Nowadays, a lot of credit card issuers have removed balance transfer fee caps, so there is no maximum fee they can charge.
This is certainly something to pay attention to, given the fact that balance transfer fees can be sky-high on large credit card balances.
At the same time, credit card issuers have increased balance transfer fees from 3% to 5% on many credit card balance transfer offers, so the costs have essentially risen two-fold and can be quite substantial.
What no maximum fee on a balance transfer can cost you:
Current credit card debt: $7,500 @ 19.99% APR
Balance transfer offer: 0% APR for 12 months, 12.99% APR thereafter
Balance transfer fee: 5%, no maximum
Balance transfer limit: $10,000
In this scenario, you’d be stuck paying $375 in balance transfer fees to move $7,500 to the 0% APR balance transfer credit card. Yikes. That doesn’t sound like a deal, does it?
Of course, it’s cheaper than keeping the balance with your existing credit card issuer and paying $1,500 in credit card finance charges annually (simple mathematics). But it’s still very expensive, and the last thing you want to do is take on more debt at the very moment you’re trying to pay it down.
So if you have a sky-high balance, you may want to just call your credit card issuer and ask that they reduce the interest rate on your credit card instead. Just tell them you’re thinking about transferring the balance elsewhere, but want to see if they want to make a deal first.
After that, you may want to consider moving just a portion of the balance if the interest rate is still relatively high.
There Used to Be Balance Transfer Fee Caps
Not so long ago, the cost could have been significantly lower, as the balance transfer fee would have probably been set at 3% with a $150 maximum.
So instead of paying $375 in balance transfer fees, you’d only have to pay $150 since it couldn’t go beyond the max, regardless of how large your credit card balance was.
So cardholders with sizable balances have basically been hit twice. First, with higher balance transfer fees, and second, with no maximums on those fees.
If you’ve got a large credit card balance you’d like to transfer, look for balance transfer fees that are maxed at a certain dollar amount.
Just realize that a no fee balance transfer probably won’t offer 0% APR, but rather a low fixed rate for the life of the balance, which while seemingly unfavorable, could end up being cheaper than the alternative.