid, done and dusted. So remember: don’t spend on a lifetime balance transfer card. It’s only there to help you pay off your existing debts, not for new purchases.
lovemoney.com, 2nd Floor 112 – 116 Old Street, London EC1V 9BG