What is a balance transfer fee?

If you're making your first balance transfer, you might be unaware that a fee usually accompanies it. Naturally, this is referred to as a balance transfer fee.

Typically, a balance transfer fee ranges from 3% to 5% of the amount being transferred. There are restrictions on balance transfers, including limits on the amount. Additionally, transfers between the same issuer—such as moving debt from one Citi card to another—are generally not permitted.

So, how do credit card balance transfer fees function, and what should you be aware of before proceeding with a transfer? Here’s your all-inclusive guide.

How does a balance transfer fee function?

Balance transfer fees generally amount to 3% to 5% of the total transferred sum, with a minimum fee ranging from $5 to $10. This fee is applied by the issuer to whom you're transferring the debt.

Since the main goal of a balance transfer is to save money by securing lower interest rates, it's essential to compare the savings on interest against the transfer fees when considering a balance transfer.

There are several balance transfer credit cards that offer a 0% introductory transfer fee, which may also feature a 0% introductory annual percentage rate and additional benefits. If you don't opt for a card with such perks, make sure your potential balance transfer will ultimately save you money.

What constitutes a reasonable balance transfer fee?

The price of a balance transfer fee depends on the conditions set by your credit card provider and the total debt being transferred. Usually, this fee falls between 3% and 5%, depending on the issuer.

While 3% is on the lower end of standard transfer fees (except for a promotional 0% offer), it really hinges on comparing the transfer fees to the interest you'd incur if you didn't make the transfer. Although balance transfers often cost less than the interest charges on a card, this isn't always guaranteed.

Is it possible to bypass balance transfer fees?

The most effective way to sidestep balance transfer fees is to look for balance transfer cards that completely eliminate the fee. Alternatively, you may come across cards that provide introductory promotions for balance transfer fees.

It's essential to understand that the $0 transfer fee might only be applicable for a limited time. Therefore, it’s vital to carefully review the terms and know when to initiate the balance transfers to qualify for the offer. Typically, this period occurs within the initial months after receiving the card.

Key takeaways

If you're making your first balance transfer, you might not realize there's a fee of 3% to 5% involved. Balance transfers can be an effective way to reduce your next high-interest payment, but it's important to evaluate whether paying the transfer fee is more beneficial than continuing to pay interest on your original card.

Discover more about the top balance transfer cards available here.