Balance transfers help customers regain their financial independence and offer options to repay the credit card debt. Credit card companies usually provide customers with enticing offers that include balance transfer fees. Balance transfer fees can be beneficial or detrimental to credit card users. Do not settle for balance transfer offers that do not offer a solution to the current financial problems. Credit card companies may not always discuss balance transfer fees with customers so it is important that customers know what they are getting into when they make the decision to transfer a balance.
What Are Balance Transfer Fees
Balance transfer fees are charges that the credit card companies charge to transfer the balance from one or more credit cards to a new credit card with a low introductory interest rate. Depending on the length of the introductory rate, cardholders could stand to save or lose money. For this reason, it is always a good idea to compare balance transfer offers to find the credit card with the most reasonable balance transfer fees.
Balance transfer fees have changed substantially over the years. Most major credit card companies use to waiver the balance transfer fees for customers. Credit card companies were trying to compete for the business of customers by waiving balance transfer fees. The market was overwhelmed with offers to credit card customers who needed help with their credit card debt. Next, the economy began to experience financial issues and that changed everything. While the many credit card companies were beginning to experience financial problems, they could not continue to offer waivers for balance transfer fees. The days of free balance transfer fees began to dwindle, and credit card companies had to find ways to keep their customers happy.
Types of Balance Transfer Fees Credit Card Companies Charge
Credit card companies vary in the balance transfer fees that they charge. The fees can be either a percentage fees or a fees with a cap.
Balance Transfer Percentage Fees
Credit card companies may charge percentage fees that may range from 3% to 5% of the balance transfer amount. Credit card companies may charge higher fees when there is no fee cap. Customers may or may not benefit from a percentage fee. For example, a credit card with a transfer balance of $3000 would result is a $90 charge from a 3% fee, a $120 charge from a 4% fee, and a $150 charge from a 5% fee.
Customers must also look at the interest rate that they receive to determine if the offer is a good one. Receiving high interest rates after the teaser rate ends may not be beneficial to customers unless the balance owed is low enough to pay off before the teaser rate ends. Short balance transfers can be beneficial if the interest rate is high on the old credit cards.
In most cases, percentage balance transfer fees are worthwhile because cardholders save some money. Customers should opt for the balance transfers that offer long introductory rates at a good percentage to receive the greatest benefits.
Balance Transfer Fee Caps
Some credit card companies use fee caps. Fee caps may be $50 or $75 per transaction. The amount of the transaction does not matter. Fee caps can be good for credit card users with a high balance to transfer. For example, a $2000 balance will only cost $50 or $75 to transfer. Transferring multiple balances can get a little expensive. For example, transferring 10 credit card balances of $1000 each at a fee of $75 per transaction can cost credit card customers $750. If the customer gets a 0% interest rate for two years, and they are able to pay of f the debt before the teaser rate ends, the balance transfer fees will be well worth it.
Tips of Avoiding or Reducing Balance Transfer Fees
- Maintain a credit score of 700 or higher at all times. Credit card companies offer the best deals to their customers with good credit. Good credit can earn customers a balance transfer fee waiver or a lower percentage.
- Negotiate other aspects of the credit card when the credit card company does not want to eliminate or reduce the balance transfer fees. Request no annual fees, low interest rates, or an increased interest rate length on the credit card to make up for the balance transfer fees.
- Transfer cash from one account to another to avoid balance transfer fees. Make sure that the credit card that is used to pay off another credit card offers a 0% interest rate so that the transaction does not cost cardholders anything. As long as the balance is paid before the teaser rate ends, cardholders are not responsible for any fees.
Balance transfer fees are hard to avoid. In most cases, these fees are worth it. Read all of the information carefully before making a commitment. There are usually ways that credit card users can negotiate balance transfer fees.