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The latest Moneyfacts UK Credit Card Trends Treasury Report has found that the average balance transfer fee on credit cards has seen a significant fall. This is now the lowest it has been in over a decade.
The figures show that the average balance transfer fee now stands at 2.03%, down from 2.11% in September and the lowest average seen since it hit 1.82% in October 2006. Rachel Springall, finance expert at Moneyfacts, points out that "there are still some fee-free balance transfer cards around, but only nine of these have an interest-free term of over a year and charge no balance transfer fee."
It's therefore likely that anyone applying for a 0% balance transfer card will be charged for the privilege, which is why a decrease in the average fee is good news. However, it also means that borrowers who leapfrog from one deal to another to get an interest-free offer should be wary of looking only for the longer interest-free term and ignoring the fee attached, as they could pay substantial charges each time.
Indeed, the most alluring balance transfer cards on the market may have interest-free terms of three years or more, but they also come with fees as high as 3.49%. Moreover, you may not even be able to find such long interest-free terms soon either, as part of the reason why providers are cutting their fees is to find an alternative way to entice borrowers. While fees are down, the introductory balance transfer term has remained stagnant and terms on 0% interest purchase cards have actually taken a fall.
|Average balance transfer fee %||2.29%||2.11%||2.03%|
|Introductory 0% balance transfer deal term (days)||637||643||643|
|Introductory 0% purchase deal term (days)||294||375||347|
Source: Moneyfacts Treasury Reports
The above table illustrates this, showing that the introductory 0% purchase term has fallen by 28 days to 347 this quarter. "Although 52% of credit cards on the market offer interest-free balance transfers, this is the lowest percentage recorded since 2006," said Rachel. In addition, only half of these cards will charge customers 2.50% or less.
Anyone eyeing up a 0% balance transfer credit card to help pay off their debts after Christmas would be wise to look at the fee as well as the term
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