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By Reno Charlton
Staff Writer, 1 October 2008
COMPETITION is great for customers as the balance transfer market continues to prove.
A recent report has suggested that some credit card providers offering 0% balance transfer credit cards may consider cutting balance transfer handling fees in a vie for more custom.
Balance transfer handling fees
Most 0% balance transfer credit cards carry a handling fee of between 2% - 3%, with the latter figure seen more commonly on the longer length offers.
The savings in interest always outweigh the cost of the handling fee. However, they can work out to be a fair cost to anyone who transfers a large balance - up to £30 for each £1,000 transferred.
However, it seems that as the credit card industry becomes increasingly competitive, providers are looking for other ways of attracting new customers and staying ahead of the competition.
Balance transfer fees are already being cut
Some providers, such as Barclays, have already cut their balance transfer fees, with Barclays reducing its balance transfer fee to just 1.7% on one of it's Platinum credit cards (however the 0% balance transfer deal is only for 9 months).
Capital One has also recently cut the balance transfer fee on their 'low rate balance transfer' credit card from 3% to 1.7%. The balance transfer deal here, however, is 5.5% p.a. until 1st January 2011.
Competition costs
Balance transfer fees have been increasing steadily over the past 18 months, with most providers upping their fees from the 2% - 2.5% mark up to 3%.
The cut in balance transfer fees could mean substantial savings for some people, especially those with larger balances to move.
Reports show that around 75% of the credit card market now offers 0% balance transfer deals to qualifying customers, and this means that competition amongst providers is hot.
The competition between lenders has been very noticeable over the last few months, as Capital One knocked Virgin off the 'best buy balance transfer' top spot by becoming the first provider to offer 0% balance transfers for up to 16 months.
Since this push by Capital One many other providers have been upping the length of the period offered at 0% interest. Including, Barclaycard stretching to 15 months and Egg also increased it's offer to 15 months.
The end of the ever-increasing 0% period..?
The reason why credit card providers are changing tactics to cutting handling fees could well be down to providers reaching a peak 0% period.
Over the last few months we have certainly seen providers increasing their 0% periods, but no one seems to be 'bunny-hopping' over Capital One's 16 month long deal.
Compare credit cards
There are currently over 180 0% balance transfer credit card deals on the market, so people may need to do their research in order to get the most competitive deal.
Lyndsey Burton from Credit Card Comparison Online said: "People need to ensure that they research the market, especially with some lenders reducing their balance transfer fees, as otherwise they could miss out on the most competitive 0% balance transfers."
If you're looking to switch cards to your first - or fifth - 0% balance transfer credit card, you need to make sure you compare balance transfer fees on a number of credit cards in order to find the most competitive deal.
Of course, the length of the 0% offer is just as important to take into consideration, as an extra month or two at 0% could save you more money than having to pay an additional 0.5% fee.
Compare 0% balance transfer credit cards here and see which lenders are offering the longest 0% periods and the cheapest balance transfer fees.
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