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Understanding Balance Transfer Fees and How to Make the Most of Them

At O1ne Mortgage, we prioritize consumer credit and finance education. This article will help you understand balance transfer fees, how to avoid them, and whether they are worth it. For any mortgage service needs, feel free to call us at 213-732-3074.

What Is a Balance Transfer Fee?

A balance transfer fee is a fee charged by a credit card issuer when you transfer debt from one credit card to another. This fee is typically a percentage of the amount being transferred, usually ranging from 3% to 5%, or a flat dollar amount, whichever is greater. For example, if you transfer a $5,000 balance with a 3% fee, you would pay $150.

What Is a Good Balance Transfer Fee?

If you can’t find a credit card without a balance transfer fee, a 3% fee is generally considered good. Choosing a card with a lower balance transfer fee helps minimize the cost of transferring your balance, making it easier to pay off your debt. Always check the card issuer’s website or the card’s “rates and fees” or “terms and conditions” document before applying.

How to Avoid Balance Transfer Fees

While cards with a $0 balance transfer fee are rare, they do exist. You may have the best chance of finding such a card at a credit union. Additionally, some promotional offers may waive the balance transfer fee for a limited time, so keep an eye out for these opportunities.

Is a Balance Transfer Fee Worth It?

A balance transfer fee can be worth it if the amount you save on interest exceeds the fee. For instance, if you have a $5,000 balance on a card with a 22.75% APR and you transfer it to a card with a 0% introductory APR for 21 months, you could save a significant amount in interest. However, you must commit to paying off the balance before the introductory period ends to maximize your savings.

Calculating the Balance Transfer Fee

Before applying for a balance transfer card, calculate the fee for the amount you plan to transfer. For example:

• 3% balance transfer fee: $150
• 5% balance transfer fee: $250

Consider the following factors as well:

• Introductory APR period: A longer promotional period gives you more time to pay off your balance.
• Post-promotional APR: Any remaining balance after the promotional period will incur interest at the card’s standard APR.
• Other fees: These can include annual fees, foreign transaction fees, or late fees.
• Time limit for balance transfers: You generally must complete the transfer within a certain timeframe to qualify for the promotional APR.

The Bottom Line

To get the most from a balance transfer card, commit to paying off your balance before the low introductory APR expires. Carefully read each card’s terms and conditions before applying to select the one that best fits your needs. Many 0% introductory APR balance transfer cards require good to excellent credit, so check your credit report and score before applying.

For any mortgage service needs, O1ne Mortgage is here to help. Call us at 213-732-3074 to speak with one of our expert loan salespersons. We are committed to providing you with the best service and helping you make informed financial decisions.

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