If you are trying to consolidate the debt on your credit cards, you may consider transferring the balance from one card to another. Some people may not realize this transfer usually comes with a price: a balance transfer fee. This is a surcharge that typically occurs when you use one credit card to pay off the balance on another card.
Is it possible to bypass this balance transfer? Yes, but you have to know what steps to take. Here is a guide explaining how to get 0 fee balance transfer.
What Is a Balance Transfer Fee?
A balance transfer fee is a charge that you have to pay for transferring the balance on one credit card to another. The fee is usually 3-4% of the amount you transfer, and that fee is typically added to your existing balance. The charge will come from the card you are putting money onto, not the one that you are taking the balance from.
Let's say you have two credit cards, A and B. Credit card A has a balance of $1,000, and credit card B has a balance of $500. If you transfer the balance from A to B, you will end up with a new total of $1,500 on credit card B. However, if B's balance transfer fee was 3%, you will now have a balance of $1,530 on card B. The extra $30 is 3% of the $1,000 balance transferred from card A. Thus, you have to be aware of your fees before moving money around from one card to another.
How to Get $0 Balance Transfer Fee
On occasion, you may come across a credit card that offers no balance transfer fee. This does not happen often, but when it does, you may want to take advantage of it. For instance, Slate from Chase offers a $0 balance transfer fee, making it a very attractive card. However, this card may not be ideal if you are looking for rewards. You have to weigh out your options to determine if the card is right for you.
Most every balance transfer card comes with an introductory period where the APR is 0%. These cards have become somewhat plentiful as the country recovers from the economic downturn. Some cards even offer 0% for up to 18 months such as the Citi Simplicity Visa or the Discover It cards. These cards have a balance transfer fee, but the fee may be worth paying depending how much you will save with no interest penalties for this extended time. The key here is to do some comparison shopping to find the best card for your unique situation. Take out a calculator and determine how much money you will save in interest penalties with each card you are considering, and then factor in the balance transfer fee to see which card saves you the most money.
Other Alternatives to $0 Balance Transfer Fees
If you can't figure out how to get a $0 balance transfer fee, you may consider taking out a personal loan to pay for your credit card. Then, you could pay the standard interest on the loan and not worry about the fee. Of course, your interest may outweigh the fee you would have originally paid--that is something that you would have to calculate. You may benefit by consolidating all your debt into one loan.
Another option to consider is just making minimum payments on a card during the 0% introductory time period. Then, put any additional money that you may have paid toward the balance into an interest-bearing account. When the introductory time period comes to a close, you can pay off the balance in one lump sum, using this money and interest you have generated.
You may discover that transferring a credit card balance just isn't right for you. There's nothing wrong with that, especially when you learn about the fees you could encounter along the way. Don't naively go into this kind of agreement without doing the math. If it is going to cost you more money to make the transfer, it's not worth the transaction. But you may be able to make it work for you. Figure out how to get yourself out of debt without falling further in it.