Nationwide building society has sent a challenge out to credit card companies by slashing the cost of transferring a balance to a 0 per cent deal.
While the average fee on the top ten balance transfer credit cards is now 2.84 per cent, Nationwide has cut the cost to just 0.75 per cent. On a typical transfer balance of £3,000 that would be a fee of £22.50, compared with the exorbitant £90 charge on cards that have a 3 per cent transfer fee.
"Nationwide has ripped up the rulebook with this outstanding credit card offer. A bold move and a very positive one for consumers," said Andrew Hagger of Moneycomms, who writes our weekly Money Insider column.
The launch targets lenders which offer long-term 0 per cent interest rates on credit cards, but catch people out with inflated transfer fees.
"The combination of a long interest-free term and ultra-low balance transfer fee is likely to see the credit card big boys, Barclaycard, MBNA, Halifax and Tesco bank scrambling to review and revamp their own deals," predicted Mr Hagger.
John Crossley, Nationwide's head of credit cards, said: "There are a lot of credit-card deals that look appealing but you could end up worse off if you don't take into consideration factors such as the balance transfer fee and the interest you pay on balances after the offers run out."
Kevin Mountford of MoneySuperMarket said: "Some of the rules about picking the best balance transfer card no longer apply in light of this offer.
"This could trigger a balance-transfer-fee price war, which is great news for anyone looking to borrow."
The Nationwide offer is available until the end of March on the building society's Select Credit Card, which is available only to FlexAccount customers, and on its Standard Credit Card, which is available to all customers.
Both deals include an interest-free balance transfer offer of 26 months.
"Although this promotional rate is five months shorter than the current market-leading credit card, if you set your monthly repayment to more than 2.5 per cent of the original balance, for example £75 per month on a £3,000 balance, then the total cost of borrowing would be cheaper than on the longest 0 per cent card, even if you borrowed over the same period," pointed out Mr Mountford.Reuse content