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Balance transfer handling fees - or transfer fees for short - were introduced by credit card companies to recoup lost profits from 0% rate offers.
It’s become a real rarity to find any 0% offer without a transfer fee – and when you do, the 0% period tends to be no longer than 6-months max.
So transfer fees can be avoided – however you need to weigh up the pros and cons of either avoiding a transfer fee by transferring to a low rate for life, or very short 0% period – or paying a transfer fee but getting a 0% deal lasting for a year or more.
Moving to a balance transfer credit card
Balance transfer credit cards can save you a small fortune if you transfer high interest credit card balances onto it, as it means that you get to enjoy an interest free period during which to pay off as much of the balance as possible without being hit by interest charges.
However, unfortunately with 0% balance transfer credit cards you will be charged a fee, which is usually a percentage of the total amount being charged, often with a minimum and maximum charge imposed. You should bear in mind:
- If you are transferring a large sum then they fee can be very high so try and find a 0% card that has a ceiling limit on fees charged.
- The percentage charged can vary from one card issuer to another.
- Make sure you determine whether the fee makes the balance transfer worth while before you rush into a transfer, as there may be a more suitable alternative (e.g. fee free low rate balance transfer cards).
About balance transfer fees
Although 0% balance transfers provide a valuable tool for those that wish to save money on the interest that they are charged on credit card balances, they can also prove expensive in terms of the fee that is charged to transfer the balance.
When 0% balance transfer credit cards were introduced some years ago they very quickly gained popularity, and as a result of the number of people transferring high interest balances onto a 0% card, credit card companies found themselves losing revenue.
As a result of this, many 0% balance transfer credit card firms introduced balance transfer fees, which means that although the consumer would continue to save money on the transferred balance due to the interest free period the card company would also profit from the transfer.
The fee charged on balance transfers can vary from one card issuer to another, and is usually a set percentage of the total amount being transferred, often with minimum and maximum charges imposed.
If you want to avoid paying these transfer fees, which can prove quite costly, there are a couple of options available.
The first one is the simply ask the new card issuer if the fees can be waived. Sometimes credit card company customer service staff have the authority to waive the transfer balance fee, so it is always worth asking.
If, however, the company is not prepared to do this then you may want to consider a low rate life of balance transfer credit card. This is where you are charged a very low rate of interest on transferred balances for the life of the balance, and no transfer fee is charged because the credit card company makes money off the interest charged on your transferred balance.
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