In an effort to claw back revenue from loss-making 0% credit cards, providers have been making quiet changes to their terms and conditions.
You may have noticed that the current 0% credit card balance transfer deals have been losing a little of their spice in recent months. It's hardly surprising really.
Card providers have been losing money hand over fist with their interest-free offers and, of course, they've now been told by the Office of Fair Trading to cut their penalty fees to a maximum of £12, which has further reduced their ability to make money out of us.
So, how are they fighting back? As ever the devil is in the detail, if you're contemplating a new 0% credit card deal, check the small print for any of the following:
Order of repayments: If the interest-free period only applies to transferred balances, you could find yourself paying interest at the full whack on any new purchases. Most card issuers put your new purchase debt at the back of the queue when allocating your monthly repayments thus ensuring they're the last debts to be paid. It means your purchase debt keeps growing at a high interest rate until your balance transfer is paid off, which rather defeats the object of switching!
Balance transfer fees: It used to be free to transfer a balance to a new 0% credit card but more and more card providers have introduced fees of between 2% and 3% over the last year. Most have a cap of around £50 but some card providers have even removed this which makes the transfer of large balances unattractive.
Introductory periods: These have been getting shorter in recent months. Whereas it used to be easy to find 0% deals lasting 9 months or more, there are now only a handful of cards offering longer periods. The resulting need to shuffle debt more frequently adds to the hassle factor for the customer.
Increases in interest rates and charges: Where the interest-free deal applies only to balance transfers, rates for new purchases and cash advances are being increased.
Finally, it's important when switching credit cards to check who's behind the company providing it so that you don't find yourself applying for, effectively, the same card provider. For example, MBNA is behind Virgin's credit card. You should not, therefore, try and transfer balances from an MBNA card to a Virgin card because you'll get turned down and, if during the application process you've given permission for them to carry out a search, it will show up as a refusal on your credit report. And that won't do your credit rating any good.
> Use the Fool to compare credit cards and find the best 0% balance transfer deals.