NEW YORK – April 7, 2022 – (Newswire.com)
iQuanti: A balance transfer consists of moving the balances of one or more credit cards to a new credit card. Many people do this to consolidate or refinance their debt.
However, most credit cards charge fees for balance transfers. The fees can be quite significant depending on the card and the amount transferred.
In this article, we’ll discuss how balance transfer fees work and help you decide if paying one is worth it. Next, we will briefly explain how to find credit cards with zero balance transfer fees.
What are balance transfer fees and how do they work?
Balance transfer fees are fees you pay when you transfer a balance on your credit card. You don’t pay the fees immediately, but they are added to your total balance.
Most balance transfer fees are 3-5% of the amount transferred, with a minimum fee of $5.
For example, let’s say you transfer a total of $1,000 from two different credit cards to a new card that has a 3% balance transfer fee and a $5 minimum fee. To calculate your fees, you would multiply 3% by $1,000 to get $30. This makes the new balance on the receiving card $1,030.
Now, instead, let’s say you transfer a total of $100 from two separate cards to this new card.
By multiplying 3% by $100, you get $3. However, your fee cannot be less than $5. Therefore, your charge is $5, bringing your new receiving card balance to $105.
Is the balance transfer fee worth it?
Balance transfer fees are worth it if you’re doing a balance transfer to save on interest, and the interest savings outweigh the fees.
For example, imagine you open a new card to perform a balance transfer. You may be paying a $50 balance transfer fee to transfer a balance from an old card to this new card, but the new card has a lower rate, saving you $500 in card interest credit.
In this case, the costs are worth it.
Some credit cards offer 0% balance transfer introductory APRs for an extended period, such as 12 months. A small balance transfer fee can be worth paying 0% interest for a year or more.
Find a credit card with no balance transfer fee
Not all credit cards charge a balance transfer fee, but such cards are quite rare. Prioritizing your search for zero balance transfer fees should be the best way to find these cards while browsing online.
That said, most of these cards offer a limited window — like 60 days — to take advantage of the no-fee offer. Wait too long and you lose the chance to avoid the fee.
Avoid balance transfer fees
Balance transfers can be a great option for consolidation or refinancing, but you need to make sure your interest savings outweigh the fees.
Looking for a 0% introductory balance transfer APR or a no-fee balance transfer card can help you with this. Ultimately, however, you need to do the math before applying for a card to ensure that a balance transfer will be worth it in the end.
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