22nd September 2015
Customers are being caught out by credit card offers they don’t understand, as only one in 20 are aware of the true cost of 0% balance transfer deals, new research reveals.
The consumer group Which? estimates that consumers pay around £334m in balance transfer fees each year.
As part of its Stop Sneaky Fees and Charges campaign, Which? asked people who have a credit card to work out how much a balance transfer would cost – only 4% got it right.
Seven in ten (68%) wrongly thought the transfer was completely free, even though they were showed the fee.
Which? also asked people to compare five credit card deals and to pick the cheapest for someone who wanted to make a balance transfer but who would not use the card for spending.
Only a third (34%) chose the correct card, while another third (35%) wrongly picked the one with the lowest APR, which had a higher balance transfer fee and would have cost over three times as much (£123.02 compared with £33).
One in five (21%) people who took out a new credit card in the last two years did so to make a balance transfer, but the rehearch suggests many may not have understood the real cost of these deals.
Which? has submitted its evidence to the Financial Conduct Authority (FCA) and it wants the regulator to look at balance transfer fees as part of its investigation into the credit card market to stop people being misled, and help them pick the best card for their needs.
It says the FCA should look FCA at whether the fee should be shown as a monetary sum rather than a percentage and even consider banning firms from advertising deals as ‘0%’ when there is a fee.
Which? executive director Richard Lloyd says: “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.”