Balance Transfers Not What They Used To Be

A lot of people move balances around from one credit card to another, chasing the zero percent balance transfer deals. It can be a good idea to save money, but it is not quite as straightforward as it sounds.

There are something like 200 zero percent balance transfer offers on the credit card market, but the actual differential choice is much lower. The reason for this is that banks offer a number of credit cards under different brand names, and you won’t be allowed to transfer a balance from one card to another if the underlying provider is the same.

Around 25% of the deals come from MBNA, which offers its own cards, as well as cards for Alliance & Leicester, Dunfermline Building Society and others.

Similar multiple coverage comes from a banking group, such as NatWest and Bank of Scotland, and Halifax and Bank of Scotland, which also backs cards for Amazon and Norwich & Peterbrough BS.

Lisa Taylor from financial data analyst Moneyfacts, said: “The other dangers are that there will be another card on your credit record and you’ll be stuck paying interest on the debt you’ve run up on the card for another month while you are waiting for your new card to come through.”

The fact is that balance transfer deals are not as good as they used to be. Most interest-free balance transfers now come with a transfer fee of around 3%. One the average credit card debt of £1,859, this amounts to a payment of £55.77.

The longest period currently available for a zero percent balance transfer deal is from Virgin Money at 15 months, the balance transfer fee being 2.98%. Barclaycard has a 2.5% fee for a 14 month deal. Egg has a free interest period to 1 April 2009 for a 3% fee.

Remember that you will have to pay interest on any purchases you make when the special-offer period is over until the balance is cleared. This is because your payments will always be used to bring down the balance first.