Balance transfers appear next on the FCA’s hit-list.
Just when you thought there was nothing left for the Financial Conduct Authority (FCA) left to tackle, Which? The consumer group, have announced today that we are not necessarily getting all the relevant information when it comes to 0% balance transfers.
£334m is paid in balance transfer fees each year
Not for the first time consumers are being misled when it comes to hidden fees.
Which? have called for the FCA to investigate these hidden fees as part of their investigation into the credit card market.
The consumer group has estimated that £334m is paid in balance transfer fees each year, yet the bulk of consumers do not fully understand the costs involved.
1 in 5 people who took out a new credit card in the last two years did so to make a balance transfer
Which? executive director, Richard Lloyd, said: “Too many credit card deals appear to include sneaky fees designed to catch customers out. With millions now using credit cards to pay for essentials, it’s vital that the Financial Conduct Authority takes action to ensure consumers are well protected. We want the regulator to scrutinise balance transfer deals and make it easier for people to understand their true cost.”
Balance transfers can help you to lower the cost of your credit card borrowing and consolidate multiple debts, potentially helping you lower your outgoings as well.
But, in the interest of fairness, any fees involved in the transfer should be made clear and transparent for all.
What it costs for balance transfers
Banks and credit card companies often charge a fee for balance transfers. These fees usually depend on the size of the transfer and can vary according to the length of the introductory period.
Make sure you check the fee and take this into account when calculating any potential savings.
Never make purchases with a credit card that you have just made a balance transfer to.
You will just add to your debt and the likelihood is any new purchases you make will usually be charged at the card’s standard APR unless specified by the provider.
If you originally applied for a credit card to help improve your credit rating and found yourself trapped after getting behind on your payments, transfer the balance using the points above as a guideline, pay off the debt over a period of months and sign yourself up with a less risky option.
In conjunction with their partners CashPlus, icount Money can offer you a credit building facility known as Creditbuilder™. It is an alternative way to have a positive impact on your credit score without the risk of getting yourself into any debt. you can apply for an icount prepaid account with optional Creditbuilder™ here
He is also a contributor to Clear Debt, ICOUNT Money and M1 Debt Advice blogs discussing all things personal finance.