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The End of Balance Transfer Deals

Michelle Slade, personal finance analyst at moneyfacts.co.uk, takes a look at the dying breed of fee free balance transfer deals.

“Long gone are the days when rate tarts could jump from one credit card provider to another without incurring fees, on a 0% balance transfer deal.

“In the two years since Barclaycard started the trend of balance transfer fees, almost all providers now charge an upfront fee for their 0% balance transfer deals. Today there are only three cards, without a fee – Britannia BS Classic Intro Visa, Britannia BS Platinum Intro Visa and Sainsbury’s Bank Advantage Visa.

“Not only has there been a trend to charge a fee, the fees are rising and many are now uncapped.

“So, the question we need to ask is, whether avoiding paying the balance transfer fee, really offers a cost saving in the long term?

“The three cards which do not charge a balance transfer fee, offer the shortest 0% deals on the market, at 5 months. Compare this with cards such as GE Money’s Transformation MasterCard and HSBC’s Bank MasterCard, which do charge fees of 2.5% (min £5) and 2% (min £5) respectively, whereby you can take advance of an extra seven months’ interest free.”

“The answer to the question may depend on the length of time the consumer takes to repay the debt. If the consumer can afford to repay the debt within a short period of time, say six months, then they could be better off choosing one of the 0% deals without a fee. But should the debt continue for a longer period, a fee deal may be preferential or even a low rate lifetime deal.

“Another factor to consider would be the size of the balance transfer. A fee at £50 capped would clearly be better than a uncapped fee of 2% for any balances greater than £2.5K. With the highest uncapped fee currently standing at 3%, transferring a balance of £5K would cost a whopping £150.

“Which ever type of deal you choose, make sure it matches your financial plans. The most suitable and cheapest card will be very different for those looking for short term or longer term finance. With over 300 credit cards available, offering a variety of terms, incentives and offers, there should be a deal out there to suit everyone’s needs.

“Once you have found the best balance transfer deal, make sure you hold a separate card for purchases and other transactions, as you could soon see your great deal quickly disappear.”