What Is a Balance Transfer Fee?
Do you have a credit card with high-interest rates you would like to lower? If so, transferring your credit card debt to another credit card might be a good solution. However, doing the math beforehand would help because some cards charge a balance transfer fee.
A balance transfer fee is an expense some credit card companies charge for moving your debt from one credit card to another. Note that the cost is set by the issuer of the new credit card (the one you’re transferring money to), not the old one that you’re transferring the funds from.
The fee is a percentage of the balance being transferred and typically ranges from 3% to 5%.
How Balance Transfer Fees Work
When initiating balance transfers, clients must ensure they have an extra amount corresponding to the balance transfer fee on top of the transferred funds. Below is an example of how it works in practice with the balance transfer card.
Let’s say you have $10,000 in credit card debt and want to transfer the funds to a new card to consolidate debt. The balance transfer fee is 5%.
To complete the balance transfer, you need to update the balance.
The new balance will be $10,500, corresponding to the transferred amount of $10,000 and the 5% balance transfer fee equalling $500.
Fixed-Fee Credit Card Debt Transfer Example
Say you intend to transfer $100 to a different credit card, the issuer of which charges a 3% credit card balance transfer fee or a minimum of $5. So, your fee would be $5 since 3% of $100 is $3.
However, if you have a $200 balance that you’d like to transfer, the balance transfer fee would be $6 because 3% of $200 exceeds $5.
Negotiating a Lower Fee
If your balance is quite high, it would be prudent to try and negotiate your balance transfer fee with the new credit card company where you’re planning to take your balance. To do this, simply call the customer service number and explain that you want to transfer your balance but are hesitant because of the high fee.
But, before you do that, prepare your case for lowering the fee, meaning take the following steps:
- Check your credit score; the credit card issuer could agree with your request if your score is very good or excellent.
- Check the transfer fees of other companies. Make a case that you're a good customer who pays on time and wants to do business with them.
- Compare balance transfer cards and calculate how much you can save with each.
Once you’ve completed your research, call the issuer and speak with a customer service agent. Let them know about your situation and see if the two of you can find some middle ground.
If not, they may be able to tell you about new offers that are in the works. If the customer service representative can't help you, it would be a good idea to ask to speak with a supervisor. Doing your research beforehand will give you an advantage in this situation, so do your best to leverage it to lower high-interest debt and save money.
The Best Way to Save on Balance Transfers
Usually, credit cards providing the most favorable terms for balance transfers offer some or all of the following benefits:
- No annual fee
- 0% intro balance transfer fee
- 0% intro APR (Annual Percentage Rate)
Just remember that the 0% offer may last only for a limited period. For example, some issuers could offer a 0% intro balance transfer fee for transfers made within 60 days of opening an account.
For years, the clients I worked for were banks. That gave me an insider’s view of how banks and other institutions create financial products and services. Then I entered the world of journalism. Fortunly is the result of our fantastic team’s hard work. I use the knowledge I acquired as a bank copywriter to create valuable content that will help you make the best possible financial decisions.
