Balance transfers are a common form of debt consolidation. When you transfer a balance, you move credit card debt from your current account to a new card with a lower APR. This helps you manage your finances and saves you money on interest.
While balance transfers can be a helpful technique, they come at a cost. Learn what a balance transfer fee is, how high you should expect one to be, and whether or not balance transfers are actually worth it.
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What is a balance transfer fee?
A balance transfer fee is the fee you pay a credit card issuer to move debt onto one card from another.
Balance transfer fees tend to be listed as percentages of the transfer amount, with minimum dollar amounts. For example, Citi lists the balance transfer fee for the Citi® Diamond Preferred® credit card as “$5 or 5% of the amount of each credit card balance transfer, whichever is greater.” 1
This is a common structure for balance transfer fees, with a small percentage of the transfer serving as the normal fee, and a hard dollar amount which you’ll still have to pay even if you make a very small transfer.
What’s a good balance transfer fee?
Most balance transfer fees are between 3% and 5%. Anything higher than 5% of the transfer amount is very high, and you should look for a different balance transfer credit card.
Pay attention to the minimum dollar amount as well. Common minimum fees are $5 and $10. Minimum balance transfer fees exceeding $10 are unusually high.
Ideally, you want to look for a balance transfer fee that’s 3% of the transaction amount with a minimum fee of $5. However, if you find a more favorable card with a higher balance transfer fee (say, 5%), it may be worth it to pay the higher rate, depending on how much debt you’re transferring.
Check out some common examples of balance transfer fees to gauge how much you may need to pay depending on the balance you wish to transfer.
Examples of balance transfer fees
|Balance transfer fee||$50 Balance||$500 Balance||$1,000 Balance||$5,000 Balance||$10,000 Balance|
|3% (with $5 minimum)||$5||$15||$30||$150||$300|
|5% (with $5 minimum)||$5||$25||$50||$250||$500|
Is a balance transfer fee worth it?
A balance transfer fee is only worth it if you save more on interest than the balance transfer fee costs.
For example, if transferring your balance to a lower-APR card (a card with a lower interest rate) saves you $50 in interest over 6 months, but the transfer balance fee is $60, the balance transfer isn’t worth it.
Let’s look at an example of how to calculate whether your balance transfer is worth the fee. Here are the details of an example balance transfer:
- Jane’s current credit card has a 20.25% APR and an outstanding balance of $3,000.
- She’s transferring onto a credit card with 0% APR for the first 6 months.
- The balance transfer fee is 3%.
- She estimates she can pay off the balance in 6 months by making monthly payments of $500.
Now she calculates whether transferring her balance is actually worth it by following these steps:
- She deduces her monthly interest rate is roughly 1.7% (annual rate of 20.25% divided by 12 months).
- If she pays $500 a month over 6 months on her current card, she’ll still owe $135.66 in interest.
- Her balance transfer fee on her current balance would be $90 ($3,000 x .03).
- If she has no opening fees or annual fees, her balance transfer is worth it, as she can save $45.66 in total (after taking out the balance transfer fee).
Given how much Jane saves, even her high balance transfer fee of $90 is justified, again assuming there are no additional fees.
How to avoid a balance transfer fee
There are ways to avoid paying a balance transfer fee, but they’re difficult to pull off and usually depend on your credit.
There are four ways to avoid a balance transfer fee:
- Find a card with no balance transfer fee: It’s uncommon, but some cards do offer balance transfers without fees. Make sure the card still allows balance transfers (as some cards do not) and that there are no conditions attached to the fee-free offer.
- Find a card with an intro fee waiver: Some credit cards offer $0 introductory balance transfer fees. These offers usually expire quickly (e.g., within 30 days of you opening your account), so make sure you qualify for the waiver and transfer your balance in the right time frame.
- Ask the issuer for a fee waiver: If you’ve picked out your balance transfer credit card but not yet applied, call the card issuer and ask if they would waive your balance transfer fee in exchange for you opening a credit card with them. This tactic will likely only work if you have good credit and are an appealing customer to the credit card company.
- Don’t do a balance transfer: Of course, you won’t need to pay a balance transfer fee if you don’t actually perform a balance transfer. Before committing to opening a new balance transfer credit card, consider calling your current card issuer and negotiating a lower APR or a deferred-interest repayment plan.