Balance Transfer Fees Fall to Lowest Level in Over a Decade
Personal_Finance / Credit Cards & Scoring Dec 18, 2017 - 03:28 PM GMTThe quarterly Moneyfacts UK Credit Card Trends Treasury Report (recently published), which studies the UK personal finance market, highlights that the average balance transfer fee has fallen to reach the lowest level seen in over a decade.
At a time when the length of interest-free balance transfers faces scrutiny, it appears that providers are finding alternative ways to entice borrowers. As a result, the average balance transfer fee has hit 2.03%, down from 2.11% in September and 2.29% a year ago. The current average is the lowest seen since it hit 1.82% in October 2006.
The last quarter has shown some stagnation in the interest-free balance transfer terms, with the average days remaining at 643, but the report highlights a downturn in the number of interest-free days available on interest-free purchase cards. The average number of interest-free days on purchases has fallen from 375 in September to 347.
Rachel Springall, Finance Expert at Moneyfacts, said:
“While it is positive to see the cost of making a balance transfer fall, it’s worth keeping in mind that the most alluring balance transfer cards on the market have interest-free terms of three years or more, but their fees can be as much as 3.49%.
“Although 52% of credit cards on the market offer interest-free balance transfers, this is the lowest percentage recorded since 2006 and in addition, only around half of these cards today will charge consumers 2.50% or less as a balance transfer fee.
“There are still some fee-free balance transfer cards around, but only nine of these have an interest-free term of over a year. Therefore, it’s much more likely that anyone applying for a balance transfer card will be charged for the privilege. This means that any borrower who leapfrogs from one deal to another to get an interest-free offer will be paying out in charges each time.
“As we head towards the New Year, it can be an expensive time for borrowers who might be using a credit card to cover the cost of Christmas. These shoppers will be actively eyeing up the credit card market to find a new deal to spread the cost of the festive season. Consumers would be wise to compare not just the longest interest-free balance transfer cards, but also take note of those with the lowest fees.
“Consumer debt in the UK is rising at a frightening pace, so much so that the average UK household owes over £7,000 in credit cards, personal loans and other borrowing not secured against their property. At the same time, over a third of households have no savings whatsoever* – a worrying statistic, should families continue to struggle with the rising cost of living and need to somehow cover life’s emergencies.”
*According to research from The Money Charity – December 2017
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