Balance transfer credit cards can become a valuable tool if you are stuck paying off debt at high interest rates. Most cards in this niche let you avoid interest for more than a year, during which every penny you pay toward your debts goes directly toward the amount you owe.
However, there is one minor detail that often throws consumers off when researching the best balance transfer credit cards—the presence of balance transfer fees.
What is a balance transfer fee?
A balance transfer fee is a fee charged by credit card issuers when you transfer a balance. These fees are not optional; they are required in order to take advantage of balance transfer offers, most of which let you enjoy 0 percent APR for a limited period of time.
How much do balance transfer fees cost?
Balance transfer fees typically add up to 3 percent or 5 percent of the total balance you transfer to your new card. This means that, for every $10,000 in debt you move to a balance transfer credit card, you’ll owe $300 or $500.
Most balance transfer fees also have a minimum charge in place, usually $5 or $10. With these minimums in place, you may wind up paying more than 3 or 5 percent in balance transfer fees if you’re only transferring a small amount of debt, such as $50 or $100.
How do balance transfer fees work?
Balance transfer fees are added to your transferred debt amount when you facilitate a balance transfer to your new card.
Let’s say you transfer $5,000 in high interest credit card debt to a new balance transfer card that charges a balance transfer fee of 3 percent. In this case, you would begin repayment on your new card with an updated balance of $5,150. This amount includes the debt you transferred ($5,000) plus the 3 percent balance transfer fee ($150).
Best credit cards without a balance transfer fee
There are normally quite a few balance transfer credit cards without a balance transfer fee, but the coronavirus pandemic led many card issuers to tweak their debt consolidation offerings. As of today, there are only a few balance transfer credit cards that don’t charge a balance transfer fee, including the following:
Wings Visa® Platinum Card
The Wings Visa Platinum Card is a very basic credit card product without any heavy perks. However, this card does give you 0 percent APR on purchases and balance transfers for a full 12 months, followed by a variable APR of 8.15 percent to 18 percent. There’s no annual fee, and you won’t pay any fees to transfer a balance. You can qualify for a minimum credit line of $500, but you do have to be a member of Wings Financial Credit Union to apply. Membership is available to consumers who work in the aviation industry or live in select metro areas surrounding cities like Atlanta, Detroit, Orlando and Seattle, as well as parts of Minnesota and Wisconsin.
Wings Member Cash Rewards Visa® Signature Card
The Wings Member Cash Rewards Visa Signature Card also requires membership with Wings Financial Credit Union. However, if you’re eligible, you can earn 1.5 percent cash back on all your spending and a $100 bonus after you spend $1,000 on your card within 90 days of account opening. You’ll also qualify for 0 percent APR on purchases and balance transfers for 12 months, followed by a variable APR of 14.20 percent to 18 percent. You won’t pay an annual fee or any balance transfer fees.
SunTrust Prime Rewards Credit Card
The SunTrust Prime Rewards Credit Card doesn’t offer 0 percent APR, but you can qualify for a three-year introductory interest rate of 4.75 percent (current prime rate) on balances transferred during the first 60 days of account opening. After that, you’ll pay a variable APR rate of 12.74 percent to 22.74 percent. You won’t pay any balance transfer fees if you transfer during the first 60 days after you open your account, but the balance transfer fee goes up to 3 percent (minimum $10) after that. This card also gives you an unlimited 1 percent cash back on each dollar you spend, and you’ll get a $100 statement credit when you spend $500 on your card within three months of account opening. No annual fee applies.
How to choose a balance transfer card
There aren’t many balance transfer credit cards that let you avoid a balance transfer fee right now, so you may want to broaden your search to include cards that do charge one.
The key to selecting a balance transfer card that does charge a fee is making sure your introductory APR offer is long enough to let you achieve considerable interest savings and that the hassle of transferring a balance will be worth it. Here are some of the main factors to consider as you compare credit cards with balance transfer offers:
- Compare 0 percent APR offers: When you compare the top balance transfer credit cards, you’ll find that many offer 0 percent APR for well over a year, or even up to 20 billing cycles. Longer offers can help you buy time to pay off your debt without any interest, which can help you make up for any balance transfer fees you have to pay.
- Do the math on balance transfer fees: Paying a balance transfer fee is generally worth it since fees cost 3 percent or 5 percent of your balance at most and you only pay the fee once, whereas the average credit card interest rate is well over 16 percent. Still, you should use a balance transfer fee calculator to determine how much you could save, even after paying a balance transfer fee.
- Look at the ongoing variable rates: Keep in mind that introductory rates don’t last forever, and make sure you know how the variable rates on cards you’re considering stack up. If you don’t pay off your debt during your card’s introductory period, you’ll be stuck paying the variable interest rate after that.
- Look for cards that offer perks you’ll use: Also consider whether the cards you’re researching offer any benefits that make them worth keeping for the long haul. You may want to consider cards that offer rewards, or ones that offer travel perks or insurance benefits.
Balance transfer alternatives
If you don’t want to pay a balance transfer fee but do want to pay off debt faster, there are other options you can consider. For example, you could look into personal loans, which let you qualify for fixed interest rates, fixed monthly payments and a fixed repayment schedule, often without any added fees.
If you have considerable home equity, you could also consolidate debt with a home equity loan or home equity line of credit (HELOC). Both of these options let you use your home equity as collateral and often come with considerably lower rates than credit cards charge.
Finally, don’t forget that you can pay off debt the old-fashioned way, either by funneling all the money you can toward your cards as fast as you can or by using the debt snowball or debt avalanche method.
The debt snowball asks you to pay as much as you can toward your smallest balances first while making minimum payments on the rest, whereas the debt avalanche method asks you to pay as much as you can toward your highest interest balances first while making minimum payments on the rest. Both strategies lead you toward paying off some of your debts one at a time until you only have one debt left, then none.
The bottom line
If you’re struggling with debt, you’re certainly not alone. Fortunately, there are many options for you to consider, including balance transfer credit cards, debt consolidation loans and more.
Make sure to spend some time researching all your options so you know which one works best for your needs. Paying a balance transfer fee and utilizing a balance transfer credit card is often the best choice, but you should run the numbers to find out.