Many consumers will use balance transfer deals to pay off existing debts on their credit cards. The best known solution may be the 0% deal but some also use lifetime balance products as an alternative. What are the differences between these deals and which is the best one to use?
What are the Differences Between a Balance Transfer for Life and a Zero Percent Deal?
Both of these options share some features. In both cases they allow the transfer of a balance/balances from other credit cards on to a new product. The aim for most here is to use the new deal to pay off credit card debts.
The first difference between the two is the length of time that the offer is applied to the balance transfer. So, for example:
- A 0% deal will usually only be offered for a set period of time.
- A lifetime balance transfer offer will last for as long as it takes to pay off the money that is switched to the new card.
There are also differences between interest rates to consider here. A 0% deal will charge no interest on the balance transfer (and possibly on new spending) until the offer is finished. A life of balance offer will charge interest but this is usually set at a lower rate than would come with a regular credit card (new spending may be charged at a higher rate).
Zero percent deals also come with a balance transfer fee that is usually charged as a percentage of the money switched over. Although many lifetime balance offers may also charge a fee, it is possible to find some that won’t. A no fee balance transfer, however, may mean higher interest rates.
Is it Better to Use a Lifetime Balance Transfer or a 0% Deal?
Choosing the correct option often comes down to the extent of the credit card debt to be transferred. Those that know that they can pay off all their debts in the time given by a 0% deal may, for example, find this the best solution. They’ll have to pay a fee to set up the switch but will then be charged no interest on their transferred sum.
Those with large debts or limited repayment budgets, however, may need more time pay them off than they’ll be given with a time limited 0% deal. For some, a life of balance transfer will work out better as they can take as long as they need. They’ll also most likely get a lower interest rate than with their original card(s) so should save some money.
In some cases, it is possible to move from one 0% balance transfer card to another once the initial offer is done. This can give enough time to pay off all that is owed by using a variety of cards to gain all the time that is needed.
Do bear in mind, however, that each new zero percent card will come with a transfer fee and this may significantly add to the costs of debt repayment. This may be worth estimating as it may be cheaper for some to take a life of balance offer instead even though the lower rate of interest will be payable.
Before making a choice between 0% or life of balance transfer credit cards it may be worth looking more closely at the advantages and disadvantages of each option. Understanding how 0% balance transfers work, for example, may make it easier to compare them with life of balance options. Those interested in clearing credit card debts as soon as possible may also want to investigate ways to speed up the repayment process.
Carol Finch - Carol Finch is the Topic Editor for Retirement Planning, Budgeting, E-Commerce & Technical/Business Writing on Suite101.
Join the Conversation