Having a reliable credit card can be a lifesaver, especially in circumstances when you need to pay for large purchases. However, when it comes to those with high credit card fees, paying your debt off can seem quite challenging.
One of the most common ways to make paying debt much more manageable than the usual is opting for a balance transfer. That does come with a balance transfer fee, but the perks outweigh the costs.
Not only will you get the chance to consolidate your debt and even get a lower APR offer, but you also get the opportunity to clear your debt for good with your diligence and smart moves.
You may be tempted to easily transfer your debt to any credit card available, but don’t. First, you should learn more about the balance transfer fee and what it entails.
This allows you to become more knowledgeable about the possible contract you will be entering. Read on to know more about this.
What Is a Balance Transfer?
Before anything else, a balance transfer is a type of action or credit card transaction that requires an individual or cardholder to move their existing debt towards a credit card.
This typically involves transferring one credit card debt to another card with a lower interest rate.
What Is a Balance Transfer Fee?
By extension, a balance transfer fee is a charge or amount levied by a financial institution or a lender to a cardholder who will be transferring his debt from another institution.
This fee is taken from a percentage of the total amount transferred by the individual, usually ranging from 3% to 5%.
This type of fee is a one-time fee that you make only when you transfer a balance or your debt from one card to another.
This is added on top of the balance you have decided to carry over to your new card, so paying this would be consolidated on your new card as well.
How Does a Balance Transfer Work?
Many credit cards offer zero or a low balance transfer rate as part of their introductory offerings. Should applicants be approved for this particular credit card, they can avail of the introductory rates afforded to them by the bank or the lender.
Then, the cardholder or the borrower in question proceeds to declare the transfers they intend to make from one card to their newly approved one.
Should you find offers like this, you can take advantage of this as you can drastically minimize fees by making transfers right after opening your account.
Common Balance Transfer Fees You Needs to Take Note Of
As balance transfers are also considered a type of credit card transaction, you can expect certain credit card fees to go with it. This can include the introductory balance transfer fee ranging from 3% to 5% of the total amount transferred.
After the introductory period, however, you can expect these fees to go up after around six months or so. From the 0% to 5% low introductory rate, you can expect these to rise as much as 15.24% to 25.24%.
Apart from this, a balance transfer fee on top of the transaction can be added by the lender.
Other credit card fees you need to factor in paying the total cost of your debt are the interest rates and late payment fees. You also should factor in how much time you’re going to need to pay off the debt.
The Bottom Line
Take hold of your finances and consider veering away from a high-interest credit card. A balance transfer can greatly alleviate that financial burden and help you move toward clearing your debts.