DEFINITION of 'Balance Transfer Fee'

A fee levied by a credit card issuer when a balance is transferred to its credit card.  A balance transfer fee can range from a low of 1% to as high as 5% of the transferred amount. Balance transfer fees generally go hand-in-hand with special “teaser” interest rates that can be as low as zero percent, but that are only applicable for a period that is usually six to 12 months, after which time interest rates on any outstanding card balance will revert to the usual levels.

A balance transfer fee may be worth paying for people with high levels of credit card debt, as the upfront cost may be more than offset by the savings on credit card interest expense.

BREAKING DOWN 'Balance Transfer Fee'

For example, at a 20% interest rate, a credit card balance of $10,000 would result in interest expense of $2,000 annually, or about $167 per month. A balance transfer fee of 1% with a promotional interest rate of 2% would result in a total cost of 3% or $300, for a saving of $1,700 on interest expense, which works out to a substantial $141 per month. The fiscally prudent thing to do would be to apply these savings to repayment of existing debt.

Some noteworthy points about balance transfers and the fees involved –

  • Balance transfers may be offered on new cards or on existing cards. Card issuers may offer lower balance transfer fees to new card users, in order to entice them to switch.
  • Transfer fees may be negotiable, but you will not know unless you ask for a lower rate. Card issuers may be willing to negotiate lower rates if the transferred amount is quite large.
  • The transfer fee should only be one of the factors to consider when deciding on a balance transfer. Other factors to take into consideration include the regular interest rate on the card (once the promotional period expires) and whether monthly payments at the promotional interest rate can be easily managed, since even one missed payment may result in a significantly higher rate.
RELATED TERMS
  1. Upfront Pricing

    The interest rates and fees stated in a credit card agreement ...
  2. New Balance

    The new balance is the sum of your previous balance, payments, ...
  3. Credit Card Balance

    The amount of charges, or lack thereof, owed to the credit card ...
  4. Linked Transfer Account

    Accounts held by an individual at a financial institution that ...
  5. Late Fee

    A charge a consumer pays for making a required minimum payment ...
  6. Zero Balance Card

    A credit card on which a consumer does not owe any money because ...
Related Articles
  1. Personal Finance

    How Credit Card Balance Transfers Work

    The pros and cons of credit card balance transfers.
  2. Personal Finance

    Transferring Credit Card Balances To A New Card

    Before you take advantage of that new credit card's 0% interest balance transfer offer, read our step-by-step guide.
  3. Personal Finance

    3 Best Credit Cards for Balance Transfers in 2016

    Find out which credit cards offer the best balance transfer opportunities in 2016, including the longest introductory periods and the lowest costs.
  4. Personal Finance

    0% Balance Transfers: Can You Beat the Odds?

    Before you accept that 0% balance transfer offer, understand why you got it and who will probably profit most. Only accept if you can beat the odds.
  5. Personal Finance

    Best Credit Cards For 2015

    The best credit card for you depends on your financial goals. Our choices for the best cards in 4 different categories.
  6. Personal Finance

    Everything You Need To Know About Credit Card Rates

    Understanding credit card rates will help you choose the right credit card, and avoid any unpleasant surprises.
  7. Personal Finance

    Credit Card Review: Chase Slate

    Take a closer look at one of the most popular balance-transfer credit cards on the market: the Chase Slate card with a 0% balance transfer fee.
  8. Personal Finance

    Best Credit Cards for 2017

    If you have good credit, card companies are competing for your business. Here are some of this year's best deals and credit cards you should look at.
  9. Personal Finance

    Credit Card Debt: America’s Biggest Struggle?

    Dealing with credit card debt is a huge struggle for many American families. Here are some tips to get you started.
RELATED FAQS
  1. When is a balance transfer a good idea for paying off debt?

    Learn the best situation in which to do a balance transfer, enabling you to pay off your credit card debt more quickly while ... Read Answer >>
  2. Do balance transfers hurt your credit?

    The extent of the hit to your credit score depends on credit utilization. Read Answer >>
Trading Center