Explaining credit card fees

[JustFuckOffPlease]

Hello. I've been approved to make a balance transfer from my current credit card to a new one (paid for a holiday - don't need to actually use it any more but want to pay it off every month).

Can someone explain the fees to me? Currently looking at ones with 0% interest for 12 months but with 1.99% or 2.99% fees. Not sure what this means.

How much do you want to transfer?

Say it’s £1,000. And the transfer fee is 1.99%. Then you will pay £19.90.

(If the fee is 2.99% then you will pay £29.90.)

Then for 12 months there’s no interest charged, so you owe £1,019.90 to pay off over 12 months. If you pay £85 a month it’s cleared.

Does that help?

The transaction fee is what will be added to your balance. So if you transfer £1000 with a 1.99% fee, your opening balance will be £1019.90. With a fee of 2.99% the opening balance will be 1029.90.
what you need to do once you’ve done the balance transfer is to calculate how much you’d need to pay each month to pay if off in full before the interest free period ends.
eg, opening balance = £1030 at 0% interest over 24 months.
Monthly payments need to be £42.92 to pay it off. Don’t fall into the trap of just paying off the minimum each month then end up having to pay interest because you don’t pay it off in time.

Do you mean that when you’ve transferred the balance to the new card, it’s then at 0% for 12 months? So in essence, keeping it simple, assuming you transferred £1000, then there would be a charge for the ‘privilege’ of transferring the balance of 1.99% or 2.99% (whatever it is), so you’d pay £19.90 (or £29.90) for the balance transfer, but there would be no interest to pay on the balance of £1019.90 (or £1029.90) for 12 months. So assuming you wanted to clear the debt in 12 months, you’d pay £84.99 each month (if it’s £1019.90) and by the end of 12 months it’d be paid off in full.

If you didn’t clear the balance in full by the end of the 12 months, then whatever was outstanding would revert to whatever the standard APR is for that card and you’d start having to pay interest on top.

The 1.99% or 2.99% is a charge that applies based on the balance you transfer and it is added to the new card. So if you have £1000 and you transfer it to another card that offers 0% interest on transfers but a 2.99% fee then the balance on your new card will be £1029.90. You'll be charged no interest for the initial offer period after which any remaining balance will attract interest at the normal extortionate rate.

It's a good way to clear debt if you are disciplined. However, the credit card providers are banking on the fact that a reasonable number of their transfer customers will still have a significant balance after the interest-free period ends and that's when they make their money. The key is that you clear as much as you can and if there's any balance after the 0% ends then you transfer to another card. Don't be tempted to think that the pressure's off and that you can start racking up credit again. Also be aware that you generally can't transfer balances between lenders that are part of the same umbrella bank or financial organisation.

Thanks everyone. That's clear now