/ Money

We’ve got zero confidence in sneaky ‘0%’ credit card deals

Credit card close-up

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?


Definitely ‘sharp practice’. The intention is to mislead rather than guide.

@jane-wallace Are you able to show us the details of the survey yet please?

I am confused as to ” clearance on the commercial data from companies involved”.

Are you referring to the company who carried out the survey on-line for Which? plus one other company we are not aware of.

Or are you referring to the card companies? Their data and terms is surely public domain and they need not be referred to for permission.

Which? really has to pull itself together. It seems to straddle uncomfortably a role derived from testing products but now out-sourcing the testing with some dubious results, campaigning on some issues where they get lots of support such as the “calling time on cold calling” which has lead to Which? chairing an industry committee and a big fat zero on ending the problem, and this research which, if true, needs serious debate.

And this debate based on a proper reveal of the questions and answers.

When a bank states that it is so easy to pay by card what they are telling you is its even easier to take it from you

Malcolm is right. If the banks are charging it is down to the individuals credit rating and overspending history. It is far too easy to get a credit card and run up debts, with banks writing off debts up to £14.000 for one guy recently, why did the bank not stop the card when the debt got to a point past the individuals income.

A number of commenters here have upheld the principle of ‘Let the buyer beware’. While this is a sensible guideline, it shouldn’t absolve sellers from responsibility to be open and honest. No company should be allowed to make headline claims that distort (or might reasonably be considered likely to distort) a potential customer’s perception of a specific offer as a whole. Finance companies are as entitled to seek profit as any other business, but only as long as their own companies are being run in a proper way. The number of financial scandals that continue to be reported suggests that this is very often not the case. And the word ‘mis-selling’ should be retired immediately. How often in real life do you hear someone say, “Oh, I’m so sorry, I sold you that by mistake”? And if someone did say that to you, how gullible would you have to be to believe the lying serpent?

i do not see that there are sneaky fees added it always states that a balance transfer fee will be added and you can easily work out how much it will be and wether it is worth you using this offer

I think most people agree that the real crux of the problem is not that people are being duped. When you transfer, they make the fee absolutely clear, sometimes more than once. You can’t miss it. The problem is one of advertising standards – it’s not a free transfer – obviously. Which? should simply be pushing the credit card suppliers to remove the implication that it is free. It is not good enough for the suppliers to claim that the adverts are ok because they specify ‘0% interest’ rather than a ‘free transfer’. Come on Which? Bring them to book for something useful!

Martyn Thompson says:
26 September 2015

I have had a great deal of respect for Which campaigns which have addressed many important issues, that was until now! This campaign seeks to make an issue out of somthing that isn’t an issue! I have received many of these offers (and used one once) and on each and every occasion the balance transfer fee was quite clearly stated. They are, in fact, a very cheap (far cheaper than a loan from a high street bank!) and useful way of managing your money if used correctly.
How does Which suggest the Credit Card companies do it differently? they can’t use APR’s as this varies according to the amount and term, the only other way would be to put the transfer fees in large numbers right across everything just to accomodate the few people who can’t be bothered to read the application form. I would also suggest that if someone is too illiterate or lazy to read the terms, which are quite clearly stated, then they shouldn’t be trusted with a credit card in the first place.
I strongly suggest that Which quietly drop this campaign and focus on something much more important and is a real problem.

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Many fought and died in this country to bring some equality to it

They did? Who were they, exactly?

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Ah – the”Peterloo Massacre”, the main outcome of which was the setting up of the Guardian, ISTR. But I’m a little curious about the relevance of events in the early 19th Century to the Ts and Cs of Credit Card balance swaps. Perhaps you could explain further?

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They use devious means of obtaining money from those who can ill afford it the aim in this new society is to get everybody into debt

So do you think this is a conspiracy?

@jane-wallace. in answer to my question above you say “we’re trying to get the report on the website for you to take a look but we’re having to check with the companies referenced that there is no commercially sensitive information in there.”
On reflection, was this not a question devised and analysed by Which? If so, why can you not publish the details? What might be “commercially sensitive”?

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Not being tricky at all, merely asking a question.

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an upmarket troll…

:-)) Never been called that before. My views of society aren’t really relevant, though, are they? What I was curious about was how you equated the subject of the current topic with historical events of little apparent relevance. When someone uses phrases such as “society of elite who think they can walk all over those 99 % who make up this country “ I believe it’s reasonable to ask them about their reasoning, which includes whether or not they believe there are conspiratorial forces at work. If you’d prefer not to answer the question, that’s entirely your right.

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That’s extremely commendable as an approach to society. And thank you for engaging.

I think the weasel wording used by the financial services industry has a lot to do with the lack of understanding.

‘Credit’ is a ‘loan’, which if not repaid in full becomes a ‘debt’, so a ‘credit’ card is really a ‘debt’ card [a ‘debit’ card being a ‘payment’ card in true language]. But the banks & co call this debt a ‘balance’ because it sounds better. They offer to pay off your debt with the original lender, for which there is a cost because they have to compensate that lender for the loss of future interest, and there is an administrative expense in closing the loan on one side and opening a new loan on the other. It is not surprising that many people do not understand that this is taking place because it is not made clear. So there is a charge for that, which – using old and obscure language – they call a ‘fee’. This fee has to be paid somehow but the new lender can wrap it up in a variety of ways. It can be more, less, or just the same as the actual cost to the new lender. It can be payable immediately, in whole or in part, or spread out by absorbing it in the interest rate on the debt that has been taken over by the new lender or through an extension of the repayment period, or by any combination of these arrangements. It’s not necessarily sneaky, but it’s jolly complicated, and since each competing lender has their own recipe for the deal it’s very difficult to compare one offer with another.

The basic debt still has to be paid back month by month but, depending on the way the transfer has been wrapped up, there may be a period when interest is not charged, or a lower rate is charged, or sometimes the new lender goes without that interest altogether [as part of the price of capturing a new debtor], or they recover the interest over time through the rate of interest charged on the debt and any increases in the debt.

What is often not appreciated is that, once you have a credit card the company can move the interest rate up or down to suit itself and you either have to accept it or pay off the outstanding debt plus any interest due. When you have a low debt level the interest rate will be in the teens%. If you start to borrow more [e.g. by putting more expenditure on the credit card or by repaying a smaller proportion of the debt each month] your interest rate will go up into the twenties%. In other words, as soon as you need a bit of personal quantitative easing they sting you for it. That is a sneaky trick in my view. The banks & co want new customers so they can exploit this feature in the future and they make tempting offers that can easily be misunderstood in order to get them. There is no doubt that switching credit cards can be a useful way of gaining some financial breathing space because , in effect your debt is being rescheduled on, apparently, easier terms. But, all is not what it seems, and the outcome can easily be that you have unwittingly increased your debt and attracted a higher rate of interest into the bargain.

There is a fine line between making loans [credit] easily available to people who need them and allowing people who might not fully understand the consequences, or who cannot understand the terms & conditions, to have easy access to them.

In the absence of any facility to discuss the pros and cons of a transfer with a representative of the credit card company I think it should be mandatory for a clearly set-out worked example [what they used to call an ‘illustration’] to be supplied on paper to the customer before a contract can exist, This can easily be done on-line but it should also be supplied to people who apply by post or by telephone. This should go through the process step by step and show how much is paid and when, what it is for, and how it is worked out.

I agree with Jane that there is no place for terms like ‘0%’ in the marketing of these transfer offers, and that the amount payable to get the transfer should be shown as a cash sum.

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John, I, like perhaps you, think credit (as in a card) is too easy to obtain (or too easily given). Many people these days have little concept of the best way to handle their money – it is too easy to buy things you’d like when you don’t have to part with cash.
However, back to the topic – transferring debt for a fee with no interest for a set period. My experience of this is that the terms are clear – you pay a % of the amount you want to transfer up front, and then have a number of months to pay the debt back without any further charges. That seems useful for those who have a struggle to pay interest to their existing card provider. I’ve had approaches from only one company, and that was easy to understand. I still want to see the information from Which? on which this article is based. If companies are making offers in ways that are deceitful I’d like to know who they are and how they do it.

Yes, I thinks it’s clear too, but the research seems to indicate that a lot of people don’t get it. I think the problem is because it is not explained well enough that the transfer is not just an administrative exercise but has to be related to the amount of the debt being transferred in order to compensate the original lender for the future loss of interest, which is obviously pro rata to the amount of debt outstanding. I certainly think that credit leading to debt is given too readily and without regard to the ability or tendency of borrowers to repay it which then leads them into more difficulty. I think the lead-in article could have been more informative but it’s difficult to fit such a big topic into a small space. I am also looking forward to a link to the evidence.

I agree with Jane that there is no place for terms like ‘0%’ in the marketing of these transfer offers, and that the amount payable to get the transfer should be shown as a cash sum.

I suppose it all depends on how far we should protect individuals. The general tenor of this topic has been that the terms are shown clearly, as is the fact that there’s a fee payable. If you Google “Apply for a credit card” you’re offered more than 100 cards, and you can filter the search by APR (fairly meaningless for reasons I don’t really understand) , transfer fee and several other criteria. It’s true that the blurb often makes a lot of the “0%” bit, but despite agreeing with your overall assessment of the credit card situation we have to accept a couple of things: firstly, financial management isn’t easy for some people and, secondly in our society we have to accept that free lunches are something of a myth. The credit card per se offers a form of revolving loan, and while it’s clear that the banks exist to make money and will do so at every opportunity it’s equally clear that many simply don’t comprehend that.

I suspect one solution is to ensure all terms are spelt out clearly, although I’ve never seen a card which hasn’t done that, but also in the long term perhaps we need to focus on education and start to teach children how our fiscally-oriented society operates, so that when they reach the age at which they can use a credit card they’re better prepared to deal with the issues.

Edit: I see Malcolm R has made similar points.

Education is the key but lenders mustn’t use confusing language. Apart from anything else, in reputational terms it suggests they are exploiting people’s unintelligence, which is not a worthy attribute. I don’t know the percentage but a significant proportion of the UK population do not have easy use of English or as a first language and the financial services industry should cut its suit accordingly if it wants to regain our trust.

People can could learn a lot free of charge from reading Which? Conversation!

a significant proportion of the UK population do not have easy use of English or as a first language

..and that’s a whole other subject, of course.

This string seems long and diverse. If you use a 0% balance transfer card use it for nothing else.
Make sure you have a regular payment set up with your bank. Mark in a calendar a month before the expiry date of your card (phone the cc company to confirm ) so that you have enough time to move any outstanding balance to another card. You can get 40 monthso for 3% (virgin)which is a fab deal and leaves you cash to earn interest elsewhere.

Yes David, that is indeed the way to do it, but a lot of people to whom the promotions of balance transfers are aimed at are on the financial edge and are basically borrowing from Peter to pay Paul, not for the purpose you are outlining, i.e. savings management.

It is also unfortunately the case that many people in difficult financial situations see only what they want to see in the way these offers work.

I am not sure how much should be done to protect people from their tendency to get caught in these traps. I just think the financial services industry should make sure it is not exploiting people’s lack of knowledge or capability in managing their financial affairs.

John, providing the terms are clear (I’m hoping Which? will show the details of their research so we can see) then one good thing about these 0% interest deals is that for someone who has temporarily got into financial difficulties has a way of cheaply dealing with their loan. Far better than using payday lenders. For those who don’t understand financial matters the Citizens Advice Bureau would help them get to grips with their problem.

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You can not blame banks and credit card companies that most people are iliterate
imbeciles and can’t add 2+2

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