The average balance transfer fee has increased 0.5% to 2.67% in just one year according to analysis by MoneyExpert.com.
Since they were forced to cut charges, credit card firms have raised the average balance transfer fees for switching debts by 0.5 per cent to 2.67 per cent over the past year in a bid to earn back the cash they’ve lost from low fees for missing payments and going over credit limits.
Currently 160 credit cards offer balance transfer fees ranging from 1.75 per cent to three per cent while a further 90 cards on the market charge a flat three per cent fee for the same thing meaning that a transfer of £5000 will cost £150 in fees.
MoneyExpert.com is advising customers who think that switching cards is the best way to get a low interest rate to also focus on the transfer fees they may be forced to pay out.
As from August 2006, the Office of Fair Trading told credit card companies to limit default charges to £12. Sean Gardner, Chief Executive of MoneyExpert.com, explains:
“What goes down must go up seems to be the experience in the credit card industry. Card firms have lost out since they were forced to cut so-called default charges so now customers are losing out as balance transfer fees increase.
“Analysts talk about the so-called water bed effect – cuts in one area mean increases in another area. And that has been the experience for credit card customers with new charges appearing to replace the old charges which have been cut.
“Customers should of course still switch credit cards in search of better deals and particularly if they are paying standard rates of 16.9 per cent or so on debts. But they’ve got to remember there is a cost involved and factor that into any savings they make.”
Currently only 34 cards charge balance transfer fees of two per cent including ones from NatWest, Royal Bank of Scotland and Stroud and Swindon Building Society. While only Capital One currently charges a balance transfer fee of less than two per cent – offering a 1.7 per cent balance transfer fee on its Platinum Mastercard.
Find out more about credit card