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Is It The End For 0% Balance Transfers?

It's been almost six years since the launch of the first 0% balance transfer deal by Egg and the credit card borrowing market has changed a lot since then. No-one could have foreseen that Egg's preferential rate would pave the way for a new way for large debtors to manage their loans and debts.

It's called rate surfing or credit card jumping. It works like this. If you have a large balance on one of your credit cards or an outstanding loan amount, you can transfer that balance to a credit card with a preferential 0% balance transfer rate. This saves you hundreds of pounds in interest and means you can pay off the balance sooner. People have turned this into a fine art, moving balances from card to card every six, nine or 12 months.

Credit Card Companies Fight Back

While this has been good for consumers, credit card companies have not been as happy. Rate surfing and credit card jumping cost them hundreds of thousands of pounds in lost interest every year. So it's hardly surprising that the credit card companies are fighting back with the introduction of balance transfer fees. These are fees that apply as soon as a balance transfer is approved. The lender gets its money up front and consumers still get a 0% balance transfer deals.

It looks like those deals are going to become less and less attractive, though. By the end of last year 45% of credit card companies were charging balance transfer fees of 2% or 2.5% of the amount transferred. And even some of those that didn't put limits on the period for which the 0% balance transfer rate would apply.

In some cases there was a maximum fee cap, but in many cases there wasn't. Since then, balance transfer fees have become standard and the fee being charged looks like it's going to rise, with uncapped fees of 3% becoming a real possibility.

Credit card tarts are being penalised by tighter lending criteria. Some credit card companies are even capping the amount that can be transferred at the preferential rate. So it looks like the attractive 0% deal may soon be a thing of the past. It may be time for big borrowers to find other ways to manage their loans and debts.