Egg extends 0% offer, but imposes 2% transfer fee |
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Wed, 04 May 2005 20:50
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People who take advantage of 0% interest introductory offers made by credit card companies, and switch from card to card, are about to learn that there is no such thing as a free lunch. Called ‘rate tarts’ by some and thrify by others, the 0% interest credit seekers will now have to pay a 2% charge for transferring their credit card balances. Online bank Egg has now imposed a 2% charge for the transfer.
Any card holder who wants to switch to Egg for their 0% offer will now have to pay a fee of 2% of the amount they are transferring. The fee will be capped at £50.
| Egg, which is one of the UK's largest credit card providers, said the transfer fee is expected to reduce the rate at which people switch between credit cards in order to take advantage of 0% introductory offers. According to a report published last month, the credit card industry was losing more than £80 million a month because of such ‘rate tarts’.
An independent researcher estimated that during last month alone, as many as 4.2 million people had switched from one credit card (or store card) to another just so they could clear them before the interest-free period ended.
Egg is not the only bank to charge a fee for transferring credit card debts. Barclays, Alliance & Leicester and MBNA have also been compelled to impose such a ‘balance transfer fee’. Egg has outstanding customer balances amounting to over £3 billion.
Egg’s move is particularly significant because it was the first provider who created the ‘0% introductory offer’ monster in a bid to attract new customers.
A spokesman for Egg said they expected “Nearly all the credit card providers or stores that make an introductory offer of 0%, will have to impose balance transfer charges, before the year ends.” Most will have scrapped the offer by then or pressured by high maintenance costs, they will announce a tranfer fee.
He explained that in their case, the fee was expected to pay for the extension of their 0% offer from six months to nine months.
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