Credit car balance transfer fee war hots up

A new credit card balance transfer war is predicted to start, with firms dropping their fees to entice customers to 0% deals.

Zero per cent transfer deals have long been popular with consumers, but in the last few years as firms started to make losses as the rate tarts switched as soon as 0% deals closed transfer fees were introduced.

Research by Abbey shows 22 per cent of people intend to transfer a balance in the next year.

The average amount transferred is £1,603.

Standing at as much as 3.5 per cent of the balance transfer, credit cards have started to cut back fees to gain customers – but the average balance transfer fee stands at £48.

Data from Moneyexpert.com show balance transfer fees have risen consistently in the last 18 months from 1.7 per cent in January 2007 to 2.4 per cent now.

Barclaycard has cut its fee on its OnePulse card to 2.5 per cent on its 14-month 0% interest deal.

Abbey is now introducing the Zero Card that has no balance transfer fee.

Sean Gardner, director of MoneyExpert, said: “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.

“Deals of around 15 months, from the likes of Virgin Money and Capital One, currently top the table, and it’ll prove very difficult for other providers to better that.

"What’s far more likely is for cards, such as the OnePulse, to start offering other incentives such as lower fees or cash back options."

Callum Gibson, head of Abbey Credit Cards, added: "The research suggests that balance transfers are providing much needed flexibility to cardholders at a time when many are feeling the pinch.

"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."