There are almost as many credit card deals as there are people to take them on. A brief browse of the banks, card providers and price comparison sites reveals a seemingly endless list of cards with a dazzling array of offers, rates, fees and perks.
So it's inevitable that whatever card you took out a few months or years ago, there will be a different deal around today (and again in six months' time). So can you transfer your balance from one to another?
Transferring is simple
If you have two credit cards and you want to transfer the balance (or some of it) across from one to the other, all you have to do is inform the supplier provider of the 'destination' credit card of the other card’s details and the amount you want to transfer, and they will do the rest.
You can usually do this over the phone or online, or perhaps in a bank if the card is affiliated with it.
You may be charged for the transaction, either as a fixed fee or a percentage of the transferred amount.
Dedicated transfer cards
You don't have to have two existing credit cards to perform a balance transfer. There are cards specifically designed for the purpose, known as balance transfer cards. They often have very attractive introductory interest rates, which can be as low as 0%. That means you can pay off your balance for the duration of the special offer without paying a penny in interest.
The benefits of transferring
There are two reasons why customers choose to transfer their balances.
- First, they might just want to simplify their credit lives. If you've got six different store and credit cards, you'll know what a pain it can be to monitor the repayment dates and stick to them. If all the balances are contained in one card, there's one payment once a month.
- Second, and most commonly, people transfer because they have found a much better deal than the one they are currently on. If you're currently paying 18% interest on your balance and you find a card you qualify for that’s charging 0%, it could be a better option.
A note of caution
There are a few things to take notice of before you make a transfer:
- There might be a one-off fee to make the transfer, often a percentage of the amount you move.
- Cards with low-interest introductory offers are usually only low-interest on the balance transfer itself. Purchases and cash withdrawals will incur higher interest rates (possibly after a short low-interest period).
- As the name suggests, introductory offers do expire, so pay attention to the duration of the deal because once it runs out, you'll be paying full interest.
- You might be tempted to regularly transfer balances from one card to another to chase new low-interest deals. Note that this can make you look like a risky customer to the card providers, and you might find yourself rejected from future deals even if you keep up with your payments.
- You generally can't transfer balances from one to card to another from the same provider or open balance transfer card accounts with companies you already have credit cards with. This also extends to their affiliated and partner providers.
Deals have been getting better and better
Since the noughties, card companies have been in strong competition to offer more attractive rates for new customers. While some offer treats, bonus points and discounts on certain products, a long interest-free period is what many customers go for, as it's essentially like getting a free loan, usually with a one off handling fee.
When you're looking for a card that's right for your balance transfer, a long interest-free period is almost certainly the offer that will save you the most money as long as you keep up with minimum payments.
In a Nutshell
A balance transfer fee is the cost some cards charge, often between 3% and 5% percent, when you transfer your debt from one card to another. By taking the time to shop around, you may be able to find cards with $0 transfer fees — but keep in mind that those are rare, and are often tied to a limited window for the transfer itself.
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A balance transfer fee is a fee that’s charged when you transfer credit card debt from one card to another.
It’s usually around 3% to 5% of the total amount you transfer, typically with a minimum fee of a few dollars (often $5 to $10). The fee is charged by the company that issues the credit card you transfer the debt to.
A balance transfer can help you take advantage of lower interest rates — a move that can save you money on interest charges. This can be a great tool to pay down debt. But it’s important to weigh how much you’ll save on interest payments against how much you’ll pay to complete the transfer if there’s a fee.
Keep reading to learn about the potential costs of a balance transfer, as well as some different options you may have.
- How does a balance transfer fee work?
- Is a 3% balance transfer fee good?
- Can you avoid balanced transfer fees?
How does a balance transfer fee work?
A balance transfer fee is the cost some cards charge, often between 3% and 5% percent, when you transfer your debt from one card to another to help consolidate debt and pay off your cards faster.
Timing can play a big part in how much you pay to transfer a balance. The card you’re transferring your debt to may charge a balance transfer fee. But there are balance transfer credit cards that waive the balance transfer fee if you make the transfer within a certain time frame.
A great way to save money with a balance transfer is with a card that offers…
- 0% intro APR on balance transfers
- $0 intro balance transfer fee
- No annual fee (which can be a cost factor if you’re getting the card just for the balance transfer)
Unless you get a card that ticks all of these boxes, you’ll have to do some math to make sure this balance transfer can actually help you save money.
The cost of a balance transfer fee all depends on the terms set by your credit card company and the amount of debt you transfer. Often this amount falls somewhere between 3% and 5%, depending on the lender.
Say you want to transfer a $2,000 balance to a card with a 3% balance transfer fee. This means your balance transfer fee would come out to $60. For a $12,000 transfer, your fee would be $360.
You can also use the calculator from the section above to see just how much a balance transfer card could save you based on your current balance, interest rate, monthly payments, balance transfer fee, and the 0% APR window.
Can you avoid balance transfer fees?
The only sure way to avoid balance transfer fees is to see if any balance transfer cards are available that have waived the fee entirely. You might also be able to find cards with intro balance transfer fee offers. Keep in mind that the $0 transfer fee might only apply for a certain time frame, so be sure to read carefully and find exactly when you’ll need to request the balance transfers for the offer to apply. Often this window will be in the first few months after you’ve received the card.
Next steps
As you’re looking to transfer your current credit card debt to a new credit card, make sure to look for a card with a low balance transfer fee. Or even better, look for one with none at all, at least during the introductory period.
Ultimately, each credit card will have unique terms and requirements. Be prepared to shop around. Taking time to find the best balance transfer card for you can be worth the hassle. It’s also worth considering other potential options for debt consolation so you can weigh all of your options as you work toward your debt-free goal.
About the author: Sarah C. Brady is a San Francisco–based financial consultant, workshop facilitator and writer. In addition to writing for Credit Karma, Sarah writes for Experian, LendingTree, Magnify Money, MSN News and more. In her … Read more.