Fewer credit cards cap balance transfer fees

The figure relating to the number of credit cards who ‘cap’ their balance transfer fees has more than halved throughout the last year.

According to MoneyExpert.com, there are now only five providers offering a total of seven cards between them which put a limit on the fee borrowers are able to be charged when transferring money or balances from another card. This is quite a difference to the 18 cards available a mere 12months ago.

Given these figures, take the example of an estimated average £2,666 moved from one card to another by the ‘rate tarts’ as the industry affectionately calls them-that is the people who swap cards fairly regularly chasing 0% and all it offers them. If there is no limit on balance transfer fees, then this group of people might find it is not actually worth their while changing over as the fees could eliminate any potential savings they may have made. Furthermore, this could be particularly true if this group repay their debt fairly quickly.

An average balance transfer fee is 2.8% and apply this to the average debt of £2,666, the cost would be £74.65. Now take the example of a £5,000 debt being shifted to a card with a 3% fee-that would cost £150 straight away.

Sean Gardner, chief executive of MoneyExpert.com says, ” Credit card switching is big business. Someone switches a card every two seconds and there are very few cards out there that still do not charge a fee for the privilege.”

Some cards which do still offer a capped fee are Citibank, John Lewis and Virgin Money’s Virgin Atlantic Black and White cards-which offer a 0% introductory offer.

Cards who not only offer a 0% introductory offer, but who also do not charge any balance transfer fee at all are-Capital One, Britannia Building Society, Norwich & Peterborough and Ulster Bank.

Sainsbury’s Finance carried out research and discovered that roughly 4.3million people estimate transferring a total of £6.68billion between credit cards during the first half of 2008.

On average each individual would expect to transfer £1,555, however about 181,000 plan to transfer more than £5,000, half of whom will actually switch more than £10,000.