If you are looking to transfer a credit card balance from a high interest credit card to a low interest credit card, you might want to look again. There is plenty of bold print that will highlight great features but some of the longer term restrictions and conditions of the card may find you shopping all over again for a new ‘deal’ six months down the road. Consumers should take the time to be completely aware of the balance transfer fees associated with their new credit card as well as the fees that could impact them down the road if a balance has not been paid off by the time the introductory period has ended.
Typical and Usual Balance Transfer Fees
Balance transfers can definitely be a way to manage a short term cash shortage but should not be a standard way of managing your debt. As you transfer balances, open new credit cards, continue to have a revolving debt and incur fees and interest rate increases, you are not optimizing your debt expenses and will in the end be saddled with far more debt than you could have imagined. More importantly, your credit rating could be negatively impacted to the point you are no longer eligible for valuable interest rate savings.
Some of the fees a consumer should expect when transferring a balance could include a onetime transfer fee that may be as much as 4% of the balance or even more. If you are transferring a $5000 balance, you have just added another $200 to your debt load. A consumer may also find credit card companies who offer a transfer fee limit, or cap of the percentage rate such as $75 or 4% of your balance, whichever is less.
People with stellar credit ratings who are careful credit card shoppers can certainly find a card that may have no fees associated with balance transfers. Even if you don’t have stellar credit, careful credit card shopping could find balance transfer fees being offered at simply a flat rate of $50.00, no matter what your actual debt transfer may be.
Balance Transfer Fees That Were Not in the Bold Print
After a consumer has found a zero or low rate transfer fee, they should also take a look at the additional fees that could come with transferring balances and using the card for additional charges. Be sure to consider the following before making your credit card transfer decision:
- Some credit cards offer one interest rate on your transferred balance but then charge a far higher rate for additional purchases.
- A single late payment may eliminate your introductory rate and now place you at a new rate that was higher than you started with on the old card you transferred from.
- If you do not pay off your card balance during the introductory rate period, within six months for example, you could incur the interest rate charges that had been accruing, but not charged during that six month introductory period.
For consumers looking to manage their debt by minimizing the balance transfer fees, they need to be sure to read more than just the front page of the credit offer. Reviewing the terms of the credit agreement could reveal hidden fees that would actually make transferring a balance far worse than paying off the debt at its current interest rate. And just as a consumer would evaluate any major purchase prior to signing on the dotted line, balance transfers, credit cards and debt management should be handled with the same degree of product research and comparison in order to obtain the best deal at the right price.
Sheryl Platte is a freelance writer based in the Seattle, WA area. With ten years of business and industry experience, Sheryl focuses her writing on strategy and consumer information writing.
