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By Reno Charlton
News Editor
Capital One has recently announced a special offer of a 0% balance transfer deal that does not charge the now quite standardised ‘balance transfer handling fee’.
Pretty much all 0% balance transfer deals, especially those lasting more than 6 months, come with an administration handling fee of between 2 and 3 percent of the amount being moved between accounts.
Often this fee is uncapped – meaning there is no upper limit on the fee amount, so for larger transfer amounts the handling fee can become quite a costly expense for what should be a way to reduce the cost of debts.
Capital One’s new offer does come with a catch though; unsurprisingly the 0% balance transfer period will only last until August 2008 – approximately just 6 months, which is considerably shorter than the now best-buy of 15 months.
So, in order for any new applicants to really benefit from this "0% with no transfer fee" deal, they will have to clear their balance in full by the time August comes around in mid summer.
Any transferees who do not clear their balance by the end of this 6-month 0% period will either have to switch cards again (with the possibly of paying a transfer fee if another fee-free 0% deal cannot be found) or face paying interest on any remaining balance at the standard rate – currently 15.9% per annum.
Applicants will also need to meet the eligibility requirements set by Capital One, as a ‘platinum’ card this includes having an excellent credit rating.
Lyndsey Burton, Director of Credit Card Comparison Online said “It’s important for people to determine whether or not they will be able to repay their outstanding balance within the six month period to avoid paying the standard interest rate on any remaining balance, which might not take long to amount to the saving made from avoiding a transfer fee.”
“Work out how much you can comfortably afford to repay each month; opting for a longer 0% balance transfer deal may well save you more money if it removes the chances of having a balance leftover when the standard interest rate kicks in.”
While handing over extra cash for an ‘administration’ charge may not be everyone’s cup of tea, it’s clear that savings and costs are calculations to be made on a whole – not an initial situation.
The transfer fee of a £2,500 balance, based on a typical fee of 3%, would cost £75. You’d need to repay around £180 per month to clear that amount in 15 months at 0%.
Alternatively, you’d need to pay back approximately £420 per month to clear the same balance (without fee) in 6 months.
If you had say, £1500 outstanding at the end of the 6 month period (by paying back £180 per month), interest of 15.9% per annum, would cost approximately £20 per month – just 4 months of that and you’d be paying out more than you would of by paying a transfer fee and getting a longer 0% deal.
Take time to compare the 0% balance transfer credit card deals available and think wisely as to how long you really need to pay back your outstanding card debts. Paying a transfer fee may not be so attractive now, but in 6-months time when you’ve still got another 9 months at 0% it might start to look a lot more appealing than paying out 15.9% p.a. on any leftover balance.
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