Wed 16th Jan, 2008
Banks Making Profit From 0% Deals
According to a report from MoneyExpert.com, banks made more than £239 million in transfer fees from credit cards offering zero percent interest rates in Britain in the last year.
Many customers choose a zero percent interest rate credit card to help manage their finances, however many credit card companies are charging customers transfer fees of up to three percent of the balance. If someone with a £5,000 debt is charged 3% they will then have to pay a fee of £150. The Office of Fair Trading is considering looking into these fees.
Many consumers who want to save money on their interest payments and manage their debts have used a zero percent balance transfer deal. Almost all credit card providers who offer zero percent balance transfers now charge a handling fee anywhere from two percent to three percent of the balance being transferred. The balance transfer handling fee became widespread after banks and building societies were hit last year by the Office of Fair Trading on charging penalty fees, so the banks then sought another source of income, which has come to be the transfer fees on zero percent balance transfer cards. According to the report almost 12 million people have switched credit cards over the past year with an average fee of £19.99.
Balance transfer credit cards are ideal for those who have large sums that they want to pay off and avoid paying interest on. However, as you are searching for a credit card with a zero percent balance transfer you will want to compare the handling fees that the credit card provider will charge as some will only charge a flat rate, while other will charge a percent of the amount being transferred.
Bear in mind too how long you realistically expect to take to pay off the debt. You may know that the 0% period only offers you a break from paying interest and that you cannot clear the outstanding sum in that time. If so, you will want to calculate how much interest you will be paying once the period is over. It may cost you less money and hassle to arrange a debt consolidation loan. Although a loan will attract interest from day one, at least you are committed to a set period to repay at a rate that won’t change.