How a Balance Transfer Card With a Low Fee Could Cost You More in the End

A balance transfer credit card can help you to repay your credit card debt more easily. Credit cards come with high interest rates, with the average rate as high as 21.19% according to the Federal Reserve. A balance transfer card allows you to set your rate to 0% for a period of time if you can qualify for a card offering a special 0% introductory balance transfer rate.

There are lots of different balance transfer cards out there, and it's important to choose the right one. Many charge an upfront fee to transfer your balance and it may be tempting to just pick a card with the lowest fee. But while this can make sense in some situations, there are also times when using a card with a lower fee could end up costing you more in the end. Here's how.

A card with a lower fee could end up costing you more

Many balance transfer credit cards that do not charge fees have shorter periods of time when you get a 0% rate.

For example, Wings Credit Union offers a Visa Platinum card with no balance transfer fee and a 0% rate on transferred balances for 12 months after opening the card, after which time you'll pay an APR between 13.40% and 18.00%.

Let's say you transferred $5,000 onto this card and could pay $200 a month toward the balance. At the end of 12 months, you'd have a remaining balance of $2,600. At an APR of 18.00%, you'd pay $269 in interest during the additional 15 months it would take to repay the card.

Or, you could choose a Citi Simplicity® Card with a 0% APR for 21 months, which has a balance transfer fee of 3% ($5 min) for first 4 months, then 5% ($5 min.) After the intro period ends, the card has a go-to 19.24% - 29.99% (Variable) APR.

Your balance will be $5,150 to start after the fee is charged. So if you paid $200 a month, you'd end up with $950 left on the card by the end of 21 months when the 0% rate expired. It would take five more months to repay the balance, and if you paid the 29.99% rate, you would end up paying $48 in interest over that time. So, your total costs would be the $150 upfront fee plus $48 in interest or $198 -- which is less than the total costs ($269) if you'd used the card with the lower fee.

Don't assume a low-fee card is always the best choice

As you can see, you can't assume you'll be better off with the card that has the lower fee in every situation. Instead, consider:

• How long you'll have to pay the card off before you'll be charged interest
• What your remaining balance will be, if any, at the end of the 0% APR period
• How much interest you would pay on any remaining balance at the end of the 0% APR period
• What fee you'd pay to transfer your balance

You can add up the total cost of fees and interest for any cards you're considering to decide which balance transfer card is right for you.