Balance transfer fees plummet in fight for new customers
With an estimated third of all credit card holders failing to pay off the full balance of their cards each month it’s clear that many people could benefit from switching to a 0% balance transfer deal.
Balance transfer fees plummet in fight for new customers
Providers are looking for new incentives to pull in business and low transfer fees are a clear solution.”
And though the credit crunch continues and the markets are bad, credit card companies are competing on just that issues.
Competitive deals
In an effort to attract customers Barclaycard has reduced the fee which it charges new OnePlus card customers, cutting down its balance transfer fee from 3% to 2.5%.
This has led which predictions of a price war as more companies rush to compete.
Moneyexpert’s Sean Gardner commented on the recent shift towards lower transfer fees and extended 0% rates, saying: “This is surprising, because you would think that, during the credit crunch, providers wouldn't want to chase people's balance transfers.”
“But it's still a competitive market, and providers can't just compete solely on offering 0 per cent deals.
"Barclaycard has signaled that there's a new front to consider. Providers are looking for new incentives to pull in business and low transfer fees are a clear solution.”
0% transfers
There are 182 different credit cards presently offering 0% balance transfers on different periods which can be as much as 16 months in some cases and as little as 3 months in others.
Virgin Money is currently a good option when it comes to longevity with their new 16 month, 16.6 % APR card however but they are charging a 2.98% transfer fee.
Mr Gardner said: “There's obviously a trade-off between how high the balance transfer fee is and how long the 0 per cent deal runs for.
"A lot of people can overlook the fee, but since it is added on to your credit card balance, it is worth comparing them, otherwise you could be hit by a nasty surprise.”
He advised. “It's worth calculating how much it costs you to transfer and how much it will cost to clear the balance depending on the transfer period to weigh up whether it's worth it.”
Sound advice
Andrew Hagger of Moneynet said that if you don’t intend on paying off your balance before the 0% period ends it’s a better idea to go for a longer period of time rather than worrying about the transfer fee as the transfer fee will almost always be smaller than the amount you’d pay in interest if you didn’t make the switch.
He said: “You'll save more money by opting for a longer interest-free period than by going for a lower fee.
"Essentially, you'll be making a bigger saving in interest than you would from the one-off saving on the fee.”
He went on to warn: “In the past, it was very easy to just switch from one interest-free balance transfer card to another and keep going on indefinitely, but that's just not an option now.
"You need to think about how you'll bring your balance down.”
Written by Max Jennings ©
