What Is a Balance Transfer Fee?

It’s never fun to deal with, but debt happens. One of the reasons that debt can be so difficult to tackle is that it often comes with high interest rates. When you have debt, you not only have to pay off the principal balance (aka the amount of money you originally borrowed), but you also have to make interest payments, which grow your balance and make it harder to pay off your debt. One way to get out from under steep interest rates is to do a balance transfer. 

If you’re considering a balance transfer, you have likely heard warnings about fees. What is a balance transfer fee? Is it worth it or does it mean you should avoid a balance transfer altogether? Whether or not a balance transfer fee is worth it depends on the size of your balance, how long you need to pay it off, and what the current interest rate is on your credit card debt.

Erika Taught Me

  • Balance transfer cards make it possible to consolidate debt and save on interest
  • Most balance transfer fees range from 3% to 5%
  • Some credit card issuers waive balance transfer fees or offer an introductory balance transfer fee
  • Look for a balance transfer credit card with a 0% APR intro offer to save on interest
  • The balance transfer fees may well be worth paying if you save more money with a lower or promotional 0% APR offer

What is a balance transfer?

Before we dive into what a balance transfer fee is, let’s take a quick look at what a balance transfer is. A balance transfer involves transferring debt from a credit card or loan (such as a personal loan) to a brand-new credit card that allows balance transfers.

In most cases, it only makes sense to do a balance transfer when you can achieve a lower interest rate than you’re currently paying. Many balance transfer cards offer a temporary 0% APR, known as a promotional APR, that typically lasts 12 to 15 months, although some can last as long as 21 months.

During the promotional period, you won’t have to make any interest payments on the transferred balance. Not having to put money towards interest each month can make it a lot easier to allocate more money towards the principal balance. This means you can pay off your debt faster and save money on interest. Ideally, you will pay off your balance completely before that promotional period ends. Once it ends, the regular interest rate kicks in on your balance transfer card, and interest payments will resume. 

What is a balance transfer fee? 

When you do balance transfers, you will often pay a fee to do so. This balance transfer fee is usually a set percentage of the transfer amount and the credit card issuer will add that amount to your new balance. You need to crunch the numbers on whether paying it makes sense or if you should avoid balance transfer fees altogether. If you don’t save money in interest to cancel out the cost of the balance transfer fee, you won’t benefit financially from this move. Some credit cards offer promotions such as a low balance transfer fee or no balance transfer fees, so it’s always a good idea to shop around for the best possible deal. 

How does it work?

To make it easier to understand how balance transfer fees work, here is a quick example. Let’s say you have a credit card balance of $1,000 that you want to transfer to a new credit card and the balance transfer fee is 3%. The balance transfer fee will result in a $30 fee and a balance on the new credit card of $1,030.

It’s important to note that having an increased balance can lead to paying more interest if the credit card does not have a 0% APR intro offer or if you don’t pay off your balance in full before that period ends. 

How to avoid balance transfer fees

As briefly noted earlier, some balance transfer credit cards come with a promotional balance transfer fee or even no balance transfer fees at all. Spend some time researching different credit card options to see which credit card comes with the lowest balance transfer fee and the longest 0% APR intro offer. That way, you can save as much money as possible and get out from under your debt even faster. 

That said, it's important to note that if you can save more money in interest with a balance transfer card than you would on your original credit card, then the cost of the balance transfer fee may well be worth it. So there's no need to avoid balance transfer fees on principal, whether or not it's worth it will depend on the amount of your credit card debt, current APR, and how quickly you can pay down your balance.

Person holding credit card and laptop: What is a balance transfer fee?

Are balance transfer fees worth it?

You need to sit down and crunch the numbers to determine if a balance transfer fee is worth it or not and should consider these main factors:

  • Fee amount: How high is the balance transfer fee and how much will it add to your debt balance?
  • Intro APR: Does the card come with an introductory 0% APR period? If so, how long is that period and how much of your debt can you pay off before it ends?
  • Regular APR: Once the promotional period ends, what is the regular APR? Is it lower than the APR you currently pay? How long will you need to pay that rate before you can pay off your balance in full?
  • Annual fee. If the credit card comes with an annual fee, is it worth paying to do your balance transfer? 

If you can pay off all or most of your balance before the intro APR period ends or can get your hands on a lower interest rate than you currently pay, oftentimes, paying a balance transfer fee is worth it. You can use a free online balance transfer credit card to get an idea of how much money a balance transfer can save you. 

FAQs

How much are the balance transfer fees?

Typically, balance transfer fees are a set percentage of the balance you transfer onto the new credit card. Usually, these fees range from 3% to 5%, but some balance transfer cards don’t charge this fee at all.  

How much will cost in fees to transfer the $1,000 balance?

How much it will cost you to transfer the $1,000 balance depends on the credit card’s balance transfer fee. For example, if the credit card charges a 5% balance transfer fee, then you would pay $50 on a $1,000 balance, but if it's 3% you'd only pay $30. The credit card issuer adds the fee amount to your credit card balance, so you may also need to pay interest on that amount.

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I'm an award-winning lawyer and personal finance expert featured in Inc. Magazine, CNBC, the Today Show, Business Insider and more. My mission is to make personal finance accessible for everyone. As the largest financial influencer in the world, I'm connected to a community of over 20 million followers across TikTok, Instagram, YouTube, Facebook and Twitter. I'm also the host of the podcast Erika Taught Me. You might recognize me from my viral tagline, "I read the fine print so you don't have to!"

I'm a graduate of Georgetown Law, where I founded the Georgetown Law Entrepreneurship Club, and the University of Notre Dame. I discovered my passion for personal finance after realizing I was drowning in over $200,000 of student debt and needed to take action-ultimately paying off my student loans in under 2 years. I then spent years as a corporate lawyer representing Fortune 500 companies, but I quit because I realized I wanted to have an impact; I wanted to help real people and teach them that you can create a financial future for yourself.

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Our aim is to help you make financial decisions with confidence through our objective article content and reviews. Erika.com is part of an affiliate sales network and receives compensation for sending traffic to partner sites, such as MileValue.com. This compensation may impact how and where links appear on this site. This site does not include all financial companies or all available financial offers. This in no way affects our recommendations or article content.

Advertiser Disclosure

Our aim is to help you make financial decisions with confidence through our objective article content and reviews. Erika.com is part of an affiliate sales network and receives compensation for sending traffic to partner sites, such as MileValue.com. This compensation may impact how and where links appear on this site. This site does not include all financial companies or all available financial offers. This in no way affects our recommendations or article content.

Advertiser Disclosure

Our aim is to help you make financial decisions with confidence through our objective article content and reviews. Erika.com is part of an affiliate sales network and receives compensation for sending traffic to partner sites, such as MileValue.com. This compensation may impact how and where links appear on this site. This site does not include all financial companies or all available financial offers. This in no way affects our recommendations or article content.