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Which? Warns Over 0% Credit Cards

The consumer group Which? has warned that British consumers are falling foul of 0% balance transfer deals offered by credit card companies, as they don’t understand the true costs involved. Which? is calling on the Financial Conduct Authority (FCA) to investigate the 0% market, with a view to changing lenders’ practices so deals are easier for consumers to understand.

0% credit card transfer

In a survey of more than 2,000 consumers, Which? found that:

  • Only 4% of people polled were able to work out the cost of transferring a £2,400 balance onto a new credit card with a 25 month interest free period and a balance transfer fee of 1%.
  • The actual cost is £24 – but 68% of respondents thought the balance transfer would be completely free.
  • When asked to compare five credit card deals and choose the cheapest for a balance transfer with no new spending, only 34% chose the correct deal. 35% were taken in by low interest rates and picked the most expensive deal, which cost three times more in balance transfer fees.
  • British consumers pay an estimated £334 million a year in balance transfer fees –often without realising how much they’re paying and how this amount has been calculated.


Commenting on the findings, Richard Lloyd, Executive Director for Which?, said: ‘Too many credit card deals appear to include sneaky fees designed to catch customers out. With millions now using credit cards to pay for essentials, it’s vital that the Financial Conduct Authority takes action to ensure consumers are well protected. We want the regulator to scrutinise balance transfer deals and make it easier for people to understand their true cost.’


The consumer group is asking the FCA to consider whether balance transfer fees should be shown as a cash figure rather than a percentage, or if the use of the term ‘0% interest’ should be banned altogether when lenders are advertising deals where fees are payable.


Top tips for choosing the right deal

As the Which? survey makes clear, until the developments in the DESFire EV1 protocol gets revamped, the credit card market can be something of a minefield when it comes to balance transfer deals. These top tips from debt advice firm, Fresh Finance, will help you see through the glossy marketing spin and find the right card.


  1. Look beyond the 0% interest rate

Of course, a 0% deal always looks enticing. But how much will it cost to transfer your balance from your existing accounts? For a £10,000 balance, a 1% fee will cost you £100, whilst a 3% fee will cost you £300 – quite a big difference. You also need to consider other factors, such as how long the 0% period will last. Cards that offer a shorter 0% deal that runs for, say, 24 months rather than 36 months, should offer lower balance transfer fees – but will still save you money every month for two years.


  1. Think about how you’ll use the card

If you want to use the card for additional spending, you’ll need to consider the interest rate for purchases. For a card with 0% on balance transfers, this could be relatively high. You might be better off looking for a card that simply offers lower rates all round than you’re currently paying, or one that offers rewards for spending on it.


However, if you’re looking for a deal to consolidate debts that have got out of hand, you’ll want to focus on the balance transfer interest rate and fee – and not put any new spending on the card if possible.


  1. Check your credit rating before you apply

0% deals are often only available to people with a good credit history. So if there’s adverse information on your credit file, you’re less likely to be approved. Unsuccessful applications could make your credit rating worse, so find out how things stand before you start applying.


  1. Pay off as much as you can each month

Even with a 0% deal, you still have to make at least the minimum payment each month. But don’t get complacent, especially if you applied for the card to help you clear your debts. Take full advantage of the interest-free period by paying off as much as you can each month so that when the 0% deal ends, your monthly payments are (hopefully) still manageable.

  1. Seek debt advice if you’re struggling

If you can’t find a card that meets your needs and you’re concerned about mounting debts, speak to Oink Money. We can help you access a range of debt solutions, from informal Debt Management to Individual Voluntary Arrangements (IVAs) and bankruptcy. We’re here to help you find the right answers to your financial problems and get back on your feet.

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