Jan
10
Zero Rate Balance Transfers: Rest in Peace
Filed Under News, Tax, credit cards
It could be the end of 0% balance transfer deals on credit cards as card issuers are forced to introduce charges in order to stem the losses caused by “rate tarts” who continually switch from one zero rate deal to another.
Last week Mint, owned by Royal Bank of Scotland, joined the ranks of providers such as MBNA and Barclaycard when it became the latest card issuer to impose a one-off fee on balance transfers form other credit cards onto their 0% deals.
Until the summer last year transferring balances to a 0% or low rate credit card was free. Last August that all changed as Barclaycard heralded the impending demise of free balance transfers when it became the first card issuer to introduce fees for transfers, charging 2%, up to a maximum of £35, of the total amount transferred to its 0% rate.
MBNA, which issues hundreds of cards including many offering 0% on balance transfer for 9 months, followed as it added a 2% charge, minimum £3 and maximum £50, to total balance transfers across the majority of the cards.
“The imminent demise of completely free borrowing should not come as a shock”, says Charles Edwards, author of “Don’t Pay Interest”. “Any technique which enables borrowers to profit and ends up costing the credit card companies will eventually be killed off”.
“Interest holidays on balance transfers, fee-free credit card cheques and even cashback on balance transfers are all dead and buried. It is not surprising that something as expensive for the credit card companies as fees free 0% balance transfers should be facing a death sentence”.
Other card issuers are expected to follow suit and introduce fees for balance transfers as they try recoup some of the losses incurred as a result of borrowers who endlessly revolve their debts form one 0% deal to another.
The advice for now. “Make use of fee-free balance transfer deals while you can”.
