Credit card companies look set to make £459 million from balance transfer fees during 2007 as consumers shift their debts to take advantage of 0% interest deals, figures showed today.
An estimated two million people will be looking to transfer their outstanding credit card balance to a new card in January to take advantage of one of the offers, according to comparison website uSwitch.com.
But the group warned that the fees people are charged for doing this had risen sharply during the past couple of years.
It said the average balance transfer fee for a 0% interest deal had soared from just 0.59% in 2005 to 2.73% this year.
At the same time it said 96% of credit cards no longer capped the maximum balance transfer fee that people would be liable for.
As a result people now paid an average of £51.65 to transfer debt from one card to another, compared with £11.16 in 2005, a 363% jump.
Around 8.9 million balance transfers were made during 2006, with people moving an average of £1,892 each time.
The group said if the number and value of transfers remained the same during 2007, people would collectively pay £459 million in charges.
USwitch.com said the market had also changed so that some cards that offered longer 0% balance transfer periods now had shorter interest fee periods for purchases, with these cards now accounting for 63% of the 0% balance transfer market.
Balance transfer fees were first introduced three years ago in a bid to recoup some of the £600 million it is estimated the industry was losing as a result of people taking advantage of 0% interest introductory deals.
Mike Naylor, personal finance expert at uSwitch.com, said: "It’s no great surprise that every 0% balance transfer credit card now levies a charge.
"Historically, fee free deals fuelled the switching market and marked the birth of the rate tart, quickly turning into a huge financial drain on the industry, to the tune of around £600 million."