When we asked people how much a ‘0%’ balance transfer would cost – close to 0% of them actually got it right. I’m not sure 100% confusion was what they were going for.
I always find choosing a credit card a bit of an ordeal. There are so many different things to weigh up: the perks, the rates, the time frames… the list goes on. It’s easy to get confused and the risks of making the wrong choice are high.
And it turns out I’m not alone. Our latest research for our Sneaky Fees and Charges campaign discovered that only one in 20 people understood the true cost of so-called ‘0%’ balance transfer deals. And seven in 10 wrongly thought the transfer was free, even though we showed them the fee.
We also asked people to pick the cheapest credit card deal for someone making a balance transfer. Only a third picked the correct card and another third picked a deal that would have cost them three times as much in fees.
Action from the financial regulator
With levels of understanding so low and the potential costs so high (customers pay around £334m a year in balance transfer fees) we want action on sneaky credit card deals.
That’s why we’re calling on the Financial Conduct Authority to step in and scrutinise these 0% balance transfer fees as part of its investigation into the credit card market. Ultimately we want the financial regulator to take action – one option could be to ban credit card firms from advertising deals as ‘0%’ when there’s still a fee to pay. Another could be to show the fee as a monetary sum rather than a percentage.
Balance transfer deals are of course really handy if you want to pay down debt, but if we can’t understand their true cost these deals could increase costs rather than reduce them.
Have you been caught out by a hidden credit card fee? Would you like to see the back of 0% balance transfer fees?