Balance transfer charge?

TonyEVS

Ive no doubt i am mistaken in my thoughts but have something bugging my brain. Under the consumer credit act all fees have to be included in an APR statement. How then can there be a ZERO % APR if there is a balance transfer fee?

sashacat

now, that is a good question

lindabea

Ehhh - donno. But I wouldn't lose sleep over it!!! Perhaps this is a question for the FSA to address.

PBA

Simple answer - because it's not 0% APR, and not advertised as such. The ads typically say 0% pa for xx months, xx% APR (variable). The APR quoted has to assume that the account is held indefinitely, so it's just based on the standard interest rate without taking promotional offers into account.

Martinslovechild

The APR accounts only for interest payments and doesn't include fees such as late payment fees, balance transfer fees etc. Balance Transfers can therefore be classed as 0%. An APR must still be quoted, however, unless the BT rate is 0% forever.

You may, therefore, see a card advertised as '0% for 9 months, typical APR 13.9%' which means that once the 0% offer expires, you revert to a standard rate of 13.9%. The fee is a bit sneaky because it allows the card companies to claw some cash back without it affecting their position in the Best Buy tables.

You may want to blame MBNA for it was they who started this trend, but they only really borrowed it from mortgage companies who have been hiking charges during the past couple of years in order to allow them to lower their mortgage rates - stand up Northern Rock, who charge an arrangement fee of something like £695 and an exit fee of £295, but they still manage to figure highly in the Best Buy tables.

It's these subtle tweaks to financial products that make all the difference and show just how difficult it really is for consumers to determine the best deal.