Oliver Crawford

By Oliver Crawford

Credit card providers are constantly looking to entice new customers by offering longer interest-free periods on balance transfers (debt transferred from another credit card), or lower balance transfer fees than their rivals.

On the face of it, this is good news for consumers. By shopping around, they can save money by getting a longer 0% deal or a lower fee. The catch, though, is that the best balance transfer offers are typically only available to customers with good credit histories.

Tesco Bank, for example, has a balance transfer card that offers a 0% period of 33 months to some customers, but only 20 months to others.

Credit card providers are entitled to offer better terms to customers with better credit histories. What they should not do is mislead customers into thinking that everyone will get the best possible offer.

Sainsbury’s has some work to do on this front. Its products are labelled according to the longest 0% period offered, even though not all customers will get this.

The Sainsbury’s ‘34 month Balance Transfer Credit Card’, for example, only offers 34 months interest-free to some customers. Others get a much shorter period of 26 months. It is labelled simply as the ‘34 month Balance Transfer Credit Card’ on the Sainsbury’s website, though, with the range of possible 0% periods left to the small print.

Barclaycard’s approach, which makes it clear that each of their cards has a 0% period of ‘up to’ a certain number of months, is less misleading (though the range of possible periods still isn’t immediately obvious).

Bank of Scotland and Lloyds Bank are also guilty of mislabelling their balance transfer credit cards. These providers both offer a ‘Low Fee 0% Balance Transfer Card’, but on closer inspection it turns out that this card has a range of fees depending on the customer’s credit score, from 1.99% to 3.49%. Since the higher fee of 3.49% is one of the biggest on the market (the lowest fee at the moment is 0% and the highest is 4%), calling this card ‘low fee’ is inaccurate.

Unlike Sainsbury’s, Bank of Scotland and Lloyds Bank do not show their balance transfer offers to all potential customers. You have to go through an eligibility checker to see their range of cards. This means that would-be customers only see the offer they are likely to receive, rather than being tempted by the best possible offer, which may not be available to them. This makes their websites more transparent than Sainsbury’s. Nonetheless, the ‘low fee’ card should be re-named to more accurately describe the range of possible fees.

Implications of the Consumer Duty

The Financial Conduct Authority’s (FCA) new consumer duty states that consumers need to be protected from ‘firms providing information which is misleadingly presented or difficult for consumers to understand, hindering their ability to properly assess the product/service’.

Balance transfer cards that are labeled with the best possible offer are potentially misleading. They should be re-named to avoid the charge that credit card providers are giving customers a false impression of how good their products are.

Better still, we’d like to see all card providers using eligibility checkers that give customers certainty around rates, fees and introductory deals before they have to apply and leave a hard search on their credit file. The Consumer Duty arguably means this is something firms must get working on now if they are to stay compliant once the new rules come into force next July.

If you would like to talk to us about how to meet the Consumer Duty challenge, please get in touch at corporate@fairerfinance.com