Should You Focus on the Balance Transfer Fee When Picking a Credit Card?

A balance transfer credit card can help you repay your debt more easily. Credit cards tend to have high interest rates, so a good portion of each payment you make goes to enriching your credit card company instead of repaying your balance. With a balance transfer card, you get a 0% promotional rate on transferred balances for a set time, so your entire payment will reduce your balance and you can become debt-free faster and for less money.

However, balance transfer fees are generally -- but not always -- charged to transfer your balance. Should you focus on how much the fee is when picking a card, or are there more important factors to consider?

Fees alone don't tell the whole story

When comparing balance transfer cards, the fee is one factor that matters, but it's not necessarily the most important one. Let's compare two possible cards:

The First Tech Choice Rewards World Mastercard offers:

• No balance transfer fee for balance transfers made within 90 days of opening a card
• A 0% APR on balance transfers for 12 months
• A higher regular APR that applies to unpaid transferred balances after 12 months

By contrast, the Citi Simplicity® Card offers:

• A balance transfer fee of 3% ($5 min) for first 4 months, then 5% ($5 min.)
• An APR of 0%, 21 months, on balance transfers
• An APR of 19.24% - 29.99% (Variable) on any unpaid transferred balances after 21 months

At first glance, the First Tech might seem like the better option since you don't get hit with that upfront fee. But you have much less time to fully repay your balance before credit card interest kicks in. And if you can't pay off the entire amount before the 12 months is over, you'd get stuck with a lot of extra interest charges.

Let's say you transferred a $4,200 balance and you could afford to pay $200 a month toward it. At the end of 12 months, you would still owe $1,800, and it would take you around 10 months to pay off that remaining balance. During that time, you'd spend $148.14 in interest.

By contrast, you'd pay an upfront fee of $126 to transfer your balance to the Citi card but you'd have your balance just about paid off by the end of the 21 months. Since the $126 fee would be tacked onto your starting balance, you'd still owe that amount and would pay a month of interest until you'd repaid the last $126 -- or about $2.58.

The Citi card would be the better choice here, even though it may seem more expensive if you don't do the math.

How can you decide what balance transfer card is best?

To pick the balance transfer card that's right for you:

• Calculate the fee you'll owe, if any, based on the amount you're transferring and the amount the card issuer charges.
• Figure out how long it will take you to pay off the amount you're transferring.
• Determine what your remaining balance would be when the 0% APR period ends on each of the credit cards you are considering.
• Use an online calculator to determine how much interest you'd end up paying on each card.
• Add together the fee and total interest costs for each card to see which is the better deal.

By taking these steps and looking beyond the fees to consider the big picture, you can make an informed choice about which card is right for you.