A balance transfer may be a helpful tool for you to pay off your debt faster. Typically, a balance transfer means moving debt from one or more credit cards onto one single new credit card to take advantage of a temporarily low interest rate.
What’s the catch? Balance transfers usually come with a one-time transfer fee that can add a large chunk of money to your debt before you even get a chance to take advantage of your new card.
To avoid the balance transfer fee, consider applying for a no-fee balance transfer card. These cards pack the same punch as normal balance transfer cards, but sweeten the deal with a few more perks. Read on to find out if a no-fee balance transfer card is the right solution for you.
Scotiabank Value Visa Card
Scotiabank Value Visa Card
Purchase interest rate
Eligibility criteria, terms and conditions, fees and charges apply
Scotiabank Value Visa Card
Apply today and enjoy a 0.99% introductory interest rate on balance transfers for the first 6 months when your new credit card account is opened by July 1, 2020.
Purchase interest rate: 12.99%
Cash advance rate: 12.99%
Intro balance transfer rate: 0.99% for the first 6 months
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Cardholders typically initiate balance transfers to
Move their credit card debt to another card with a lower interest rate.
Consolidate debt from multiple credit cards.
What is a no-fee balance transfer credit card?
A no-fee balance transfer credit card lets you transfer balances from other credit cards to the no-fee card without paying a one-time balance transfer fee.
How much money can I save with no-fee balance transfers?
Transferring balances can be convenient, but there’s one thing that isn’t so great: thebalance transfer fee.
This is either a flat fee or a percentage of the amount you’re transferring. For example, your credit card company might write the terms of your balance transfer fee as:
“Either $5 or 5% of the amount of each transfer, whichever is greater.”
Percentage-based balance transfer fees are usually between 1% and 5%.
Let’s say you’re transferring $1,000
Using the balance transfer terms above, you’d pay the greater of $5 or 5% of your transfer amount. To calculate 5% of $1,000, multiply 1,000 by 0.05 to get $50.
You’ll be charged a $50 fee for the transfer since it’s more than the flat $5 fee.
Paying a $50 fee to make a balance transfer can be pricey, especially if you are already in debt – but this is where a no-fee balance transfer card could be helpful. If you transfer $1,000 on a no-fee balance transfer credit card, you’ll pay $0 in fees. This could lead to big savings, especially if you’re transferring large balances or making multiple balance transfers.
What is the meaning of a free balance transfer card?
In the case of a free balance transfer card, free means that there’s no transfer fee. You still have to make the minimum payments every month on the new card – you just aren’t charged by the lender for the process of transferring your balances from other cards to your new card.
The truth behind the flat-fee balance transfer myth
There’s a lot of misinformation about balance transfers, especially when it comes to fees.
One myth is that a balance transfer is cheap because you’ll always pay a flat fee for it. As we’ve shown above, initiating a balance transfer rarely comes with just a flat fee. Many people miss the “whichever is greater” part of the credit card terms and end up paying a shockingly big fee based on a percentage of the transfer.
Always calculate your percentage fee prior to applying for the card when transferring to a credit card that has a balance transfer fee. A large balance will likely exceed the flat fee and have you paying the 1-5% instead.
Potential costs of balance transfers
When it comes to balance transfers, the math can add up quickly. Check out the fees you’ll pay for typical balance transfer cards compared to a no-fee balance transfer card.
Balance transfer amount
What are the perks of no-fee balance transfer credit cards?
You can save cash. You’ll pay nothing to transfer your balance to this credit card – even if you’re transferring a large sum of money.
Possible low intro APR on transferred balances. You can sometimes get a 0% or low introductory annual percentage rate (APR) on the debt you move to a no-fee balance transfer card.Back to top
Will I qualify for a no-fee balance transfer card?
Now that you know what a no-fee balance transfer card is, let’s discuss how you might qualify for one.
Your credit history
Generally, credit card companies will take on your debt if they’re reasonably certain they’ll be repaid. With that said, it’s easier to qualify for a no-fee balance transfer card if you have good or excellent credit score (650+). It may be possible to get a balance transfer card with lower credit rating, but the card’s terms may not be as generous. You’ll likely be looking at a higher APR and you may not secure as many months with the introductory rate.
The size of your debt
Another factor to consider is how much debt you’re planning to transfer. Of course, the less credit card debt you have, the better. Almost a third of your credit score is based on how much of your available credit you’re using, which is also known as your credit utilization ratio.
Why is my credit utilization ratio important?
Credit card providers want to see that you’re using a relatively small amount of your available credit. This implies that you’re in control of your finances and won’t have any trouble making future payments.
If you have a lot of debt, your credit card company may offer you a lower balance transfer limit than you hoped for. Even though you might not be able to transfer all of your debt, you should still consider transferring at least some of it, especially if the new card offers a better interest rate.
how will my card provider set a balance transfer limit?
Your credit card provider will set a balance transfer limit based on factors such as your credit score and how much debt you owe.
Income and other factors
Like any other credit card, applying for a no-fee balance transfer card means that you’ll need to submit your income details and other financial information for approval. Just as your credit score helps a provider to determine how reliably you’ll pay your bills, your income can indicate whether you’re a good candidate for a no-fee balance transfer card.
The minimum income required for a no-fee balance transfer card varies by card provider. As a general rule, the higher your income, the better your chances of approval.
A balance transfer card can be incredibly helpful, but you should understand your card’s terms and conditions before proceeding with any transfers. Knowing the various pros and cons other cardholders have experienced can help you avoid falling into any traps.
No fees for balance transfers. Balance transfer fees can add up quickly, especially with large or multiple transfers. No-fee balance transfer cards can eliminate this expense.
Low interest rates. No-fee balance transfer cards typically come with the added benefit of a 0% or low introductory APR. While a few offer 0% interest rates for several months, others offer low interest rates which typically start from 1.9%.
Potential $0 annual fees. No-fee balance transfer cards often come with no annual card fees. That’s a welcome addition to the already great perk of paying $0 fees on balance transfers.
Ongoing APRs can be high. A 0% APR promotion is nice, but it will only last so long, typically from 3-12 months. If you don’t pay off your balance by the time the promotion expires, your remaining debt might be assessed at a high interest rate.
0% APR promo is not a requirement. With some no-fee balance transfer cards, you’ll start paying interest on balance transfers immediately.
Other fees. Cards usually aren’t limited to just annual fees and balance transfer fees. Other fees can include cash advance fees and foreign transaction fees. Read the terms and conditions of the card before you make any additional purchases on top of your debt.
Is a no-fee balance transfer card right for me?
As with any other credit card, weighing the merits of a no-fee balance transfer card involves a bit of math. Specifically, you will want to understand how much you are going to save by consolidating your debt onto your new no-fee balance transfer credit card.
Let’s look at two examples of hypothetical cardholders to illustrate who might need (or not need) a no-fee balance transfer card.
Mary is $20,000 in credit card debt, and she’s paying a sky-high 25% interest rate on her balance. She could benefit from a balance transfer card. If she transfers that $20,000 to a card offering 0% APR for 20 months, she’ll get a much-needed break from paying all that interest.
However, consider the potential balance transfer fees on that $20,000. If she’s transferring her balance to a card that comes with a 3% balance transfer fee, she’ll pay $600 (or 20,000 x 0.03) in balance transfer fees alone.
If Mary applies for a no-fee balance transfer card, she can transfer her $20,000 balance and pay nothing to do so. Assuming her card doesn’t come with annual fees, she’s saved a cool $600 just by picking the right card.
Verdict: A no-fee balance transfer card is a fine choice for Mary.
John has $1,000 in credit card debt that he’s paying 20% interest on. That’s a pretty standard interest rate in Canada, however he will pay a lot of interest on his debt, so he could benefit from a balance transfer card.
He is considering a no-fee balance transfer card, however the card he has chosen has a $39 annual fee. Would it be worth it for John to get this card?
If John’s only considering his savings on balance transfers, the card probably isn’t his best choice. He does save money by not having to pay balance transfer fees, but he still has to pay the $39 annual fee. He looks at a balance transfer card that charges a 3% transfer fee and no annual fees with a 0% APR for 12 months. He realizes that he will save money by paying a transfer fee and no annual fee.
Verdict: Since John is transferring a smaller amount of money, he might have better options than a no-fee balance transfer card.
To help you decide on the best no-fee balance transfer card for your needs, consider these factors:
Intro APR. Some cards offer 0% or low APR on balance transfers, which can provide you a break from high interest payments on your debt.
Ongoing APR. Will you pay off your debt before your intro APR ends? If not, consider what the ongoing APR will be. If you plan on carrying debt for a long time, low-APR cards might be a more attractive option, even if you have to start paying interest on your balance immediately. Any new purchases you make on your card may be subject to the revert rate, which will be a higher interest rate, so keep this in mind if you plan on making new purchases on your card.
Annual fee. An annual fee can knock off a bit of your savings from a balance transfer card, so factor it in when you’re doing the math on how much you will save each month.
Ongoing balance transfer fees. If you plan on transferring balances over long periods of time, confirm whether your card offers no fees indefinitely or only for an intro period. Most cards only offer no fees for the intro period.
Applying for a no-fee balance transfer card
To apply for a no-fee balance transfer card, you typically must be at least 18 years old. While you’re applying, have the following information on hand:
Your name and home address.
Your email address, phone number and date of birth.
Financial information, like your annual salary and wages.
Information about your debt, including your current credit card provider’s and the balances on each card.Back to top
Speeding up your debt elimination
Let’s look at two hypothetical scenarios with our friend, Dan, to see how much he can save with a no-fee balance transfer card.
Scenario 1: Dan is paying off two credit cards
Here’s Dan’s situation with two credit cards:
On Card A, he’s carrying $5,000 in debt with a 23% APR.
On Card B, he’s carrying $7,000 in debt with a 14% APR.
He’s paying $600 every month on each card – $1,200 total each month for the two cards – toward eliminating his debt.
By paying $600 every month on each card, Dan will pay off:
Card A in 10 months and pay $501 in total interest.
Card B in 13 months and pay $569 in total interest.
That means that on his $12,000 in credit card balances, Dan’s paying $1,070 in interest over the lifetime of his debt – or $13,070 in total.
Is there a better way? Let’s look at a different option Dan can take.
Scenario 2: Dan consolidates his debt
Let’s say that instead of paying off the debt through his existing credit cards, he consolidates his debt with a no-fee balance transfer card.
Dan will transfer $12,000 to the no-fee balance transfer credit card and pay $0 in fees.
Since the Visa he has chosen offers 0% APR for 12 months, Dan’s debt won’t accumulate interest for a while.
Continuing to pay $1,200 a month toward his debt, Dan will pay off his debt in 10 months.
Since Dan pays off his debt before his intro APR expires, he pays nothing in interest. In total, he pays $12,000 and saves $1,070 in interest payments.
Potential no-fee balance transfer credit card mistakes
To stay out of trouble with no-fee balance transfer credit cards, avoid these common mistakes:
Defaulting on payments
Even with a 0% interest rate on balance transfers, you’re required to make monthly payments.
Missing monthly payments can lead to painful consequences. Not only will your credit score go down, but you could also be subject to a penalty rate.
You may immediately lose your 0% or low interest rate.
Your interest rate could shoot up to as high as 36%.
You can avoid an unfortunate credit card fate by staying vigilant with your payments.
What is a penalty rate?
The penalty rate, also known as the default or revert rate, is a 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.
Getting hit with late fees
Beyond potentially receiving a penalty interest rate for defaulting on payments, you might also pay late fees.
To avoid missing payments, consider setting up automatic payments, if your card provider allows them.
Transferring balances after the intro fee period ends
Unfortunately, the “no-fee” part of “no-fee balance transfer cards” sometimes expires. You may pay nothing on balance transfer cards for, say, 60 days. After that you’ll have to start paying fees. To avoid surprise balance transfer fees, read your card’s fine print to see if and when your no-fee promotion ends.
Making more purchases with the card
Moving your debt to a no-fee balance transfer card — especially one with a 0% APR promo — is a fresh start. It gives you a golden opportunity to pay off your debt without paying unnecessary and heavy interest rates. If you can, try to avoid adding more debt to your card with new purchases.
Balance transfers aren’t the only way to deal with credit card debt. You might want to consider the other options listed below. As always, do your research to see which method is right for you.
Payday loans. A short-term loan that’s offered for a small amount of money – about $1,500 or less. It’s called a payday loan because you typically pay it back on your next payday.
Personal loans. You borrow money that you pay back over a slightly longer period of time – usually in one to five years.
Filing for bankruptcy. If you’re unable to pay your credit card debt in any capacity, you might want to consider filing for bankruptcy. Bankruptcy can help you reduce debt and prevent lenders from taking legal action against you.
Slowly pay off debt. If you’re not getting approved for balance transfer cards and other options for debt elimination don’t seem appealing, you could tackle your debt the old-fashioned way: paying it off slowly.
Debt consolidation. You take out a loan to and move all of your debts to the loan –then you’ll pay off that one loan over time.
Credit counselling. This method can help you create a plan to pay off your debt and stay out of debt in the future. Though counselling can cost money, in the long run it might save you more than the price of admission.
Research is key when it comes to getting a no-fee balance transfer credit card. Your individual situation will dictate what card is right for you, so take the time to evaluate your current financial situation and what options will make the most sense in terms of tackling your debt.
Frequently asked questions
Yes. Although your balance won’t accrue interest during the promotional APR period, you’ll still need to pay at least the minimum payment each month.
Applying for a no-fee balance transfer credit card is similar to applying for a normal credit card. The difference is that you may need to complete a section in your application for your balance transfer. You’ll give details like how much you want to transfer and information about your current credit card accounts. If approved, your debt will automatically transfer to the new credit card.
Most of the time, you can transfer balances online. Check with your credit card issuer to see if this is an option.
The exact time frame varies by card provider, but a balance transfer can take up to 10 days to complete, or sometimes longer, depending on your situation and if the provider requires more time and information to process your application.
Adrienne Fuller is the head of publishing at Finder. With a decade of experience creating guides in finance and education, she aims to deliver the accurate and transparent information she wishes she had when she made some of life's important financial decisions. For the past 3 years she has been the publisher of money transfers, helping readers save when they send money all over the globe. She has a BA from Colorado College and loves to hike with her two Catahoula dogs around her home in San Diego.
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