What Is a Balance Transfer Fee?

by Christy Bieber | Aug. 14, 2019

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Close to half of all Americans don’t know if their credit card has a balance transfer fee. Learn what a balance transfer fee is and find out when you may be charged this fee and what you can do to avoid paying it.

According to a recent study from U.S. News & World Report, approximately half of all Americans don’t know if their credit card has a balance transfer fee. This is a problem because balance transfers can be an important debt-management tool, but balance transfer fees can make them more expensive.

So what is a balance transfer fee exactly? A balance transfer fee is a fee charged by your credit card issuer when you transfer a balance onto a credit card. It’s not charged when you make a standard purchase -- only if you move a credit card balance onto the card. Balance transfer fees are typically around 3% to 5% of the transferred amount, which can be a hefty sum of money. 

Let’s look more at what balance transfer fees are, when you might have to pay them, how you can avoid them, and the circumstances under which paying a balance transfer fee might make sense.

A woman at a table with a credit card, notebook, phone, and coffee cup.

Image source: Getty Images

What is your credit card’s balance transfer fee?

Your card’s balance transfer fee is set by your card issuer, so you will need to look at your card’s terms and conditions to find out what the fee is. 

This information should be in your cardmember agreement. If you do not have a copy, you can call your credit card issuer and request one. Your card issuer may also allow you to request your cardmember agreement on your online account. Check under Account Services or Account Tools to see if you have the option to request a copy. 

Your card’s balance transfer fee will be listed in the Fee section of your card’s terms and conditions. Here’s what this will look like:

Chase table

Image source: Getty Images

Be aware that fees can vary from one card to another, even among the same card issuer. Make sure you’re looking at the specific cardmember agreement for the card you have to find out what your card’s balance transfer fee is.  

How do balance transfer fees work?

Balance transfer fees are generally charged as a percentage of the amount that is transferred. However, there is a minimum fee that card issuers could impose instead. 

In our above example, the fee was equal to the greater of 3% of the amount of each transfer or a minimum fee of $5. In that case if you transferred a $100 balance, your fee would be $5 because that’s greater than 3% of $100. But if you transferred $1,000, your fee would be $30 since, in this case, 3% of $1,000 is greater than $5.

When you’re charged a balance transfer fee, this fee is put on your card. If you transfer $1,000 and pay a $30 fee, that would mean you’d owe $1,030 on your card. Credit cards typically have limits on how much of a balance you can transfer, so you need to take the fee into account. In our above example, if you only had a $1,000 credit line for balance transfers and you wanted to transfer a $1,000 balance, you’d run into trouble because your balance transfer would actually cost you $1,030, putting you over the limit.

How does a balance transfer fee affect the cost of transferring a balance?

Balance transfer fees increase the cost of transferring a balance. This fee has to be paid up front, so even if you plan to pay off the balance transfer quickly, the fee still has to be paid. You need to take this cost into account when you’re trying to decide if a balance transfer is a cost-effective way to pay down debt. 

Can you find a credit card with no balance transfer fees?

It is often possible to get special promotional offers from credit card companies where you can transfer a balance with no fee. 

Usually these promotional offers are meant for new cardholders, so you may need to open a new credit card to get one. A new card may offer you no fees on balance transfers made within 60 days of account opening, for example. 

Existing credit card companies you already have a relationship with may also be willing to make a promotional offer to you -- especially if they don’t want to lose your business. You can always ask your existing creditors what balance transfer offers you may be eligible for. 

Be sure to pay attention to both the fee for transferring the balance as well as the APR you’ll be charged on the transferred balance. It makes no sense to transfer a balance to a card that isn’t offering a low promotional APR -- even if there’s no fee -- since you wouldn’t be able to reduce your interest rate or repayment costs

Does it ever make sense to pay a balance transfer fee? 

It can sometimes make sense to pay a balance transfer fee if the card is offering better terms than a different one with no fee. 

For example, say you are choosing between two credit cards: one with a 0% promotional offer for six months that charges no fee and another with a 0% promotional offer for 15 months that charges a 3% fee. You’ll be transferring a $5,000 balance and you can afford payments of $350 per month. 

With the first card, you’d pay a $150 fee to transfer your balance. You’d have the card paid off within a total of 15 months, though, so your total cost of debt repayment would be $5,150. With the second card, the promotional rate would expire after six months, but you’d still have a $2,900 balance and the card’s interest rate would go up. If the rate went up to 18% and you kept making your $350 monthly payments, you’d take another nine months to pay what you owe. And you’d incur about $220 in interest costs. This exceeds the $150 fee you paid for the other card and your total debt repayment cost -- $5,220 -- would thus be higher.

In this case, you’d have been better off paying the fee for the card with the longer promotional rate. 

Now you know how credit card balance transfer fees work

To recap: A credit card balance transfer fee is a small fee your credit card issuer charges you when you transfer a balance from one card to another. While this fee is usually pretty small at around 3% to 5% of the transferred balance, it still increases the amount borrowed and reduces the credit available to you. You can find credit cards with no balance transfer fees, but will want to compare all the details of the balance transfer offer to find out if paying the fee makes sense. 

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