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A closer look at costs involved in transferring card balance
[12:00:00 AM Friday, December 03, 2010]
The latest trend in card lending business is offering transfer of balance of one credit card to another to clear off the debts at a promotional rate of interest and asking the card holders to avail the benefit before the offer expires.
The fee charged for such transfer may vary between 3% and 5% of the balance. The offer also comes with a zero-percent rate of interest for first six months. Mr. Jeff Weber, President of the firm Credit Card Depot which keeps track of offers on its website says that if the offer comes with zero-percent interest for a period of 12 months and the fee for such transfer is 5%, then it would be equivalent to annualised rate of 5%.
The Discover More Card charges, for each transfer, a fee of $10 or 5% of the amount transferred, whichever is higher. Of late the competition between the credit card lending companies and softening of credit card lending standards have given impetus to the trend of offering 0% interest for a certain period, which was not in vogue during the period of economic crunch.
Mr.Anuj Shahani, Director of Synovate, which keeps track of such balance transfers, has observed in their August month statement that Citibank having charged a balance transfer fee of 7%. That means a balance transfer of $5,000 would attract a transfer fee of $350.
One of the card holders transferred a balance of $4,000 on 0% rate of interest which was in vogue up to February 2010. Later a further amount to the tune of $8,000 was transferred on which the 0% rate holdsgooduntil July 2010 using the same card.But it was really surprising for the cardholder when it was learnt that the 0% rate on the first transfer as of February would attract existing annual rate of interest of 12%.
In one case a card holder transferred $1,500 of a credit card to Citibank card on 0% offer which lasts up to May 2010. The fee on that transfer would be $45 or 3% of the amounttransferred, wherein the rules indicated that the interest is applicable from the date the transaction took place. In which case, does it mean that, if the card holder had still left with certain amount to pay off by May 2010, the card holder owes interest retrospectively on $1,500.
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