Today, a credit card that charges a 3% balance transfer fee is a good deal.  With Bank of America and Chase raising their balance transfer fees to 4% and 5% respectively, it is only a matter of time before other banks follow suit.  Unfortunately, credit card companies are not only raising balance transfer fees, but also decreasing the length of 0% APR balance transfer deals.  A year ago, most companies offered 0% rates for a full year.  Today, getting a 0% APR for 6 months is an accomplishment.

Because 0% introductory periods are growing shorter while fees rise, consumers looking to take advantage of balance transfer credit cards need to look at more than just the 0% rate when choosing a credit card for balance transfers.  During the past five years, it was very, very easy to move your balances from one 0% card to another.  With new laws due to take effect and increasing amounts of consumers failing to stay current on their debt, credit card companies have become significantly less generous with 0% deals.

Ultimately, consumers now need to look at both the 0% rate and the go-to or long term interest rate before they elect to transfer balances.  Unfortunately, credit card companies generally do not provide applicants with information on their long term interest rate until after an application has been reviewed.  Consequently, consumers applying for balance transfer credit cards should wait until the card they apply for arrives in the mail to initiate the balance transfer process.  This not only gives them a chance to see the long term rate, but also may improve the chances of getting approved, as credit card companies may be electing to not approve applicants who intend to use their credit cards for balance transfers.

You can read more about why you should not transfer credit card balances online or review current 0% APR balance transfer credit cards on our website.

Balance transfer fees have flown under the regulatory radar largely because consumers who utilize 0% balance transfers are more than happy to pay them in exchange for a massive reduction in their interest rates.  However, balance transfer fees have risen exponentially over the past year, vastly increasing the price consumers must pay to take advantage of a popular debt refinancing option that has helped many consumers get their credit card debt under control.

To get a sense of just how dramatically these fees have risen in the past 12 months, let’s look at the year over year change in the costs of transferring $10,000 from a high interest credit card to one that offers a 0% APR for 1 year.  For starters, a year ago today, a handful of credit cards offered no fee balance transfers.  While this type of offer was more readily available two years ago, it was still possible for a consumer to get a 0% APR for 1 year and pay no fees at this time last year.

While no fee balance transfers were available a year ago, the vast majority of credit card companies charged a 3% fee that was capped at $75 per transaction.  Thus, a person who did a $10,000 balance transfer would be charged $75, or .0075%.

As the credit crunch intensified in the fall, credit card companies removed the $75 maximum fee and began charging a full 3% of the balance transferred.  Thus, the cost of a $10,000 balance transfer increased by 400% from $75 to $300.

While it is an understatement to call a 400% fee increase dramatic, it is still a pittance compared with the amount of money the consumer would save by transferring money from a credit card with a 15% interest rate to a card with a 0% rate, as the interest savings would be close to $1,000.

0% balance transfers are a great deal, even with 3% fees, as they can ultimately save the average consumer with a 15% interest rate anywhere approximately $100 in interest costs for every $1,000 transferred.  Given the current state of the economy, we are all very lucky to have 0% rates at all.

Unfortunately, balance transfer fee increases are once again on the horizon.  On April 15th, Bloomberg.com reported that Bank of America will be raising balance transfer fees to 4% on June 1st.  Our analysis of this development yielded some stark but obvious conclusions.  Since banks tend to emulate one another, it is only a matter of time before more banks begin charging 4% balance transfer fees.

Given the dramatic increase in average balance transfer fees this past year, we believe consumers who would benefit from 0% balance transfers should act quickly before more companies increase fees.  Paying 3% or even 4% in fees is a drop in the bucket to the interest expense carrying credit card debt accrues.  However, it may only be a matter of time before banks cease offering 0% interest rates for 1 year and begin offering 2.9% or higher rates as they did in 2001.

If credit card companies raise fees and increase introductory rates, getting out of debt with balance transfers will not be nearly as easy as it is today, let alone last year.

Given the fact that it is highly unlikely that either the President or the Congress will effect any changes in balance transfer fees, consumers should continue to happily pay 3% or even 4% to take advantage of 0% balance transfers.  However, 0% rates may not be available for long, so consumers should act now while these deals are still readily available.

For additional details on current 0% offers, please see the balance transfer credit card comparison section of this website where you can compare deals and apply online.

A year ago, it was possible to get a 0% APR for a full year on purchases and balance transfers while paying no balance transfer fees.  Today, that is an impossibility.  Major credit card companies have not only pulled no fee balance transfer deals, but increased the fees associated with balance transfers.

For example, the standard balance transfer fee in February of 2008 was 3% with a maximum of $75 per transfer.  With this pricing model, a person with a $5,000 balance on a single credit card would pay $75 for a balance transfer.  Today, that same balance transfer would rack up $150 in fees.

Unfortunately, paying balance transfer fees is now a necessity.  Nevertheless, these fees are a drop in the bucket compared to what can be saved with a 0% APR for a year.  What should be of concern to consumers is the future availability of 0% rates.

During the credit boom years, credit card companies battled each other to gain new customers.  A key weapon in that battle was the 0% interest rate.  Now, however, credit card companies are not particularly interested in taking on new customers.  And as the competition between lenders declines, so should the availability of 0% rates.

Fortunately, it is still possible to get a 0% APR for a full year on purchases and balance transfers (for more information, see these 0 balance transfer offers).  Many banks, however, are only granting these rates to customers with very high credit scores.  Those with good credit scores and high debt levels may find it hard to get approved.  And people with average credit are being shut out of the 0% marketplace.

Hopefully, the economy will improve soon and credit card companies will stop their belt tightening.  However, if things continue on their current path, getting a 0 balance transfer for a year may become extremely difficult.

Discover, the last major bank to cap balance transfer fees at $75 per transaction, is now charging a full 3% on all balance transfers.  This is unfortunate as it leaves consumers with virtually no option of getting a 0% APR balance transfer for a full year without paying a full 3% balance transfer fee.

Bank of America also added to the balance transfer market malaise by removing the last major bank issued credit card that charged no fees and offered a 0% APR for 6 months.  Although this card offered no fee balance transfers, the APR after the introductory period was 14.99%, making this offer good only for those who could afford to repay their balance in full during the introductory period.

Capital One does offer no fee balance transfers with one of its card.  However, this card has some big drawbacks.  First, it does not offer a 0% APR; instead, it offers an 8.9% variable APR.  In about four months, the money you would have spent on fees will be spent on interest. 

The second drawback to this no fee offer is that the credit card is designed for people with average credit and has a maximum credit limit of $3000, generally less than most would need.

However, as has been the case with Bank of America, Citi, and Capital One, Chase has lifted the maximum dollar amount on balance transfer fees to infinity.  For example, if you transfer a $5000 balance to the popular Chase Platinum Visa® Card, the cost will be $150.  Prior to this recent change, it would have been $99. 

As we’ve written recently, the credit crunch and resulting turmoil on Wall Street is having a very negative impact on the quality of credit card offers available, even to people with superb credit.  Unfortunately, things are likely to get worse.  Consequently, we continue to encourage anyone who is considering a balance transfer to do it now while decent, low fee 0% offers are still available.

April 28 2009 Update:  After a visitor posted on this site recently, I took a look at this posting from October of 2008 and really got a sense of how much the balance transfer landscape has changed, particularly in regards to fees.  Today, every major issuer is charging full 3% balance transfer fees on 0% deals and Bank of American has announced plans to raise balance transfer fees to 4% on June 1st.

While everyone enjoys being correct about a prediction, on this matter, I truly wish I was wrong.  Unfortunately, most of the dire predictions I began blogging about late last year are coming to fruition.  And, while my prediction that 0% balance transfers may soon disappear has yet to become completely true, these offers continue to be for shorter durations, regardless of the company.  So, lets all hope I’m wrong about 0% rates disappearing.

When you’re getting ready to apply for a balance transfer card, there is one very important disclosure to look for:  the balance transfer fee.  While different credit cards disclose this information in different ways, you will generally find information on balance transfer fees in the “Other Fees” section of the terms and conditions.

Once you’ve located this section, carefully review the specifics.  In total, there are three different possible fee structures.  The best, and most difficult to find, is a statement that there are no balance transfer fees. 

The most common balance transfer fee disclosure generally states, “ BALANCE TRANSFER TRANSACTION FEE: 3.0% for each balance transfer made under this offer, with a minimum of $10 and a maximum of $75.”

Notice that a maximum fee is clearly stated.  The third possible fee disclosure will look very similar to the one cited above.  However, there will be no notice of a maximum fee.  If there is no stated maximum fee, you will be charged a full 3% of the balance you transfer.  This means that a $10,000 balance transfer would cost $300, as opposed to $75.

If possible, we recommend finding a credit card that charges no balance transfer fees.  We list every available no fee balance transfer offer on our website.  If you cannot get approved for a no fee balance transfer card, we strongly encourage you to avoid a credit card that does not cap the maximum fee at $75.

 Now, the savings one gets from transferring a $7500 balance from a 14% credit card is over $1000.  However, if you pay balance transfer fees, the amount would be reduced to around $800.  Now, while balance transfer fees are by no means deal breakers, they do help boost savings (in this example, by 20%).

 Given our stance on no fee balance transfers, it should come as no surprise that our selection for “Best Balance Transfer” offers no fees on balance transfers and a 0% APR for 1 year.  And the winner is…The Citi Professional Cash Card.

Below you can vote on the best balance transfer credit cards.  You can compare all of the offers listed in the 0% APR Balance Transfer section of our website and apply online for approval.

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The runners up are credit cards that offer a 0% APR on balance transfers for 1 year, a 0% APR on purchases as well as low long term APRs. Cards that fall into this category are the Discover More Card and the now defunct Chase Platinum Card

With credit markets tightening, it is becoming more difficult to get approved for a good 0% APR balance transfer credit card. Thus, we suggest that anyone who carries a balance on a high interest credit card take action soon to lock in a 0% rate before the banks get stingier.

To compare all current balance transfer credit cards, including our picks for the best balance transfers, visit the credit card comparison section of SmartBalanceTransfers.

Also, feel free to post a comment or shoot us an email with your opinions.

Once Friday comes, there will only be two solid 0% APR, no fee balance transfer offers left on the market, neither of which offer a 0% interest rate for 1 year. These no fee cards offer 0% rates for 6 and 9 months respectively.

If you’re looking to transfer a balance to Citi Home Rebate card before the no fee balance transfer offer expires, you can do so at SmartBalanceTransfers.com before the offer expires. Additionally, you can view all current no fee balance transfer offers at our website at any time.

First, she was charged a $75 balance transfer fee. If you’ve been here before, you know I strongly recommend no fee balance transfer credit cards. However, the $75 in balance transfer fees was only the tip of the iceberg. When the visitor made payments to her consolidated credit card bill, she was surprised to find out that every dollar she paid reduced the portion of her debt being charged 0% interest, not the balance being charged 14%. Fortunately, she realized this nasty credit card trick after only a few statements.

After finding my site on Google, she applied for a no fee balance transfer card and sent me an email asking that I share her story with my visitors. I was more than happy to oblige as this highlights one of the nastiest little tricks in the credit card industry. Buried in the fine print of just about every credit card’s terms and conditions will be a statement such as this: every payment will be applied to the balance with the lowest interest rate. In a nutshell, this means that if you have a balance on your credit card and you are offered a 0% balance transfer deal, you’re best off putting it in the shredder and consolidating your credit balances on a new 0% APR credit card that charges no balance transfer fees.