When zero per cent balance transfer credit cards first came onto the market, those providers who offered the deal found themselves very popular with borrowers. And now, with the credit crunch raging on, consumers are taking advantage of these types of offer more than ever.
But, with around 75 per cent of credit card providers offering 0% on balance transfers for a limited period, the market is becoming saturated, and providers need to offer something else to get customers to bite. And according to MoneyExpert.com, the new credit card battleground is set to be balance transfer fees.
"The best-buy tables have been dominated over the last couple of years by cards offering lengthy 0% balance transfer deals, but there inevitably comes a point when trumping the pack becomes impossible," explains Sean Gardner, Director at MoneyExpert.com.
Currently leading the best buy tables are the Virgin Money and Capital One credit cards, which are offering up to 15 months of 0% balance transfers, and Mr Gardner says it will be difficult for other providers to trey and offer a longer 0% rate, and instead he expects other incentives to come onto the market.
"What's far more likely is for cards to start offering other incentives such as lower fees or cash back options," he said.
The Virgin Money credit card, which is offering 0 per cent balance transfers for 15 months, actually charges a balance transfer fee of 2.9 per cent, which is a minimum charge of £3 and no maximum charge. The Capital One card is offering 0% on balance transfers until January 2010, but there is a fee of 3 per cent, again, with no maximum.
So, although zero per cent balance transfer credit cards
are attractive, the balance transfer fee could make the card more expensive than a card with no fee but a shorter 0% period or even no 0% period at all.
Mr Gardner says he expects more card providers to follow Barclaycard's lead – it has cut the transfer fee on its OnePulse card from 3% to 2.5% whilst maintaining a 14 month 0% deal.
And there are also some free balance transfer credit card
deals; the Abbey Zero card offers 0% on balance transfers for six months.
Abbey says it is confident the Abbey Zero credit card will be popular, especially in the run up to Christmas.
"Our research suggests that balance transfers are providing much needed flexibility to cardholders at a time when many are feeling the pinch," said Callum Gibson, Head of Abbey Credit Cards.
"If people are planning to transfer a balance, they should study the small print as fees for transferring balances can sometime cancel the savings made," he said, "the Zero Card is a perfect card for anyone looking to transfer a balance, as you'll avoid average of £48 in BT fees charged by the majority of 0 per cent cards."
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