How To Calculate Your Minimum Monthly Repayment On A Balance Transfer For Life

Before you choose a balance transfer offer, you may want to know exactly what your repayments will be, and how much you will be saving by transferring from your high interest credit card.

If you are considering a balance transfer for life offer, there will still be interest charges applied to your monthly payments, even though the interest portion will be less.

To help you decide whether a balance transfer for life offer would be the best for your needs, consider the standard features of a for life offer:

• A lower interest rate. A for life balance transfer offer will charge an interest rate of around four or five per cent on your transferred balance, which is much lower than many standard credit cards which charge around 18.00% interest.
• No expiry date to your low interest rate. You will be able to enjoy a low interest rate for as long as you need, for the life of your balance until it is repaid.
• Consolidation of multiple cards and high balances. Since you have an unlimited amount of time to repay your balance you can transfer the outstanding balances you have on all of your existing credit cards and store cards to consolidate them into one low interest repayment.

Monthly Repayment Calculations on a Balance Transfer For Life

Every credit card repayment is made up of two parts – the payment of the purchases and the payment of the interest charges. While you are paying less interest on a balance transfer card, you still have to account for the interest charges calculation, so follow these simple calculations to give you an idea of how much your monthly payment will be.

To calculate the balance portion of your repayment:

• Most credit card providers charge around three percent of the balance each month.
• On a $5,000 balance for example, the portion of your balance repayment will be $150.
• You can work out your balance repayment amount by calculating three per cent of your balance with the following formula: (3/100) x (your balance) = your balance repayment amount
• Remember this is the highest your repayment will ever be because as you make payments to your credit card, the balance reduces and so does the amount you have to repay.

To calculate the interest portion of your repayment:

• Your interest charges are added to your balance repayment amount to form your monthly payment
• On a $5,000 balance for example, with a 5.9% for life balance transfer interest rate, the interest portion of your repayment will be around $25.
• To calculate the amount of interest included in your monthly repayment, use this calculation:(5.9/100) x (your balance) = your interest repayment amount.
• The interest charges will also reduce each month as your balance decreases.

Making your own calculations on the balance amount you have to transfer and adding it to the calculations of interest rates you are comparing, you can calculate the differences the interest rates can make to your monthly repayments on a for life balance transfer offer.

Minimum Payments and Maximum Returns on Balance Transfers For Life

In the example above, your minimum monthly repayment would be $175 a month on a for life balance transfer offer with a 5.9% interest rate. If you make only the minimum payments on your card, you will pay $475 in interest over the 37 months it will take to pay your balance to zero.

If you were to make additional payments each month of just $50, you would pay only $349 in interest and your balance would be fully repaid in just 27 months instead. Just think about how much you could save if you could budget to pay $300 every month – you would pay just $230 in interest, and would have paid off your balance in 12 months.

However, there is no need to put added pressure on your finances if you can only afford the minimum payment of a for life balance transfer credit card. In this example, even if you only made the minimum payments you would still be better off than on your standard credit card. On a standard credit card charging the average interest rate of 16.9% you would pay $1,615 in interest to repay your balance making the minimum repayments, and take 45 months to get there.

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Popular Credit Card Offers

			Interest Rate (p.a.)	Balance Transfer Rate (p.a.)	Annual fee	Cash Advance Rate (p.a.)
	Westpac Low Rate Card - 0% Offer	A credit card with a low rate offer on both balance transfers and purchases, plus a low annual fee.	0% for 6 months (reverts to 13.49% )	0% for 6 months	$45	21.49%
	Citibank Clear Platinum Card	Competitive interest rate on purchases and balance transfers offer.	11.99%	2.9% for 12 months	$99	21.74%
	St George Vertigo	Take advantage of this great offer from St.George with a low rate on purchases and a low balance transfer offer.	13.24%	0.99% for 12 months	$55	21.49%
	ANZ Platinum Credit Card	An introductory interest rate offer on balance transfers and purchases, plus a $0 first year annual fee.	0% for 6 months (reverts to 19.24% )	0% for 6 months	$0 annual fee for the first year( $87 thereafter)	20.99%