What’s a Balance Transfer Fee?

Balance Transfer Fees Are Attached to Most Offers

• Most balance transfer offers come with a small fee
• Typically it’s 3% of the transfer amount with a dollar amount minimum
• So if you transfer $2,500, the fee might be $75
• This makes your total outstanding balance $2,575

A balance transfer credit card can be quite handy if you’ve got a lot of existing credit card debt that’s subject to costly finance charges, but the main drawback is the associated “balance transfer fee.”

Yep, there’s often a cost to transferring a balance because credit card companies aren’t in the business of just helping you out for free.

In exchange for that awesome 0% intro APR, balance transfer credit cards typically come with an upfront 3% fee, though it can be as high as 5%. So for every $1,000 you transfer, you’ll likely pay $30 to $50.

It’s basically the credit card issuers way of ensuring they make some money while taking on your debt since they won’t be making any interest income if the APR is set at zero.

Most balance transfers have fees, but there are plenty of big banks and credit unions that waive the fee or don’t charge it all.

What Is a Balance Transfer Fee?

• Think of the one-time fee as prepaid interest
• If the bank is giving you a 0% loan, they often want something upfront
• But not credit card issuers charge a fee for balance transfers
• Look for a no-fee balance transfer that also offers 0% APR to snag the best deal

It’s essentially prepaid interest in exchange for 0% intro APR.

As mentioned, these fees can range from 3-5% of the amount transferred, and typically have a minimum of say $10.

The average balance transfer fee is 3%. If you’re being charged more, know that you can probably do better.

They charge these fees to ensure they make money off cardholders who are taking advantage of their 0% APR and other low-rate offers.

If they didn’t charge fees, they would essentially run the risk of a cardholder moving their credit card debt to them, making only the minimum payment each month, and then transferring it again before the promotional 0% APR ended.

In other words, the credit card companies wouldn’t make a dime!

Balance transfer fee example:

Amount transferred: $2,500
Balance transfer fee: 3%
Balance transfer cost: $75
New balance: $2,575

In this rather common scenario, you’d have to pay $75 for the privilege of transferring your credit card balance to another credit card issuer.

In exchange for that fee, the new credit card company would agree to take on your credit card balance at a lower interest rate.

This one-time fee is added to your new balance, so in our example you would owe $2,575 on your new credit card right off the bat.

While higher than your old balance, it won’t accrue any new interest if set at 0% APR, which means each and every dollar paid during the promotional period will pay down the outstanding balance. That’s where you win.

However, if the APR is above 0%, you will pay interest on the balance transfer fee.

Generally, there is a minimum amount you must pay to transfer a balance, such as $5 or $10, assuming it’s not a no fee balance transfer offer.

In the past, it was fairly easy to get your hands on a no fee balance transfer, but the financial collapse that occurred in late 2006 wiped out many of those deals.

No Balance Transfer Fees Used to Be the Norm

During the boom years, many savvy consumers took advantage of no fee balance transfer offers, and moved credit card debt from one card to the next, all the while never paying a dime in interest, or any fees.

But credit card issuers quickly (well, not that quickly) caught wind of this so-called “balance transfer arbitrage,” and started slapping fees onto their balance transfer offers.

Not only did they add fees, but in many cases, they raised fees from 3% to 5% and removed maximum fees on balance transfers.

Before the credit crunch, most fees were capped at a certain dollar amount, such as $75, regardless of how large the transfer amount was. Clearly this was a huge benefit for those transferring big balances.

Today, it’s not uncommon to see a balance transfer offer with no cap on the fee, meaning you could pay a hefty amount on a large balance.

In short, it may cost money to do a balance transfer today, though the savings can easily eclipse any upfront costs.

Typical BT Fees Charged by Credit Card Company

*Note that these fees may vary based on the credit card in question. And there are some cards that don’t charge bt fees, such as Chase Slate. So always check the fine print!

You Can Still Avoid Balance Transfer Fees!

However, there are still no fee balance transfer offers out there if you look hard enough, and even with the fees, balance transfers can save you some serious money.

The key is to determine whether a balance transfer makes sense for you (fee and all) by looking at your current interest rate and the balance transfer interest rate, factoring in any fees.

Even with a 5% fee, it could be the right move, especially if your current credit card has a sky-high APR.

Most credit cards carry APR in the teens or higher, so moving a credit card balance to a credit card with an APR of 0% or something in the single digits could be a huge money saver.

Tip: If you can’t find a no fee balance transfer, why not simply ask your credit card issuer to waive the balance transfer fee.