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"Is it the end for capped balance transfer fees?"

By admin | March 20th, 2008 | Featured

Balance transfer credit cards have become very popular over recent years, but over time credit card companies have started to try and make up for the lost revenue that comes with offering a 0% interest period by charging balance transfer fees.

A balance transfer card is used by those that have high interest credit card balances, and by transferring these balances to a 0% balance transfer card the customer can avoid paying any interest on the combined balance for a set period of time. However, most cards charge a fee of 2-3% of the total amount transferred on to the card.

The good news about these balance transfer cards is that many of those that offered a 0% interest free period and charged a transfer fee capped the fee at around £50, so even those transferring a high balance would not have to worry about paying over the odds in order to transfer their money. However, according to recent reports capped transfer fees are becoming a thing of the past, and consumers – particularly rate tarts who transfer their balances regularly in order to avoid paying interest – could end up paying a small fortune to transfer their balances.

Reports indicate that a year ago consumers could choose from around eighteen credit cards that capped balance transfer fees. However, the number of cards that now offer this facility is just seven, and these are from five different providers. This means that anyone that transfers a large balance to another card that does not cap its balance transfer fees stands to pay a fortune for the transfer. Rate tarts will find that regularly transferring balances may become unviable because of the amount that they will have to pay out in fees.

However, there is some good news on the horizon. When 0% balance transfer cards were first launched many did not charge a transfer fee, but over recent years these have pretty much disappeared. Reports now show that a handful of lenders are now offering fee free balance transfers onto a 0% balance transfer card, but there is a catch – the interest free period offered is only a short one, and this means that in order to avoid fees and interest charges you will need to repay your transferred balance pretty quickly.

If you want to avoid paying balance transfer fees but cannot repay your balance off within six months, which is the maximum that these fee free cards offer at present, then you may find that a low interest life of balance transfer car may be more suitable. If you want to transfer to a 0% balance transfer card with a longer interest free period you will have to pay the transfer fee, but you can look for cards that charge a lower fee or try and find one of the remaining cards that do cap the transfer fee.

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