Although many credit card companies have sharply reduced the length of 0% balance transfer offers, balance transfer fees continue to rise. In 2008, some credit card companies charged no fees on balance transfers, although most charged a 3% fee with a $75 maximum per transaction. In 2009, many credit card companies did away with $75 maximums, and some began charging 4-5% balance transfer fees. Today, most credit card companies are charging 4-5% balance transfer fees for 0% rates that last as little as 6 months.
The rise of balance transfer fees is less of an issue than the decline of 0% offers. A credit card that charges a 5% balance transfer fee, but offers a 0% APR for 1 year, will provide substantial savings to most people. For example, a person with a $2,000 balance on a credit card with a 14% interest rate could save over $150 by doing a balance transfer and paying a 5% fee as long as the 0% rate last for 12 months.
However, with a 0% period of 6 or 7 months, a person with a 14% rate will likely see no benefit. Of course, anyone who has an interest rate in the high teens or twenty percent range could benefit from getting a lower interest rate once the 0% period expires. Most others, however, need to be sure to avoid 0% offers lasting less than a year.
One way to avoid paying high balance transfer fees on a credit card that only offers a 0% APR for 6 months is to carefully review the fine print. Many credit cards advertise a 0% APR on balance transfers for 12 months, but may only grant you a 0% rate for 6 months, thanks to some fine print trickery. If the credit card you are considering offers more than one 0% period, wait until your card arrives before transferring balances. This way you can inspect your offer and make sure you’re getting a 0% for a full year and not wasting money on balance transfer fees.
For more information on credit cards offering balance transfers, please see the main section of Smart Balance Transfers.
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