How to avoid the new transfer fees

How to avoid the new transfer fees

If you are still paying off your Christmas and January sales debts, switching to a cheap credit card deal could be one of the best ways of getting your finances back into shape. Halifax this week announced that its "online exclusive" One Card, offering 0% interest on both balance transfers and purchases for 12 months, will be available until the end of February.

This offer, which features in the Moneyfacts "best buy" tables, is only available via halifax.co.uk/creditcards. After the introductory period is up, the typical APR is 15.9%.

"This is a market-leading card. People need to act fast if they want to take advantage of this great deal," says the bank. But there is a catch. Like most card providers, Halifax charges a fee for balance transfers, and in the case of this card it is a chunky 3% of the debt.

It is getting harder to find a card that does not impose a balance transfer fee, though there are still a few providers that don't. The average fee seems to come in at around the 2%-2.5% mark. Two or three per cent might not sound much, but this is an up-front charge, based on the entire balance.

Perhaps as a reaction to the unpopularity of this new breed of fee, Yorkshire Bank and Clydesdale Bank recently announced that their 2% balance transfer fees are being waived for new customers transferring their card balances to one of their six-month 0% introductory deals.

The offer applies to either banks' Gold Mastercard, but ends on.....continued below

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February 28. The 0% rate also applies to purchases. After the six months are up, the typical APR in both cases is 14.9%. The Yorkshire Bank and Clydesdale Bank cards also throw in a concierge-style travel and leisure advice and booking service provided by Travelex.

Norwich & Peterborough building society is one of the very few other providers offering 0% on balance transfers (for six months) with no balance transfer fee, but says on its website that "due to the high volume of applications received, we are currently only able to offer our credit card to existing customers of the society". A spokeswoman adds: "We were flooded. In order to keep service levels where we wanted to have them, we had to just keep it to existing members".

Another provider that doesn't impose a balance transfer fee is Sainsbury's Bank. Its platinum credit card has a rate of 5.94% a year for the lifetime of balances transferred in the first six months, plus 0% interest on purchases for 10 months.

Balance transfer fees can mean that many people who switch cards to benefit from a 0% offer could end up worse off than if they kept the debt on their existing card, according to recent research from Marks & Spencer Money - another company that does not charge a fee. It found that the cost of borrowing on a card with a 0% balance transfer period of six months and a 2.5% fee is effectively an annual equivalent interest rate of 8.9%. If the fee is 3% it would be 10.7%.

M&S Money's &MORE credit card offers 0% interest on purchases for 12 months, plus balance transfers charged at 3.9% a year for the lifetime of balances transferred within six months of the account being opened. You also earn reward points.

r.jones@guardian.co.uk

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