What is a Balance Transfer Fee, and Why Should You Care?
- UpdatedOct 27, 2024
- If you’re paying high interest rates, transferring your balance to a credit card with a lower interest rate can save you money.
- Some credit cards offer promotional interest rates on balance transfers.
- To save the most money, look for the option with the lowest balance transfer fee and balance transfer interest rate.
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If you have credit card debt or loans that have a high-interest rate, a balance transfer to a different credit card with a lower interest rate can save you money over the long term. Most balance transfers also charge a one-time balance transfer fee. It’s important to know how much you’ll pay in balance transfer fees to determine how much a credit card balance transfer will save you.
What is a balance transfer?
A balance transfer is a way of paying off existing credit card debt by moving it to one of your other credit cards or opening a new one. Transferring your balance from a high-interest credit card to a low-interest credit card can save you money. But most credit cards also add a balance transfer fee to your transfer amount.
If you want to transfer a credit card balance to another card you have, you can call customer service or go online to request a balance transfer. Your credit card company will tell you the interest rate you’ll pay on the balance transfer and any balance transfer fee you'll pay.
Some credit cards offer new customers lower fees and interest rates on balance transfers, so shop for the best offers.
What is a balance transfer fee?
A balance transfer fee is a percentage of your balance transfer, usually with a minimum dollar amount. The fee is added to the amount you transfer. For example, if you transfer a $1,000 credit card balance and pay a 3% balance transfer fee. Your total balance on the new card will be $1,030.
Balance transfer fee example
Citi offers new customers a 0% introductory APR on balance transfers for 18 months after opening a new Citi Double Cash card (current in April 2023). That card has a 3% balance transfer fee. If you transferred a $1,000 balance to a new Double Cash card, your balance would be $1,030. You'd have 18 months to pay off the balance before Citi charges any interest. That can save you a lot of money in interest and give you more time to pay down your debt.
Is it worth it to pay a balance transfer fee?
Whether a balance transfer fee is worth paying depends on a few questions:
How much is the balance transfer fee? A high balance transfer fee can eat up a lot of the money you save in interest.
How much lower is the new interest rate? The bigger the difference from your current rate, the more you’ll save.
How long will it take you to pay off the balance? If you plan to repay it immediately, it’s probably not worth paying a balance transfer on top of what you already owe.
Here are a few examples of current balance transfer offers:
| Features | Citi Double Cash | BankAmericard Credit Card | Wells Fargo Reflect |
|---|---|---|---|
| Balance transfer fee | $5 or 3%, whichever is higher | 3% | $5 or 3%, whichever is higher, for the first 120 days; then $5 or 5%, whichever is higher |
| Introductory APR | 0% for 18 months | 0% for 21 months | 0% for up to 21 months |
| Regular APR | 18.49%-28.49% based on creditworthiness | 15.49%-24.49% based on creditworthiness | 17.49-29.49% based on creditworthiness |
Pro tip: Know how to spot a deferred interest offer
A 0% balance transfer and a “0% interest for X months” offer may appear similar in your search, but they aren’t the same. Sometimes, 0% interest is a deferred interest offer.
Balance transfer: Interest doesn’t start to accrue on the transferred balance until the promotional period is over.
Deferred interest: Interest accrues during the promotional period but isn't added to your balance until after the promotional period is over. If you haven’t paid off your entire balance by the end of the promotional period, you'll be charged all of the interest from day one of your loan. Even if your balance is $1 on the last day of the promotional period. You can avoid those interest charges by paying off the debt before the promotional period ends.
Debt relief stats and trends
We looked at a sample of data from Freedom Debt Relief of people seeking debt relief during September 2024. The data uncovers various trends and statistics about people seeking debt help.
Credit utilization and debt relief
How are people using their credit before seeking help? Credit utilization measures how much of a credit line is being used. For example, if you have a credit line of $10,000 and your balance is $3,000, that is a credit utilization of 30%. High credit utilization often signals financial stress. We have looked at people who are seeking debt relief and their credit utilization. (Low credit utilization is 30% or less, medium is between 31% and 50%, high is between 51% and 75%, very high is between 76% to 100%, and over-utilized over 100%). In September 2024, people seeking debt relief had an average of 83% credit utilization.
Here are some interesting numbers:
| Credit utilization bucket | Percent of debt relief seekers |
|---|---|
| Over utilized | 30% |
| Very high | 32% |
| High | 19% |
| Medium | 10% |
| Low | 9% |
The statistics refer to people who had a credit card balance greater than $0.
You don't have to have high credit utilization to look for a debt relief solution. There are a number of solutions for people, whether they have maxed out their credit cards or still have a significant part available.
Credit card debt - average debt by selected states.
According to the 2023 Federal Reserve Survey of Consumer Finances (SCF) the average credit card debt for those with a balance was $6,021. The percentage of families with credit card debt was 45%. (Note: It used 2022 data).
Unsurprisingly, the level of credit card debt among those seeking debt relief was much higher. According to September 2024 data, 88% of the debt relief seekers had a credit card balance. The average credit card balance was $15,142.
Here's a quick look at the top five states based on average credit card balance.
| State | Average credit card balance | Average # of open credit card tradelines | Average credit limit | Average Credit Utilization |
|---|---|---|---|---|
| Alaska | $18,493 | 7 | $24,102 | 89% |
| Connecticut | $18,231 | 9 | $28,791 | 94% |
| New Jersey | $18,127 | 9 | $27,261 | 91% |
| Minnesota | $17,744 | 8 | $25,731 | 82% |
| New Hampshire | $17,333 | 8 | $26,156 | 92% |
The statistics are based on all debt relief seekers with a credit card balance over $0.
Are you starting to navigate your finances? Or planning for your retirement? These insights can help you make informed choices. They can help you work toward financial stability and security.
Tackle Financial Challenges
Don’t let debt overwhelm you. Learn more about debt relief options. They can help you tackle your financial challenges. This is true whether you have high credit card balances or many tradelines. Start your path to recovery with the first step.
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How can you avoid paying a balance transfer fee?
Now and then, a credit card offers $0 balance transfer fees and a 0% or very low interest promotional period. It’s rare, though. For instance, you may find this offer at Navy Federal Credit Union or First Tech Federal Credit Union, but not everyone is eligible to join. More often, if there is no balance transfer fee, that means there is no promotional interest rate.
Shopping around is the best way to ensure you pay the lowest balance transfer fee possible.
Can you negotiate a balance transfer fee?
No, most balance transfer fees are set by credit card companies based on the market. Offers change over time, so if you can’t find a low-balance transfer fee option today, it might be worth waiting for a better offer later.
Is 3% a good balance transfer fee?
Most balance transfer fees are between 3% and 5%, so a 3% balance transfer fee is a good price. Be sure to compare each card’s introductory balance transfer interest rate and terms of the promotion.
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