Balance Transfer Fee
One-time charge (3-5%) to transfer debt to 0% APR card. $5K balance = $150-250 fee. Must save more than fee to make transfer worthwhile.
What You Need to Know
Balance transfer fee is a one-time charge (typically 3-5%) when moving credit card debt to a new card with promotional 0% APR. The fee is added to your balance immediately.
Math example:
- Transfer $10,000 balance at 24% APR to 0% card for 18 months
- Balance transfer fee: 3% = $300 (added to balance)
- Interest saved over 18 months: ~$3,600
- Net benefit: $3,300 savings
Break-even calculation: If promotional period is too short or fee is too high, transfer doesn't make sense. $5,000 balance with 5% fee ($250) and only 6-month 0% APR saves ~$600 interest = marginal benefit.
Look for:
- 0% APR for 15-21 months
- Balance transfer fee 3% or less
- No annual fee
- Time to pay off before rate jumps to 20%+
Don't transfer if you can't pay off the balance before promotional rate expires. The ongoing APR after promo ends is usually 20-25%+.
Sources & References
This information is sourced from authoritative government and academic institutions:
- consumerfinance.gov
https://www.consumerfinance.gov/ask-cfpb/what-is-a-balance-transfer-fee-en-49/
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Related Terms in Debt & Credit
APR (Annual Percentage Rate)
The total yearly cost of borrowing money, including interest and fees, expressed as a percentage.
Amortization
The process of paying off a loan through regular payments that cover both principal and interest.
Annual Fee
Yearly charge for having a credit card—$0 to $550+. Premium cards charge fees but offer rewards that can exceed cost for high spenders.
BNPL (Buy Now, Pay Later)
A short-term financing option that lets you split purchases into installment payments (usually 4 payments over 6 weeks) with little or no interest—if you pay on time.
Balance Transfer
Moving credit card debt from one card to another, typically to take advantage of a lower interest rate or 0% promotional APR.
Balloon Payment
A large lump-sum payment due at the end of some loans after a period of smaller monthly payments.