M&S Money urges customers to fully investigate credit card rates

September 28, 2006

Customers have been advised by M&S Money to look beyond the headline rates offered by credit card providers and check the "real cost" of zero per cent interest deals.

The lender claims that, while balance transfer (BT) fees are often only two or three per cent, they should not be underestimated as they are an up-front charge and are based on the entire balance, as opposed to standard interest which is applied monthly to any outstanding amount.

Customers who transfer a balance could end up being worse off than if they had remained with their initial provider, according to M&S Money.

Eddie Nott, deputy chief executive of M&S Money, said: "You would like to think that nothing could be cheaper than zero per cent interest, however the spread of credit card balance transfer fees has in some cases wiped out much of the benefit of switching.

"Fees of three per cent are already being charged, should these increase further then the vast majority of zero per cent balance transfer deals will become largely worthless."

According to research by M&S Money, the cost of borrowing on a card with a zero per cent BT period of six months and a 2.5 per cent fee would effectively equate to an annual interest rate of nine per cent.