This is a guest article from credit card comparison site, UK
Over the past few years, 0% balance transfer fees have been the credit card industry’s goose that lays the golden eggs.
The offer both builds a better reputation for credit card providers among consumers – a credit card which actually helps people with high-interest debts! – and it’s popular among providers for the same reason any credit card deal is… because it makes them plenty of money. Yes, he deals are by no means the kindness that they appear to be. High rates of credit card debt after the 0% deal after notoriously common, either because cardholders have failed to pay off the balance transfer or because they just go on to run up another debt, but the most obvious, yet least understood, portion of 0% balance transfer credit cards’ profit margins are balance transfer fees.
Balance transfer fees The fees tend to range from 2 to 4% and are charged as a one-off payment when cardholders move their balance from the high-interest credit card to the introductory offer. They can cost new credit card holders, already paying out large amounts in monthly interest, hundreds of pounds. Because the interest rate looks fairly low, many credit card holders don’t consider how paying that one-off fee compares to a standard credit card interest rate. If a balance is fully repaid by the end of an introductory 0% balance transfer period, a fee of 2% is equivalent to the cardholder paying a 7.0% annual interest rate over six months. Consumers must walk a tightrope if they want to make a 0% balance transfer deal worthwhile. On the one hand, fees must not exceed the amount they save by moving from a high interest to a 0% deal. On the other hand, the lowest fees are often offered alongside the shorter 0% balance transfer periods, increasing the risk that the cardholder will end up paying interest on the balance that they moved. Comparing products carefully is the only defense against yet another sneaky move from credit card providers.
References: Balance Transfer Magic by Lawrence D. Goldberg
About Author: This is a guest post from credit card comparison site, Choose. This site specializes in 0% balance transfer credit cards.
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