Balance transfers are one of the most sophisticated ways of saving money on a credit card. They do come with a number of catches that have to be considered before one rushes in and applies and these include balance transfer fees. Some instant approval credit cards offer introductory balance transfer rates that are every bit as competitive as the best in the marketplace including 0% balance transfer credit cards.
The main reason a consumer would go through the hassle of tranfering a balance because the new card offers low interest rates. This low interest rate may be an introductory offer which lasts for a few months or it may be at a higher interest rate than the introductory offer but lasting for a longer time.
A balance transfer fee is an administrative fee that covers the lender for the administration involved in transferring a balance from one card to another. Some credit cards do not charge it, as many borrowers are becoming more aware of it and factoring it into their calculations. However it is not a prominently advertised fee and can add to the interest that is actually being paid. A balance transfer fee is generally calculated as a percentage of the balance that is being transferred on to the card. This is typically 1% or 2% of the card balance. Sometimes a flat fee may be charged, however this is somewhat rare.
A balance transfer offer is when it is possible to get a lower interest rate on the balance that is transferred from another credit card than the credit card interest rate. Sometimes a fee is charged on a balance transfer offer. This is known as the balance transfer fee. It is most often worked out as a percentage of the balance that is transferred on to the credit card.
A typical range of a balance transfer fee is from 1% to 3% of the balance that is being transferred to the new credit card. In most, but not all, cases this will be limited to a certain amount. If there is no cap on the fee then this will add a large amount to the cost of the transfer.
Most balance transfer fee caps will be between $20 and $100. If there is a cap of $75 and a balance transfer fee of 2%, then the 2% charge will apply to any money up to $3,750. There will then be no difference what amount is transferred.
A high balance transfer fee can reduce the benefit of zero per cent balance deals. When considering balance transfers these should be added to the interest and charges on the card. If an interest free or low interest offer is only available for a short period then this will add considerably to the overall cost.
