What Is a Balance Transfer Fee and Can You Avoid It
What Is a Balance Transfer Fee?
A balance transfer fee is the money lenders charge borrowers to transfer existing debt from another institution. Credit card companies commonly offer balance transfers. Fees can be a percentage of the transferred amount or a fixed amount. The fee is displayed on credit card statements.
How Does a Balance Transfer Fee Work?
When a cardholder transfers a balance from one credit card to another, a balance transfer fee is incurred. The cardholder provides their name, the amount to be transferred, and the account number of the card they are transferring to. Balance transfers are often used to move high-interest debt to cards with lower interest rates. The fee is determined by the institution or card company receiving the balance. It can be a percentage or a fixed dollar amount. Credit card companies generally display the fee as a separate line item on statements.
Special Considerations
Credit card companies make offers to attract new customers, such as low-percentage introductory rates. These rates usually revert to higher percentages after a certain period. When considering an offer, it is important to look at the terms, including the transfer fee, future rate, and any annual fees. Only consumers with excellent credit scores may be approved for cards with no transfer fee.
Advantages and Disadvantages of a Balance Transfer
Advantages include paying off debt at a lower interest rate, saving money, and consolidating debt. Disadvantages include a lender’s lack of interest in the cardholder’s best interests, the decreased time to pay down debt with introductory offers, and the possibility of paying more interest when the regular rate kicks in.
Are Balance Transfer Fees Worth It?
If you have significant credit card debt with high interest rates, balance transfer fees could be worth it. By transferring a balance to a lower interest-bearing card, you can reduce the amount of interest paid overall. Using a card with no balance transfer fee is even more beneficial.
Credit Cards With No Balance Transfer Fees
Many credit cards allow balance transfers without fees or interest for a limited time. Some cards with no transfer fees and 0% APR include Wings Visa Platinum, Navy Federal Platinum Visa, and First Tech Fed Platinum Mastercard.
How to Avoid or Decrease Balance Transfer Fees
To avoid or decrease balance transfer fees, it is best to shop around for credit cards with low fees and low APRs after the introductory period. Negotiating with card providers may also be possible.
Example of a Balance Transfer Fee
Calculating the total cost of debt repayment over time, with or without a transfer offer, is crucial. Factors to consider include interest rates, fees, and the time it will take to repay the debt.
Frequently Asked Questions
– Is 3% a Good Balance Transfer Fee?
– Can Balance Transfer Fees Be Avoided?
– How Much Will It Cost to Transfer a $1,000 Balance?
– Is There a Fee to Transfer a Credit Card Balance?
The Bottom Line
Balance transfer fees can help cardholders with chronic balances save money if they commit to paying off the debt before the introductory offer expires. Transferring debt to a card with a lower rate and paying down the principal can make the fee worthwhile.
