How to Save Money with Balance Transfer Credit Cards

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Understanding Balance Transfer Fees

At O1ne Mortgage, we prioritize consumer credit and finance education. This post aims to provide an objective view to help you make the best decisions regarding balance transfer fees. For more information, see our Editorial Policy.

What Is a Balance Transfer Fee?

A balance transfer fee is a charge imposed by a credit card issuer when you transfer debt from one credit card to another. This fee is typically 3% to 5% of the amount being transferred or a flat dollar amount, whichever is greater. It’s important to weigh the savings from a low introductory APR against the balance transfer fee before making a transfer.

What Is a Good Balance Transfer Fee?

If you can’t find a credit card without a balance transfer fee, a 3% fee is generally considered good. Opting for a card with a lower balance transfer fee helps minimize costs, making it easier to pay off the balance on your new credit card. Always check the card issuer’s website or the card’s “rates and fees” or “terms and conditions” document before applying.

How to Avoid Balance Transfer Fees

To avoid balance transfer fees, look for a credit card that doesn’t charge them. Although rare, some credit unions offer cards with no balance transfer fees. Finding such a card can save you money and make debt repayment more manageable.

Is a Balance Transfer Fee Worth It?

A balance transfer fee can be worth it if the interest savings exceed the fee and you commit to paying off the balance before the introductory APR period ends. For example, transferring a $5,000 balance from a card with a 22.75% APR to one with a 0% introductory APR for 21 months can save you significant interest, even after paying a balance transfer fee.

Additional Considerations

Before applying for a balance transfer card, consider the following:

• Introductory APR period: A longer promotional period gives you more time to pay off your balance.
• Post-promotional APR: Any remaining balance after the promotional period will incur interest at the card’s standard APR.
• Other fees: Be aware of annual fees, foreign transaction fees, or late fees.
• Time limits: Ensure you complete the balance transfer within the required timeframe to qualify for the promotional APR.

All this information can be found in the card’s “Terms and Conditions,” “Rates and Fees,” or “Cardmember Agreement” on the issuer’s website.

The Bottom Line

Maximizing the benefits of a balance transfer card requires a commitment to paying off your balance before the introductory APR expires. Carefully reading each card’s terms and conditions will help you choose the best card for your needs. Many 0% introductory APR balance transfer cards require good to excellent credit, so check your credit report and score before applying.

For any mortgage service needs, call O1ne Mortgage at 213-732-3074. We’re here to help you make the best financial decisions.

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