Cautious credit card lenders eliminating free balance transfers
Wednesday, 02 September 2009 03:09
The number of interest free credit card balance transfers has declined, according to a report.
Moneynet.co.uk research shows the average balance transfer fee is now at 2.92 per cent with the number of 0% deals offered has dropped to 52 - down from 80 last year.
The study attributes the rising interest rates for cash transactions and increasing cautiousness of credit card lenders to the drop in offers.
"With bad debts causing a real headache for most credit card lenders, it's no surprise to see that the number of interest free balance transfer deals has started to decline," said Moneynet's Andrew Haggar.
He added: "It's not just the total number of zero per cent balance transfer cards that have fallen away, but we've also seen the number of longer term (one year +) offers chopped too."
The average term length of zero per cent balance transfer deals has dropped from last year to 9.7 months. Additionally, the interest payments on cash advances increased to 26.01 per cent.
In 2005 the rate was 19.04 per cent.
"The knock-on effect of the recession and surging unemployment is that defaults are hitting lenders hard and impacting on their profit margins, one of the main reasons that credit card rates remain stubbornly high even though base rate has been slashed to a record low," continued Mr Haggar.
He concluded: "Zero per cent balance transfers still make financial sense if used correctly, and if you have a spotless credit record you may still be able to play the tarting strategy for a while longer."
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