Caps on balance transfer cards disappearing : Credit Card Guide

Caps on balance transfer cards disappearing

According to a recent report the number of 0% balance transfer cards that cap the transfer fee at a set amount are is falling, which means that an increasing number of people that transfer high interest balances on to 0% balance transfer cards are likely to have to pay more for the privilege of doing so.

The vast majority of 0% balance transfer cards charge a transfer fee, usually of 2-3% of the total balance being transferred, but in many cases providers were capping the maximum fee at around £50.

However, even this area of the financial sector has been affected by the financial turmoil in the money markets, and this has resulted in a drop in the number of card providers that cap the balance transfer fee, which means that for some people that are transferring large sums of cash the cost of the transfer could prove crippling.

This move could put an end to rate tarting, where cardholders continually transfer balances from card to card in order to avoid paying interest, as the cost of making these transfers could counteract the benefits of avoiding interest.

According to financial experts there were eighteen different credit cards that were available with capped transfer fees one year ago, but this has now fallen to just seven cards from five different providers.

Although the number of cards that caps transfer fees has fallen officials still state that some consumers should try and look for one of the ones that does still offer caps on these fees.

One industry professional stated: 'In the past, the simple advice for rate tarts was to look for a 0% deal, and then for a card with low balance transfer fees. Now however with the majority of long term 0% credit cards charging 2-3% for a balance transfer, getting a card that caps its fees might be a sensible option if you don't like the look of one with no fee at all.'

Tom Smith
1st March 2008

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