What is the benefit to credit card companies of a 0% balance transfer fee 0% interest card?

Yorkshire_Pud

I’ve always paid off such cards before the interest free period ends and get how the debt could benefit the card company if I failed to pay it off but as I think many people do this stoozing I wonder if there is actually some benefit to the card companies even if the card is not used for spending and the balance is cleared at the end of the interest free period?

Only one I can think of is once you are with a certain bank etc you might be open to taking out other products with them. 

Or is it simply a bet that you might end up in an unforeseen financial predicament and pay them lots of interest?

Brie

For the last decade at least companies have always charged a fee for doing a transfer.  So currently my cards have a 5% fee for a 0% BT for 12 months.  I might look at doing one as my flexy mortgage charges me 8% APR if I am using their "overdraft".  I'm currently in credit so it's not worth my while so the CC company doesn't get my 5%.  

And yes a lot of them count on the fact that people will take out a 0% deal with good intentions to pay it off but don't.  At which point 0% becomes 26% or worse.  Which is also why some people (myself included in the past) become serial BTers paying one debt off by getting another elsewhere.  I'm currently down to 1 only card with a BT on it but that hasn't been properly cleared in 10 - 15 years.  So they've made quite a lot off of me even if it hasn't been from interest.  

born_again

Marketing hype to boost customer userbase.
Nothing more, nothing less. Just the same as the switch bribes.

hugheskevi

Brie said:

For the last decade at least companies have always charged a fee for doing a transfer.  So currently my cards have a 5% fee for a 0% BT for 12 months.  I might look at doing one as my flexy mortgage charges me 8% APR if I am using their "overdraft".  I'm currently in credit so it's not worth my while so the CC company doesn't get my 5%.  

This isn't the case. I've Stoozed since 2011, with typically £50,000 to £70,000 of debt across my and my wife's credit cards. I have never paid a fee for transfers during that time.

For many years I had an MBNA card that offered fee-free money transfers. I opened 0% interest, nil fee balance transfer cards, made a money transfer from the MBNA card, and a balance transfer on the balance transfer credit card all with no fees. I now have a no-fee money transfer card from Halifax, which has taken the place of the old MBNA card.

Nowadays there seem to be fewer nil-fee, 0% balance transfer offers, but Natwest, Santander, Barclaycard, UIster, and Royal Bank of Scotland are available. Plus there are several 0% interest purchases cards available for slow stoozing. My wife and I currently have just over £52,000 of credit card debt, all at 0%, all borrowed since March as we were away traveling for a long time and so paid everything off in 2022, and none of it has involved a fee.

As to what benefits there are to the credit card company, I have no idea. Although the people exploiting these offers to the fullest extent will be very low-cost customers to maintain, so the main cost will be the cost of capital - these customers are not going to be paying late or defaulting or requiring customer service.

surreysaver

Brie said:

For the last decade at least companies have always charged a fee for doing a transfer.  

Not always, they haven't. NatWest is one that offers a card which doesn't charge a fee

gbhxu

The same as card holders that pay off in full each month. Zilch 

CliveOfIndia

gbhxu said:

The same as card holders that pay off in full each month. Zilch 

Not strictly true.  The card issuer charges a fee to the retailer on every transaction, based on a percentage of the transaction value (which is one reason why some places won't accept credit cards, and why many car dealerships won't accept full payment by credit card - for high-value transactions the fees can become fairly significant).

Yes, of course if the customer ends up paying interest as well that's an extra source of revenue for the card issuer.  But even if you pay in full every month, as long as you're using the card regularly they get a nice steady income stream.

Nasqueron

CliveOfIndia said:

gbhxu said:

The same as card holders that pay off in full each month. Zilch 

Not strictly true.  The card issuer charges a fee to the retailer on every transaction, based on a percentage of the transaction value (which is one reason why some places won't accept credit cards, and why many car dealerships won't accept full payment by credit card - for high-value transactions the fees can become fairly significant).

Yes, of course if the customer ends up paying interest as well that's an extra source of revenue for the card issuer.  But even if you pay in full every month, as long as you're using the card regularly they get a nice steady income stream.

In the US at least, based on data I have seen from a finance site, anything from 20-30% of their income comes from these sort of fees, the vast majority of course is from customers paying interest

zagfles

hugheskevi said:

Brie said:

For the last decade at least companies have always charged a fee for doing a transfer.  So currently my cards have a 5% fee for a 0% BT for 12 months.  I might look at doing one as my flexy mortgage charges me 8% APR if I am using their "overdraft".  I'm currently in credit so it's not worth my while so the CC company doesn't get my 5%.  

This isn't the case. I've Stoozed since 2011, with typically £50,000 to £70,000 of debt across my and my wife's credit cards. I have never paid a fee for transfers during that time.

For many years I had an MBNA card that offered fee-free money transfers. I opened 0% interest, nil fee balance transfer cards, made a money transfer from the MBNA card, and a balance transfer on the balance transfer credit card all with no fees. I now have a no-fee money transfer card from Halifax, which has taken the place of the old MBNA card.

Nowadays there seem to be fewer nil-fee, 0% balance transfer offers, but Natwest, Santander, Barclaycard, UIster, and Royal Bank of Scotland are available. Plus there are several 0% interest purchases cards available for slow stoozing. My wife and I currently have just over £52,000 of credit card debt, all at 0%, all borrowed since March as we were away traveling for a long time and so paid everything off in 2022, and none of it has involved a fee.

As to what benefits there are to the credit card company, I have no idea. Although the people exploiting these offers to the fullest extent will be very low-cost customers to maintain, so the main cost will be the cost of capital - these customers are not going to be paying late or defaulting or requiring customer service.

And even if a fee is charged it's usually far less than the interest that could be earned on the balance over the interest free period. I've got a couple with BC and NW where the fee was something like 2.5% and the interest free period was 18+ months, easily enough to recoup the fee 2 or 3 times over. 

Chrysalis

I assume they hope the debt is maintained past offer expiry date or you use them for interest bearing spending.  Although 0% fee cards seem really rare, none of my 0% cards have ever been 0% fee.