Consumers looking to execute balance transfers typically look for offers with no fee.
But nowadays those usually aren’t the best deals, considering it’s near impossible to find a 0% APR balance transfer with no fee.
If the balance transfer doesn’t come with a fee, there’s a very good chance it’ll come with APR above 0%.
Let’s look at an example:
Balance transfer offer: 4.99% APR for 12 months, 12.99% APR thereafter
Balance transfer fee: no fee
Credit card balance: $5,000
In this scenario, you’d avoid paying a balance transfer fee, but you’d be stuck paying 4.99% APR on your transferred balance.
Using simple math, that would be roughly $250 in finance charges annually, or about $21 a month.
You’d pay $150 upfront in fees, but you wouldn’t pay any finance charges during the first year (roughly $100 in savings).
This could help you get out of debt faster as payments would go entirely to the principal balance and not to pay off interest.
As a result, you’d probably be able to reduce your debt a lot quicker, making the balance transfer with a fee the better deal!
However, if you plan to pay off all the debt in just a few months, moving the balance with a no fee balance transfer could make more sense, as you’d only pay a few months of interest.
Tip: Currently very few credit card issuers offer balance transfers with no fee, opting instead to charge a fee so they can continue to offer 0% APR promotional periods.