How Much Do Balance Transfers Cost?

How Much Do Balance Transfers Cost?

Posted on August 19, 2012 by Amy in Balance Transfer, Credit Card Debt, Credit Card Tips, Credit Card Transactions

Balance transfer credit cards may have the lowest interest rates, but there are other costs you should consider before you make the switch.

While there are a few cards that come with annual fees, the bigger costs for balance transfers come at the start and end of the process.

First there are balance transfer fees when you move your debt to another card and then there are higher interest charges when the rates revert.

The cost of these two features varies from card to card, so here we take a look at how much both of them could cost you in the short and long term.

Balance Transfer Fees

When you change to a different card, the new issuer could apply this fee for their services in organizing the financial switch.

Balance transfer fees tend to cost a minimum of $5 for small balances, but could be up to 3% of the total debt.

So if you were transferring $3000, for example, you could expect an additional cost of $90 on your first bill.

But if you were consolidating several credit card debts and your balance was $8000, a 3% fee would cost you $240.

Fortunately there are some cards that do not charge any fees when you switch. The Slate credit card from Chase, for example, is currently waiving this fee for new customers, while most Capital One cards don’t carry this cost.

That means you can compare the cost of different credit cards to help you find the most affordable balance transfer option.

Standard Balance Transfer Rates

Balance transfer credit cards are popular because of the competitive rates they offer for new cardholders.

These rates, unfortunately, are introductory offers that will eventually revert to a more standard APR.

Some cards apply the APR used for purchases, while others charge a completely different rate, but ultimately the interest rate applied once a balance transfer deal ends depends on two main things:

  1. The credit card you have chosen; and
  2. Your credit score

While the change in rates is inevitable, the cost to you is more flexible. If you can find a balance transfer deal that helps you pay off all or most of the balance during the introductory period, then the rate change will be much more affordable.

For smaller balances, that may mean looking at 0% balance transfer cards, while for bigger debts the priority could be longer introductory periods.

Whatever your needs, there is always a wide range of balance transfer cards you can choose from, and simply being aware of these two features will help you find the best credit option for you so that you can work towards being debt free.