Boom in 0% credit card transfers

New data shows that the average amount of money people are transferring from credit card to credit card has risen to £1,400.

This represents a 22 per cent rise in the last six months, personal finance website uSwitch revealed today.

But while consumers are taking advantage of the savings that can be made by managing debts in this way, uSwitch has warned that unless they are careful borrowers could see their schemes for saving money turn into costly mistakes.

Recently a number of credit card providers, including Barclays, have imposed fees on the money people transfer onto cards, something many are still unaware of.

"The balance transfer fee levied by some cards can prove costly to those consumers juggling their debt from card to card," said Nick White, head of personal finance at uSwitch.

"While zero per cent offers are likely to remain, other providers may follow Barclaycard's example by charging fees or become more selective about those customers they allow to transfer balances," he added.

Additionally, many lenders make sure any payments a customer makes are used to pay off the balances with the lowest rate of interest, such as a zero per cent balance transfer, meaning customers continue to be charged interest on more costly debts.

But by paying attention to small print, consumers can avoid both of these pitfalls. Nationwide is among the lenders that pays off the most expensive part of a customer's balance first, while lenders like Capital One, Virgin, and Egg do not charge a fee to transfer credit card balances to a zero per cent deal.

Perhaps more worryingly, around 40 per cent of people with interest-free balance transfers do not manage to pay off or switch their balance to new cards before the interest-free period ends.

"It is easy to be attracted to a zero per cent credit card offer but it is important to remember that the interest free period is usually only available for a limited time. After this period, the consumer is charged interest at a much higher rate," Mr White said.

uSwitch points out to forgetful consumers that there are cards available with a low rate of interest for the lifetime of the balance, such as American Express' 4.9 per cent offer.