Should you get a credit card with no balance transfer fee?

If you have credit card debt, you might have thought about using a balance transfer credit card to help pay it down. Figure out whether you could save money with a balance transfer credit card.

What is a balance transfer fee?

A balance transfer fee is a fee that credit cards charge when transferring debt from one card to another. Average balance transfer fees will be 3-5% or $5, whichever value is greater.

Is a balance transfer fee worth the transfer?

In order to figure out whether you'll save on interest with a balance transfer, you need to calculate how any balance transfer fees compared to your potential savings. You can do this using a balance transfer calculator, or you can figure it out on your own in a few simple steps.

First, calculate how long it will take you to pay down your debt, and how much interest you'll accrue in that time based on your current credit card APR.

Next, calculate the balance transfer fee of the balance transfer cards you're considering.

Finally, compare the two figures. If the value of the interest is greater than the value of the balance transfer fee, that means even with the card's balance transfer fee, you'll save on interest with a balance transfer.

What does it mean for a credit card to have no balance transfer fee?

Some credit cards will offer introductory balance transfers with no fee, meaning you can move debts to the card without paying a percentage of that debt.

However, it is important to weigh the value of the balance transfer fee against all the elements of opening a new card. Be sure to pay attention to the length of the introductory low APR period as well as the interest rate on new purchases, and watch out for annual fees associated with the card.

How to figure out if a balance transfer will save on interest

Step 1: Figure out how long it will take you to pay down your debt.

Step 2: Calculate how much interest your debt will earn in that time on your current card.

Step 3: Add up any balance transfer fees for a new card.

Step 4: Subtract the fees from the future interest. What's left is what you could save on interest from a balance transfer.

Comparing balance transfer cards

When comparing balance transfer cards, there are multiple factors to keep in mind. You can compare balance transfer offers by looking at the length of the intro 0% APR period, balance transfer fees, and annual fees.

However, it's also important to keep in mind your current credit, as many of the top balance transfer credit cards require good credit, and your balance transfer offer will depend on your creditworthiness.

If you plan to use your new card for purchases as well as a balance transfer, you should also consider the intro APR period for purchases, potential rewards and perks, and the interest rate after the introductory period ends.

What are alternatives to a balance transfer?

If you're not sure a balance transfer is the right option for you, a personal loan can be an alternative. Much like balance transfer offers, the personal loans and interest rates that you qualify for will depend heavily on your creditworthiness, but some people may find personal loans offer a better interest rate for the long term.

Disclosure: This article is for educational purposes. It is not intended to provide legal, investment, or financial advice and is not a substitute for professional advice. It does not indicate the availability of any Citi product or service. For advice about your specific circumstances, you should consult a qualified professional.

 

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