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Category: Credit cards Date: 1/12/2012
People looking to begin the New Year with a new credit card have been urged to watch out for high fees.
Credit card holders can get up to two years at 0% interest on balance transfers but fees charged to move balances are at their highest level in four years, moneyfacts.co.uk research shows.
On average, balance transfer cards offer 356 days of interest free debt transfer compared to 295 days three years ago.
But, the average balance transfer fee is now at its highest level in four years at 2.93% compared to 2.88% a year ago, 2.65% two years ago and 2.63% four years ago.
It means that a credit card holder transferring a balance of £3,000 would have to pay an average fee of £87.90.
Somebody with a £5,500 balance would face forking out £161.15 if their provider was charging a transfer fee of 2.93%.
Rachel Springall, spokesperson for Moneyfacts.co.uk said that customers moving their credit card debt should shop around for a 0% deal, but warned that they should be aware of how much it is going to cost them to switch.
"The Barclaycard Platinum Balance Transfer Visa has a two year interest free period for balance transfers, giving customers the opportunity to reduce their debt interest free," she commented.
"Customers need to watch out for any fees that may apply, as these are at the highest level for four years."
Separate figures from Monyefacts.co.uk show that the average purchase rate for a credit card is currently 18.3% APR.
It means on the common minimum repayment of 1% or £5 a month, a balance of £350 would take over 21 years to repay costing £946 in interest. However, if that balance was £1,000 the interest would build up so much that the balance would never get repaid.
"Customers should always aim to pay off more than the minimum repayment on a credit card and work towards paying off the whole balance before interest charges start to apply," cautioned Ms Springall.
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Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at anytime.