Devil in the detail of credit card balance transfers

Devil in the detail of credit card balance transfers

Banking Ombudsman Deborah Battell says her office has experienced an increase in complaints about credit card balance transfers due to competition between banks offering deals.

When a credit card debt balance is transferred from one bank to the other, the new provider pays off the debt on the old card. The customer still owes the money but to a different provider.

“The trouble is some people aren’t necessarily across the conditions that go with the deal and find themselves caught out when they get their statement. Transferring a credit card debt may help save on interest – as long as you’re fully across how it works,” said Ms Battell.

People thinking about a balance transfer should know:

• new purchases and cash advances are not considered part of the transferred balance and will attract a higher interest rate

• new spending on the card will not be paid off first as it is standard for credit card payments to be allocated to the portion of debt with the lowest interest rate

• the low interest rate may only apply for a specific timeframe before increasing.

“To avoid unwelcome surprises, customers should ensure they understand the balance transfer conditions before they take up the offer,” said Ms Battell.

The Banking Ombudsman Scheme has published a Quick Guide on credit card debt balance transfers to alert people to what they need to be aware of when considering a balance transfer.

Ms Battell said people must also ensure they take "reasonable care" of their credit cards. Go to our Quick Guide on Looking after credit and debit cards and PINs.

Ends

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