Consumers express confusion over card transfer fees
Many consumers are struggling to understand the true cost of balance transfer credit card deals which offer enticing 0% interest rates, research by Which? suggests.
Less than one in 20 (4%) people were able to correctly work out how much a balance transfer would cost in a test by the consumer group.
The findings raise concerns that people are concentrating on the interest-free periods being offered, without taking full account of any charges for transferring the balance over to the new card.
Which? wants the Financial Conduct Authority (FCA) to take a closer look at balance transfer deals.
In the test, Which? asked more than 2,000 consumers to assume a debt of £2,400 would be placed on a card with a balance transfer deal and the balance would be interest-free for a period of 25 months. The debt would be paid off within 24 months, before the end of the deal period. They were told to assume that no extra spending would be made on the card. They were also told that there would be a balance transfer fee of 1%.
Only 4% of people correctly said that the 1% balance transfer fee would incur a cost of £24. Seven in 10 (68%) wrongly thought the transfer would be completely free.
Which? also asked people to compare five credit card deals and to pick the cheapest for someone who wanted to make a balance transfer but who would not use the card for spending.