Save with a no-fee balance transfer and an intro APR.
A balance transfer may be a helpful part of your get-out-of-debt plan. Typically, a balance transfer means moving debt from one credit card to another to take advantage of a temporarily low-interest rate.
The problem? Balance transfers usually come with fees that can add to your debt before you get a chance to take advantage of your new card.
No-fee balance transfer handbook and tutorials
What is a no-fee balance transfer card?
A no-fee balance transfer credit card allows you to transfer balances from other credit cards without paying a balance transfer fee.
How much money can I save with no-fee balance transfers?
The balance transfer fee is either a flat fee or a percentage of the amount you’re transferring — typically between 3% and 5%. 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.”
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.
If you transfer $1,000 to a no-fee balance transfer card, however, you’ll pay $0 in fees. Which could lead to big savings, especially if you’re transferring large balances or making multiple balance transfers.
Potential costs of balance transfers
When it comes to balance transfers, the math can add up. Check out the fees you’ll pay for typical balance transfer cards compared to a no-fee balance transfer card.
| Balance transfer fee | $5,000 | $15,000 | $30,000 |
|---|---|---|---|
| 3% | $150 | $450 | $900 |
| 5% | $250 | $750 | $1,500 |
| None | $0 | $0 | $0 |
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 when transferring to a credit card that’s not a no-fee balance transfer card. A large balance will likely exceed the flat fee.
How to compare no-fee balance transfer cards
To help you decide on the best no-fee balance transfer card for you, consider these factors:
- Intro APR. Most balance transfer cards offer a low or 0% intro APR on balance transfers for a designated period of months from account opening.
- Ongoing APR. Consider if you can pay off the entirety of your debt during the intro APR. 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.
- 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.
- 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.
Compare balance transfer credit cards
Qualifying 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.
Your credit history
Generally, credit card companies will take on your debt if they’re reasonably certain they’ll be repaid. That said, it’s easier to qualify for a no-fee balance transfer card if you have good or excellent credit of 670 or higher. It may be possible to get a balance transfer card with lower credit, but the card’s terms may not be as generous.
The size of your debt
Another factor to consider is how much debt you’re planning on transferring. 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 — or your credit utilization ratio.
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 extend 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 solid interest rate.
Income and other factors
Like any other credit card, applying for a no-fee balance transfer card means you’ll submit your income and other financial information for approval. 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. However, the higher your income, the better your chances of approval.
Is a no-fee balance transfer card right for you?
As with any other card, weighing the merits of a no-fee balance transfer card involves a bit of math. Specifically, you want to see how your savings will stack up.
A longer 0% intro APR may fetch you more savings than a short intro period and no balance transfer fee. It depends on how much you owe, how much you can pay each month and your revert rate if you can’t pay the debt off within the intro period.
Potential no-fee balance transfer card mistakes
To stay out of trouble with no-fee balance transfer 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.
This means:
- You may immediately lose your nice 0% interest rate.
- Your interest rate may shoot up to as high as 29.99%.
You can avoid an unfortunate credit card fate by staying vigilant with your payments.
Getting hit with late fees
Beyond potentially receiving a penalty interest rate for defaulting on payments, you might also pay late fees, which can run up to $35.
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 fees for a set time following your account opening, after which 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. Namely, it’s a golden opportunity to pay off your debt while it’s not burdened by heavy interest rates. If you can, try to avoid adding more debt to your card with new purchases.
Alternatives to balance transfers
Balance transfer credit cards aren’t the only way to deal with credit card debt. You might want to consider these other options. As always, do your research to see which method is right for you.
- A personal loan. Borrow money that you pay back over a slightly longer period of time — usually in one to five years — and typically at a lower rate than a standard credit card.
- Filing for bankruptcy. You might want to consider filing for bankruptcy if you’re unable to pay your credit card debt in any capacity. 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 can try to tackle your debt the old-fashioned way: paying it off slowly.
- Credit counseling. Get help creating a plan to pay off your debt and stay out of debt in the future. Though counseling can cost money, in the long run, it might save you more than the price of admission.
Bottom line
Research is key when it comes to getting a balance transfer credit card. Your individual financial wellness will dictate what is or isn’t right for you, so take the time to evaluate where you’re at and what options make the most sense. Your debt doesn’t define you, but it’ll be a great day when you get out from under it.
