0% balance transfers-what's in it for the banks?

mustachio

I am considering a 0% balance transfers as a way of settling a debt at a lower rate.

My question is what is in it for the banks to offer 0% balance transfers? Is it based on the assumption that a fair amount of people don't clear the debt within the agreed time? Any ideas?

Thanks in advance.

[Deleted User]

Yes. Plus fees, purchases, people losing the 0% offer through breaching terms, cross sell opportunities etc.

grumbler

mustachio wrote: »

My question is what is in it for the banks to offer 0% balance transfers?

You are asking this like it's the only business in UK with introductory offers for new customers. In fact it's a typical business model in UK based on the apathy of UK population unwilling to switch/change anything.

Banking, bookmaking/gambling, insurance, mobiles, utilities - to name a few.

Is it based on the assumption that a fair amount of people don't clear the debt within the agreed time?

If they clear the debt, they are even more likely to stay with the new provider.

sunnyflower

I've often wondered that as well Mustachio:undecided

Another puzzle...I have just applied for an M&S card ( thanks MSE, looking forward to my £30 voucher :j:j).

I won't be using it much, and have opted to pay the whole balance off, by direct debit, every month. What's in it for them? The only thing I can think of is my likelihood to shop at M&S to accumulate Sparks points.

bengalknights

The bank will receive a cut of the merchant fees from Visa/MC

nb0825

There's a multitude of reasons. The big money is when you don't clear the debt within the 0% period and you start paying them interest and not the previous debt owner. The only way the CC issuer actually loses money is when you never use the card and only pay off the debt, followed by cancelling the card. While most savvy people do this, the large majority of the UK does not.