If you’re doing research on balance transfer cards, you might have come across some confusing terms. In this quick guide, we’ll explain some common (and important) terms you should know.
Your balance is the amount of debt you owe.
Typically, you initiate a balance transfer to move debt from one credit card to another card. You might do this because:
- The other card has a better interest rate, or
- You want to consolidate debt from multiple cards.
Though balance transfers are usually conducted with credit card debt, you can often transfer many different types of debt, including student loans, mortgages, and auto loans.
A credit score is a numerical summary of an individual’s reliability of paying debt. The most widely used score is distributed by FICO, a credit rating agency, and is composed of various factors like payment history and how long someone has been using credit.
No-fee balance transfer card
With a no-fee balance transfer card, you’re not charged fees when you move debt to it. Sometimes, this perk only lasts temporarily (say, 60 days). Other card providers may offer no balance transfer fees indefinitely.
Keep in mind that though a no-fee balance transfer card doesn’t charge balance transfer fees, it may still charge annual fees, foreign transaction fees, cash advance fees, and more.
Compare balance transfer credit cards
An annual fee is a yearly fee you pay to your credit card company for the ability to use your card.
Balance transfer fees
Most providers charge balance transfer fees when you initiate balance transfers. Typically, these fees are 3% to 5% of the amount you transfer.
Cash advance fee
A cash advance fee is a fee assessed when you use your card to take out some form of cash. This generally means withdrawing cash at an ATM or a bank, but your card provider may also categorize other activities (like purchasing gambling chips) as cash advances.
A cash advance fee is typically 5% of the amount you withdraw.
Foreign transaction fee
A foreign transaction fee is a fee assessed when you use your credit card for a purchase outside of the United States. A card’s foreign transaction fee is usually between 1% to 3% of the transaction amount in U.S. dollars.
You may be charged a late fee when you fail to submit a payment to your credit card company by the due date.
APR stands for annual percentage rate — the interest rate that’s charged to debt.
When a credit card company (or other lender) loans you money, it wants to make a profit. So, it charges you an interest rate — the price you pay for the privilege of borrowing money.
An introductory APR, also called an intro APR, is a temporary interest rate a credit card provider offers to a new customer. After the intro APR ends, it will revert to an ongoing APR (defined below).
The ongoing APR, also known in some regions as the revert rate, is the interest rate you’ll pay after your introductory APR period ends. Typically, the ongoing APR is much higher than the intro APR.
The penalty rate, also known as the default rate, is a very high interest rate you’re charged when you violate the terms of your cardholder agreement. The penalty rate is usually assessed if you’re late on a monthly payment.