Credit cards battling over fees

Credit card providers are cutting balance transfer fees in the battle for customers at the same time as they cut back on zero per cent transfer deals, according to new research from MoneyExpert.com.

The number of cards with no balance transfer fee has risen by just under 20% in the past year with MBNA the latest provider to launch a balance transfer card without a transfer fee, research for the independent price comparison website reveals.

There are now 69 cards offering balance transfers without a fee compared to 58 at the same time last year reversing the trend towards increased balance transfer fees.

However customers are urged to make sure the numbers add up as paying a balance transfer fee can still be worth it if the card on offer provides a longer interest-free period.

Someone with a £5,000 balance opting for a card with a 2.98% transfer fee and 0% APR on balance transfers for 16 months - the longest zero deal currently available - would have to pay back around £312 a month to clear the balance in the 0% period.

Doing the same on a card with no transfer fee but a 0% period of just 12 months would require monthly payments of £417 a month.

However, for credit card users with smaller balances opting for a shorter 0% deal with no transfer fee would be the better option. A credit card balance of £1,000 could be cleared within 12 months with monthly payments of just over £83.

Pierre Williams, Head of Research, MoneyExpert.com, said: “Card companies were battling over the longest length of balance transfer deal, and transfer fees crept up. Now they are cutting back on extensive 0% deals and instead looking to offer fee free transfers.”

“Clearly an increase in cards offering balance transfers without fees is good news for consumers, but we’re also seeing the lengths of introductory deals decreasing. The number of cards with 0% deals lasting more than 12 months has fallen significantly in the last year so card users will have to consider whether they can clear their balance in the allotted period.”

Average balance transfer fees across the market currently are 2.4% unchanged from a year ago when they had just hit a peak following years of gradual rises. Barclaycard was among the first to actually cut fees last year when it reduced its charge from 3% to 2.5%.

Credit cards have typically offered introductory APRs on balance transfers for periods ranging from upwards of three months, but typical lengths of deal are now decreasing. MoneyExpert.com research has found the average length of deal to have fallen from 10.3 months this time last year, to 9.6 months now. And the number of cards in the market offering 0% deals for at least 12 months has fallen by over 25% in the last year from 102 to 74.