A balance transfer fee is a charge applied when you move debt from one credit card to another. It is usually a percentage of the amount transferred, often ranging from 2% to 3%.
How It Works
If you transfer $5,000 to a new credit card with a 3% balance transfer fee, the cost will be $150. This fee is added to the new card balance, increasing the total debt owed.
Why It Matters
- Cost of transferring: Even with promotional interest rates, fees add to the total cost of refinancing debt.
- Savings potential: If the interest savings outweigh the fee, a balance transfer can still be worthwhile.
Final Thoughts
The balance transfer fee is a key factor in deciding whether to move debt. Borrowers should compare the fee against potential interest savings before proceeding.