Warning - 'Free' 0% balance transfers can wreck your credit score and are rarely free

User972475987

"Free" 0% balance transfers can be bad for your credit score and are mis-labelled. 

If you have built up credit card debt, your interest repayments are high and your credit rating is low, 0% balance transfers can sound like a great option.
However ... 

1. Every time you do a balance transfer the card company does a credit check and more than one of these every 3 - 6 months can ruin your credit score.  

2. Most of them allow you to balance transfer 90 % - 95% of the new credit limit, which sounds like a boon.  

However, not a lot of people know this but, if you borrow over 30% of any credit limit, it reduces your credit score further.

3. Almost none of them are free, they often have a 2% - 4% charge. This is blatant mislabelling and an attempt to pull the wool over peoples' eyes.

This happened to me. My credit score dropped by a huge amount, well over 100 points. I paid 3% for the "0%" balance transfers, then had to pay down the smaller loans as my credit score was drastically reduced.

The credit scoring system is not fit for purpose as far as balance transfers go.

[Deleted User]

I have some very good news for you.

No one ever sees or cares about your credit score.

0% BTs are amongst the lowest risk of debts, and far better than interest bearing, so all is well.

But you do need to start checking what you apply for, because the fees are always clearly shown on a BT offer, so should never be a surprise.

phillw

1. How is that anything to do with 0% balance transfers? The more credit you apply for in quick succession, the less credit you will be offered.

2. Weren't you already at the same credit utilization before transferring from the original card to the new one?

3. No fee 0% credit cards exist and there is a list of them here, if someone hid the fee from you then you should complain.

If someone wants to refuse you credit because you used a balance transfer then that is up to them. Lenders with no fee 0% balance transfers are going to be pickier about who they lend money to & you shouldn't rely on getting one.

PixelPound

Not sure if the OP is just trolling for a reply, hasn't read any posts on here, or simply took out a card and found out it wasn't as they expected/hoped for and hadn't checked anything before applying.

1. why are you applying for credit every 3-6 months? If you applied for a new card every 3months the same effect would happen irrespective of any promotional rates. 

2. That's standard practice to ensure the transfer fee does not put you over utilisation. Why are you wanting to go as high anyway - its interest free not "free money".

2. They say interest free, not fee free, and with any credit product you should read the offer in full and not stop after the word "free". Whilst as stated there are fee free offers if your credit history is such that you are only getting offered 3 months interest free (hence why reapplying as in #1) then you really should look at whether paying 3% is worth it.

kimwp

Unfortunate that you got a shock, but as above, points 1 and 2 are nothing to do with the balance transfer and just a part of applying for/using products with credit facilities.
I looked into 0% credit cards for stoozing (so didn't even apply) and it was pretty obvious that they charge to do the balance transfer in the upfront information. As with any product, they will advertise the most attractive part of it, but it's not a "solve all your problems card", just another product giving you options that suit some circumstances better than others.
Good that your instinct is to let others know though, thank you for posting.