Thrifty Loans

The number of bargain balance transfers available for credit cards is shrinking. The number of capped fees has fallen by around two-thirds in the last 12 months.

A year ago card customers could choose from 18 different cards, but now consumers have a choice of only seven from only five providers.

Comparison website MoneyExpert.com warns that so-called ‘rate tarts’ – who transfer their balance from one low interest rate to another – are beginning to find their efforts rendered almost pointless by the high transfer fees.

Transfer fee caps generally have a limit of £50 for a transfer, but a balance of £5,000 could be subject to a fee of £150 at one of the common transfer rates of 3%.

The average transferred balance is now £2,666 and the average fee is 2.8%, so with those figures the transfer fee would £74.65.

Although there are over 60 credit cards that charge no balance transfer fee, hardly any come with a 0% interest rate on the transferred amount – which is what most people transferring their balance are after.

Five of the seven cards with capped fees have a limit of £50. They are Citibank, John Lewis, LV=, Virgin Money’s Virgin Atlantic Black and White cards.

Chief executive at MoneyExpert.com, Sean Gardner, said: “In the past, the simple advice for rate tarts was to look for a 0% deal, and then for a card with low balance transfer fees. Now however with the majority of long term 0% credit cards charging 2-3% for a balance transfer, getting a card that caps its fees might be a sensible option if you don’t like the look of one with no fee at all.”

According to MoneyExpert.com there was an increase of 394,000 people who switched their cards in the last six months of 2007 than did in the first six months. That meant that 13% of credit card holders changed their card in the second half of the year.

Another figure from Sainsbury’s Finance suggests that more than one in three credit card holders are currently paying interest on their credit card balances.