Balance Transfer 101
If you are looking for a credit card with no balance transfer fee then you are in luck because there always seems to be quite a few credit card issuers that offer low introductory rates and low or no balance transfer fees for introductory periods of between 6 and 15 months.
The question then becomes: what exactly do I need to know to transfer my balance without overlooking something that will cost me in interest charges or penalties down the road because I did not read the fine print?
Read on and master Balance Transfer 101 so that you can get started saving yourself some money, possibly even make yourself some money, pay off some credit cards, and make smart decisions about transferring credit card balances. Then when you are finished reading be sure and compare the top credit cards with free or low balance transfer fees.
What is a Balance Transfer?
A credit card balance transfer is the act of transferring debt from one credit card to another credit card. The goal of a balance transfer is to take debt from a credit card with less favorable terms to a credit card with more favorable terms. Often, credit card issuers will offer a teaser rate of 0% (or some other very low interest rate) for a duration of 6-15 months in order to incentivize people to apply for the issuer’s credit card and transfer their balances from their other higher interest credit cards.
What are Balance Transfer Fees?
The most common type of balance transfer fee is a transaction fee. This fee is usually levied as a percentage of the amount transferred and ranges from 1% to 5% and is usually accompanied by a maximum capped amount and/or a minimum fee amount. This type of balance transfer transaction fee is not to be confused with other types of credit card fees such as cash advance fees, annual fees, or late fees.
What Happens to Credit Ratings (Credit Scores) with a Balance Transfer?
Your credit rating/credit score can be affected in a combination of positive and negative ways when you transfer credit card balances. One of the positive ways that a balance transfer may affect your credit score is that you will increase the amount of available credit you have and in turn decrease your credit used/credit available ratio (a good thing). One of the negative ways that a balance transfer may affect your credit score is that you will of course have to apply for the credit card and too many applications for credit in a short amount of time can cause your credit score to decrease (at least temporarily).