Balance Transfer Fees Fall But Interest Rates Going Up

Balance transfers from one credit card to another have long been one of the most popular offers of credit card companies. These offers are very convenient for credit card holders who want to move their balance in an existing credit card line to another credit card line which, ideally will charge a lower interest rate compared to the current one. The most popular, perhaps are the 0% interest rate balance transfers. With these offers, card holders pay 0% interest rate for their transferred balances for a limited amount of time. However, when the economic crisis and the resulting credit card crisis hit, these offers became rare.

As credit card companies try to recoup losses caused by the slow economy, they are struggling to find the perfect balance of maintaining profitability while still making these balance transfer offers attractive to consumers. Now that credit card companies are seeing some of their most lucrative sources of profit begin to close down, partially due to the credit card crisis and partially due to the Credit CARD (Card Accountability, Responsibility and Disclosure) Act, credit card companies are scrambling to find other avenues of profit. These balance transfer deals seem to be among the most lucrative ones.

The financial website MoneyExpert.com recently released figures showing the current trend in the credit industry regarding balance transfer deals. According to their figures, the number of credit card companies offering card holders the chance to move their outstanding debts from one card to another without any fees has actually risen to 20% for the past year.

However, while the number of no fee balance transfer offers did increase, the average interest rate charged on balances moved from one card to another has also increased. The average interest rate for balance transfers that charge transfer fees is at 4.26% while for balance transfers that do not charge fees is at 7.03%. Transfer charges for 0% balance transfers can go as high as 15.9% of the balance transferred. There are still a few providers that offer 0% limited time balance transfer deals and do not charge transfer fees such as Northern Bank. However, these companies are the exception rather than the rule.

Figures from MoneyExpert actually show that, for the past few years, credit card companies have been increasing steadily their transfer fees for 0% balance transfer offers. Right now, the typical transfer fee for 0% interest balance transfer packages is at 2.4%. MoneyExpert head of research Pierre Williams summed it up, saying, “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.”. He also said, “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”.