What Is A Balance Transfer Fee? How It Works

what is a balance transfer fee
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Because credit card interest rates can reach 30%, a balance transfer credit card is a great option to refinance current credit card debt. You can immediately avoid growing interest rates and provide yourself with repayment flexibility by switching your balance to a card with a 0% intro APR.
However, there is normally a fee for completing a balance transfer for a credit card, which is usually 3%. But is it worthwhile to pay? Continue reading to find out more.

What Is a Balance Transfer Fee on a Credit Card?

A balance transfer fee is a fee for moving debt from one credit card to another. These fees are typically 3% to 5% of the carrying balance: A 3% fee, for example, would transfer to $150 when transferring a $5,000 balance. They are imposed by the banking institution that issued the card to which the balance is being transferred.

You should do the math to ensure that what you save on interest rates outweighs the balance transfer fee.

How Does a Balance Transfer Fee Work

A balance transfer fee is a fee that certain credit cards charge when you transfer your debt from one card to another in order to consolidate debt and pay off your cards faster.

Timing can have a significant impact on how much you spend to transfer a balance. A balance transfer fee may be charged by the card to which you are transferring your debt. However, some balance transfer credit cards waive the balance transfer fee provided the transfer is completed within a particular time limit.

An excellent method to save money on a balance transfer is a card that gives;

  • On balance transfers, there is a 0% introductory APR.
  • There is no initial balance transfer fee.
  • There is no annual fee (which can be a financial consideration if you obtain the card just for the balance transfer).

Unless you receive a card that checks all of these boxes, you’ll need to do some math to ensure that this balance transfer can genuinely save you money.

How Much Do Balance Transfer Fees Cost?

Balance transfer fees are normally 3% or 5% of the entire balance transferred to your new card. So, for every $10,000 in debt transferred to a balance transfer credit card, you’ll owe $300 or $500. The fee is determined by the card you choose.

Most balance transfer fees include a minimum charge, which is usually $5 or $10. With these minimums in place, you may end up paying more than 3% or 5% in balance transfer fees if you’re only transferring a little amount of debt, such as $50 or $100.

Is It Possible to Avoid Balance Transfer Fees?

The only sure approach to avoid balance transfer fees is to look for balance transfer cards that have waived the fee completely. You may also be able to find cards with zero-fee balance transfer deals. Keep in mind that the $0 transfer fee may only be available for a limited period, so read carefully to determine when you must request the balance transfers in order for the offer to be valid. This window is usually in the first few months after you obtain the card.

Is Balance Transfer Fees Worth It?

Balance transfer fees may appear to be yet another way for banks and lenders to grab more money from you, but if you have considerable credit card debt with high-interest rates, it may be worth it.

For instance, if you possessed a credit card with a 15% APR and a balance of $4,500, a 3% transfer fee would cost you $135. However, if you kept your balance and paid $101 monthly payments, you’d spend more than $2,000 in interest and it would take 65 months to pay it off.

However, you may be able to pay it off and just pay $135 in interest. This is conceivable, but you’d have to pay $784 per month for six months to cover the $140 in interest. Transferring your balance to a card with a lower interest rate will minimize the amount of interest you pay overall. For example, a 12% interest rate card would take 59 months to pay off. You’d pay slightly more than $1,400 in interest, a $600 savings. Even after factoring in the $135 transfer fee (for a total of $1,535), you’ve still paid less interest than on the card with a 15% interest rate.

It is worth it if you can find and qualify for a card with no balance transfer fee because you will pay even less.

Several credit cards offer 0% APR on balance transfers for a limited time. You could save a lot of money if you transferred your balance to a card with 0% APR for one year and a lower rate than you had previously.

Credit Cards with No Balance Transfer Fees

Many credit cards allow you to transfer balances without paying any fees or interest for up to 21 months. Several claim free APR on transfers for a limited time, however many charges a 3% balance transfer fee. Other cards have a time limit for transferring a balance without incurring fees. Here are some cards that have no transfer fees, 0% APR, and one that has transfer fees after the introductory period ends.

CardAPRTransfer Fee 
Wings Visa Platinum0% for 15 monthsNone
Navy Federal Platinum Visa0% for 12 monthsNone
Union Bank Platinum Visa  0% for 15 monthsNone if transferred within 60 days of opening the account
First Tech Fed Platinum Mastercard0% for 12 cyclesNone

Balance Transfer Fees: How to Avoid or Reduce Them

Because there are so many credit cards and deals to select from, shopping around is the greatest method to cut or avoid paying transfer fees. There are thousands of credit unions and banks in the United States, each with its own credit cards and policies, so there are plenty of possibilities.

To begin, look around credit cards with cheap balance transfer fees. Some cards charge more than 5% in transfer fees, however, many popular cards charge only 3%. Second, after the introductory period has expired, examine the card’s APR. Many credit cards offer 0% APR for 12 to 15 months and then charge a 15% to 22% APR beyond that. You want one with the lowest feasible APR. For example, the Wings Visa Platinum has variable rates ranging from 9.54% to 18.00%—the better your credit, the cheaper your rate.

You may be able to negotiate a lesser fee with your credit card company, so phone beforehand to see if they are prepared to discuss. Make sure to complete this before transferring your balance. Also, you should have information about other cards on hand to use as bargaining chips.

A Balance Transfer Fee Example

If you’re thinking about a balance transfer, figure out the entire cost of repaying your present debt over time, both with and without accepting a transfer offer. The relative interest rates and fees, as well as the length of time it will take to repay the entire debt, are all factors.

A $10,000 credit card balance at a 20% interest rate, for example, results in an annual interest expense of $2,000—roughly $167 per month. Assume a credit card company offers you a 2% promotional interest rate for a 12-month introductory term, with a 1% balance transfer fee. If you accept that offer, the total cost of relocating the entire $10,000 is $300 (the $100 transfer fee plus the $200 interest payments). By shifting your balance, you would save $1,700 in that year.

How to Bargain a Balance Transfer Fee

You can always try negotiating your balance transfer fee over the phone with a customer service agent. There’s no guarantee of success, but you can always call the card company and explain your situation. Depending on the circumstances, they may be able to negotiate the balance transfer fee on an existing offer, but you should describe your position as thoroughly as possible.

Read Also: Check Card Balance: How To Check Card Balance(+Quick Guide).

Here are some things you can do to try to negotiate a balance transfer fee.

  1. Examine your credit score. Before applying for a balance transfer card, check your credit score. If your FICO score is in the “very good” category or higher, you’ll have a greater chance of negotiating terms with a card provider.
  2. Examine balance transfer deals. Next, examine the best balance transfer cards on the market in terms of their promotional APR offers and duration, as well as other aspects such as rewards and annual fees. When you’ve narrowed your search, look at the cards you’re thinking about to see what their advertised balance transfer fee is, which is usually 3 percent or 5 percent of your balance. By comparing offers, you will gain a better understanding of the possibilities available and which card best meets your financial needs.
  3. Perform the calculations. Once you’ve decided on the best card for you, calculate how much you’d have to spend with the current balance transfer fee requirement and how much you could potentially save if you negotiated it down.
  4. Call the card company and explain your situation. You’ve decided which balance transfer card to apply for and how much the current fee will be. Call the issuer and ask to speak with a customer service representative. Explain that you’d like to avoid paying a balance transfer fee. They may be able to negotiate the fee on an existing offer, depending on the circumstances. It’s likely that a fresh balance transfer offer is in the works, and the agent you’re chatting with could let you know about it. You can request a supervisor if the customer support representative does not have the authority to share any of these things with you. Make the most of your research!

Is 3% a Reasonable Balance Transfer Fee?

The best balance transfer fee is 0%, but if you can’t locate a card with that low of a fee or don’t qualify for it, 3% is a decent transfer fee.

Is It Possible to Avoid Balance Transfer Fees?

You can avoid balance transfer fees by looking for credit cards with no fees or introductory periods with no fees. If you transfer your balance within the introductory period, you will not be charged any transfer fees.

Is It Necessary to Pay a Fee to Transfer a Credit Card Balance?

Some credit cards charge a fee to transfer a balance, while others do not. It’s a good idea to browse around for a card that won’t charge you to transfer your balance.

Conclusion

Many people are burdened by debt. Fortunately, there are other solutions available, including balance transfer credit cards and debt consolidation. Spend some time investigating all of your alternatives to determine which one will work best for you. Paying a balance transfer fee to utilize one of the finest balance transfer credit cards can be a decent option, but you need to do the math to be sure.

Balance Transfer Fee FAQs

Is a balance transfer fee worth it?

If you have a considerable amount of credit card debt, paying the 3% balance transfer fee (or sometimes even a 5% fee) while transferring your balance to a card with a 0% initial APR offer is well worth it, but only if you still need time to pay off a balance.

Is there a downside to balance transfers?

However, there are some drawbacks to consider, such as large balance transfer fees and the possibility of adding to your debt if you don’t pay off your balance before the promotional period expires.

How long does a balance transfer take?

About five to seven days

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