The cap no longer fits on credit cards

The number of credit cards with capped balance transfer fees is dwindling dramatically, according to MoneyExpert.com.

The independent financial comparison website says that a year ago consumers could choose from 18 different credit cards with capped balance transfer fees, whereas now that number has dropped to just seven offered by only five different providers.

And with the average balance transfer now as high as £2,666, MoneyExpert.com is warning so-called ‘rate tarts’ with balances of at least £3,000 that they could incur fees of over £100 just to transfer credit to a new provider.

Sean Gardner, Chief Executive of MoneyExpert.com, said: “Credit card switching is big business. Someone switches a credit card every two seconds and there are very few cards out there that still do not charge a fee for the privilege.

“Consumers looking to move credit card provider will be in for a nasty shock if they don’t choose a card with a capped balance transfer fee – so much so that the process of switching may be entirely pointless if the fee is too extravagant.”

According to MoneyExpert.com the average balance transfer fee is 2.8 per cent of the amount transferred, meaning the typical cost of a balance transfer is some £74.65.

And customers with higher balances could incur much larger fees – a £5,000 balance transfer could cost as much as £150 with a three per cent fee, which is not unusual.

However of the cards with capped fees, five of the seven limit the amount you pay to just £50, and three of those also come with introductory zero per cent deals. Over 60 credit cards do not charge a fee at all, although only a handful also offer zero per cent balance transfer deals. These include Norwich & Peterborough Building Society and Ulster Bank.

The providers that offer credit cards with capped balance transfer fees are: Citibank, John Lewis, LV= and Virgin Money’s Virgin Atlantic Black and White cards.

Sean Gardner continued: “In the past the simple advice for rate tarts was to look for a zero per cent deal, and then for a card with low balance transfer fees.

“Now however with the majority of long term zero percent credit cards charging two or three per cent for a balance transfer, getting a card that caps its fees might be a sensible option if you don’t like the look of one with no fee at all.”

MoneyExpert.com research shows that some 394,000 more people switched cards in search of better deals during the second half of last year compared to the first six months – 13 per cent of credit card customers moved provider in the past six months compared to 12 per cent in the first half of 2007.

MoneyExpert.com says that regularly reviewing providers for a range of services is good practice but warns consumers that it might not always make financial sense to switch.