Balance Transfer Fee vs. Interest: Which Costs More?

The average credit card APR now tops 21%, according to the Federal Reserve -- and that means hundreds or even thousands in interest if you're carrying a balance.

That's why balance transfer cards can be such a lifesaver. They offer a 0% introductory APR period so you can pay down debt without interest stacking up.

But before you jump in, there's one key cost to understand: the balance transfer fee.

Typical balance transfer fees

Most issuers charge a balance transfer fee when you move debt from one card to another. This is usually around 3% to 5% of the amount transferred, or a $5 minimum.

So if you move $6,000 in credit card debt, here's what that looks like:

• 3% fee = $180
• 5% fee = $300

That fee is charged one time, upfront. After that, the transferred balance sits at 0% interest during the promotional period.

It's easy to see why people hesitate to pay a few hundred bucks in fees. But it's usually a drop in the bucket compared to the interest they could save.

How the fee compares to paying interest

Let's use that same $6,000 balance example with a 21% APR and $300 monthly payments.

Without a balance transfer card, you'd pay roughly $1,450 in interest over about 25 months.

With a balance transfer card offering 21 months of 0% intro APR, you'd pay no interest at all, and be debt-free within that window too. It would only cost the balance transfer fee -- maybe $300.

That's a savings of around $1,150, even after paying the fee.

Here's a quick side-by-side look at how the costs stack up:

Different 0% intro APR cards offer different payoff windows. Many offer 12 months, others up to 24 months. Which one is best for you depends on your timeline and monthly payment amount.

If you want more flexibility, go for the longest intro period possible. That extra time can make all the difference when you're knocking out debt.

Compare the best balance transfer cards to find 0% intro APR offers that fit your payoff plan.

When paying the fee doesn't make sense

A balance transfer isn't always the best move. Here are a few times to pause and rethink your strategy:

• Your debt is small or almost paid off. If you can clear it in two or three months, a transfer fee might outweigh the interest saved.
• You're planning new purchases. New charges might not get the 0% rate, and you could lose track of what's being paid down.
• You can't handle debt responsibly. If getting a 0% interest period will cause you to spend more, you could end up in a worse situation down the road. In which case it's best to avoid new credit cards and work on fixing spending habits.

I recommend people do the math according to their exact situation. Here's an online balance transfer calculator to help determine if the fee will cost more than the interest saved.

How to make a balance transfer work for you

I've helped dozens of folks use balance transfer cards to get rid of their debts faster and with less interest. Here are a few tips to make the most of a 0% intro APR period:

1. Transfer once. Don't hop between cards. Each transfer comes with a fee and can ding your credit slightly.
2. Pay on time, every time. One late payment can void your 0% promo. So set up autopay if you can and never miss a payment.
3. Build new spending habits. The goal is to escape debt for good. So focus on building responsible usage habits so you don't go back into debt right after you've dug yourself out.

Yes, paying a balance transfer fee can sting at first. But compared to paying months (or years) of high interest, it's often a no-brainer.

You're swapping hundreds in ongoing costs for one manageable fee.

So if you've been staring down a growing balance, do the math. You might find that one small move can save you thousands and help you get your finances back on track.

See our full list of the best 0% intro APR and balance transfer cards to start saving money on interest today.