Comprehensive balance transfer fees handbook. Learn how BT fees work, minimize costs with 0% APR cards, optimize timelines and payments to eliminate interest and impact on your credit score.
Balance transfer fees can take a bite out of any savings from transferring a credit card balance. When moving debt from one card to a new card offering a 0% introductory interest rate, a balance transfer fee typically applies. This one-time cost is usually a percentage of the total amount transferred. Understanding how balance transfer fees work is key to maximizing savings from a 0% deal. This comprehensive guide covers everything you need to know.
How Do Balance Transfer Fees Work?
A balance transfer fee is a one-time cost you pay when moving debt from one credit card to another. It is typically a percentage of the total balance transferred [1].
For example, if you transfer a $5,000 balance to a new card with a 3% fee, you would pay $150 upfront. This $150 transaction fee gets tacked onto your new balance.
Some credit card companies charge flat balance transfer fees instead of a percentage. This fee amount stays the same no matter the size of the transfer. Flat fees often fall between $5-10, but can reach up to $75 with some issuers [2].
Balance transfer fees provide revenue for credit card companies. They know consumers want to take advantage of 0% intro APRs to save on interest. Charging an upfront cost allows banks and lenders to offset promotional financing deals.
8 Savings Tips to Maximize with Balance Transfer Card Use in 2024
What Other Fees May Apply?
In addition to balance transfer fees, you may also encounter other transaction costs when moving debt:
Cash Advance Fees: Some card issuers treat balance transfers as cash advances. This means they apply much higher interest rates and transaction fees compared to purchases. Cash advance fees are usually 3-5% of the amount moved, with a $5-10 minimum [3].
Foreign Transaction Fees: If transferring a balance from a foreign bank, you may pay a foreign transaction fee of around 3%. Some cards specifically exclude balance transfers from foreign transaction fees, but not all [4].
Expedited Payment Fees: Most balance transfers process within a billing cycle or two. Some card issuers offer expedited payment options, where they send a payment check within days. Expedited services have fees ranging from $15-30 on top of normal balance transfer costs [5].
Returned Payment Fees: If a balance transfer payment comes back unpaid due to providing the wrong account information, card issuers often charge returned payment fees. These are similar to bounced check fees, costing around $30-40 [5].
Tips to Lower or Avoid Balance Transfer Fees
The best way to avoid paying balance transfer fees is to opt for a card with an introductory 0% interest rate and no fee. These deals do exist but have stricter approval requirements. Some options include :
- Wells Fargo Reflect® Card
- Citi Simplicity® Card
- BankAmericard® Credit Card
- Discover it® Balance Transfer
If paying a one-time balance transfer fee is unavoidable for a 0% intro APR, several strategies can help minimize costs:
Compare Multiple Card Offers: Do not settle on the first balance transfer credit card you see advertised. Thoroughly research different offers and issuers to get the best deal on rates and fees [7]. You can save hundreds just by comparing.
Meet Minimum Spend Requirements: Some cards waive balance transfer fees when you meet a minimum dollar amount transferred within a certain timeframe. For example, no balance transfer fees for amounts over $5,000 moved in the first 60 days.
Take Advantage of Introductory Offers: Sign-up bonuses and limited-time discounts can offset transfer costs. Target new cardmember incentives that offer statement credits to cancel out fees.
Ask the Issuer to Waive Fees: Especially if you have a good credit score or long history with the bank, a quick call to reconsider fees can save money. The worst they can do is say no.
Use a 0% Purchase Card: Consider a card offering an intro 0% APR on new purchases instead of balance transfers. This avoids fees while allowing you to pay down existing debts faster.
How Long Do 0% Intro Balance Transfer Offers Last?
The most competitive balance transfer credit cards provide 0% intro APR periods ranging from 12 to 21 months . This interest-fee grace period allows you to pay down debt aggressively without accumulating new finance charges each month.
Different issuers offer varying 0% term lengths:
- 12 Months – Bank of America® Customized Cash Rewards credit card
- 15 Months – Chase Freedom FlexSM
- 18 Months – Citi® Double Cash Card
- 21 Months – Wells Fargo Active CashSM Card
Those new to balance transfers should start with 12-15 month 0% terms. This gives enough time to pay off smaller debts without new interest kicking in before you finish. Cards with 15+ month offers work better for larger, more stubborn balances needing an extended timeframe.
One catch to watch out for – most 0% intro APRs revert to higher regular APRs after the promotional period ends. The go-to rate typically ranges between 16-26% for balances. Set calendar reminders so you pay off the entire transferred amount before deferred interest applies.
Maximizing the 0% Intro APR Term Length
To optimize interest savings over an extended 0% term, follow this blueprint:
Month 1: Complete balance transfers from old card(s) to new account. Begin aggressively paying down debts.
Months 2-12: Keep making above-minimum payments on the transferred balance each month. Shoot to have at least 50% of original amount paid off by month 12.
Months 13-18: With half already repaid in the first year, the remaining amount due shouldn’t be difficult to eliminate given the extra 6 month grace period. Just don’t slack on payments.
Month 18-21: Only activate cards with the longest 0% transfer periods if you need all 21 months to achieve a zero balance. The free ride ends soon, so push hard to finish off the last segment of debt!
Should I Make Minimum or Maximum Payments?
To optimize interest savings from balance transfer deals, financial experts advise paying as much as possible toward the transferred amount each month [9]. Making minimum payments drags out the repayment timeline and increases risk of interest down the road.
For example, let’s say you transfer a $5,000 balance to a new card with a 12-month 0% intro APR deal. The regular APR after the intro period jumps to a whopping 25%.
If making minimum payments of $83 per month, only $1,000 gets paid off in the 12 months. So when the 25% APR hits month 13, you still get charged interest on the remaining $4,000 balance. Plus, it takes over 4 more years to clear at minimum payments.
By maximizing payments to $500 per month, you pay off the entire $5,000 within the 0% APR period. No interest gets charged at all, saving money. Knocking out debt faster by paying more than the minimum due frees up cash flow going forward too.
Balance Transfer Impact on Credit Score
A question that often comes up – will transferring balances to a new account hurt your credit? The short answer is maybe a little, but likely not much. As long as you continue making on-time payments, a small temporary score drop evens out over time.
Balance transfers impact credit scores in three main ways :
- Credit Inquiries: When applying for a new card to transfer debt, the bank runs a hard inquiry on your credit file. too many inquiries can negatively impact scores.
- Lower Account Age: Opening a new credit card lowers the average age of accounts on your credit reports. Older accounts demonstrate long-term financial responsibility.
- Higher Credit Utilization: Transferring balances from one card to another keeps your overall credit utilization high until debts get paid down. Experts recommend maintaining credit usage below 30%.
The key is proper account management after completing balance transfers. Pay all credit card bills on time and keep usage low on both old and new accounts. Give it 6+ months and your score often rebounds to pre-transfer levels or better. Do not apply for additional credit during this period though, as too many hard inquiries creates risk.
Pro Tip: Consider leaving a small balance on old card accounts after transferring most debt away. Maintaining a tiny credit line utilization shows lenders you still actively use and manage that account. Just keep balances low!
Balance Transfer Checklist
To recap, go through this checklist before transferring any credit card balances to ensure you get the best overall deal:
🔎 Research multiple credit card offers from different issuers before deciding which has the top terms for your situation
🔎 Compare interest rates and all balance transfer fees to estimate total savings
🔎 Review if new card has foreign transaction or cash advance fees if applicable
🔎 Check if meeting initial spend requirements can waive transfer fees
🔎 Contact issuer to ask about one-time fee waivers and discounts
🔎 Understand length of 0% intro APR and plan repayment before deferred interest hits
Closing Thoughts
While balance transfer fees take a bite out of savings, focusing too much on the upfront costs misses the big picture benefits. A 3-5% fee pales in comparison to double digit credit card interest rates. If you carry a revolving balance, debt transfer deals can potentially save you thousands long term.
Use this guide to understand all aspects of navigating balance transfer offers from fee structures to what other costs may hit your bill, tips to minimize fees, ideal introductory rate durations, optimizing monthly payments to repay debts faster, how transfers impact your credit score, and setting a checklist before submitting applications.[1] The more informed you go into the process, the more money winds up back in your wallet.
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