Balance transfer fees

Balance transfer fees are fees that are charged on a balance transfer offer.  This fee is usually charged as a proportion of the balance that is charged.

Balance transfer offers are when a credit card offers a lower interest rate for any money that is transferred from another credit card.  This is because credit cards spend a large amount of money marketing their credit cards, and so they will share some of that money with their future consumers and not spend the money on advertising.  These balance transfer offers are usually open only to credit card users who do not have an account already with the current credit card account.

A balance transfer fee is usually about 1% to 3% of the balance that is being transferred.  This will often be capped at a certain amount, but if it is not capped then this can result in a considerable increase in the cost of running a credit card.  If there is a cap, then the cap is usually between $25 and $100.  If there is a cap of $50 then there will be 1% of all the money on the balance transfer up to $5,000.  After this there is no difference between whether $5,000 or $50,000 is transferred.

0% deals are a big growth area with credit cards.  These are when there is an interest free period for a period of between three and fifteen months.  If this was done a number of times with the balance being taken from one card to another in the right time without triggering any interest or penalties then this can result in a considerable interest free loan.

Balance transfer fees can seriously cut into these zero percent balance deals as they will add on to the interest and charges that are charged on the card.  It is important to take balance transfer fees into account.  If interest free deals are only available for short periods of time then special care needs to be taken.

The most important part about a balance transfer fee is not the percentage rate, but the cap on the balance transfer fee.  A 1% fee with a cap of $15,000 will be more expensive for a large balance transfer than a 3% fee with a $4,000 cap.

Balance transfer fees are added on to the balance of the account.  They should always be advertised, although this may not be prominent.