How does a balance transfer fee work?
Balance transfer credit cards allow you to move debts without accumulating interest. They typically come with a fee of 2-4%.
A balance transfer fee is usually calculated as a percentage of the amount moved from your old card to the new one. For example, if you're transferring £1,000 and the balance transfer fee is 3%, you'd pay £30 as a fee. This fee is added to your new credit card balance.
Consider the fee when deciding if a balance transfer is worthwhile, especially against potential interest savings. Calculating the fee beforehand helps determine if transferring your balance saves you money in the long run.
How much is a balance transfer fee?
Balance transfer fees typically range from 2% to 4% of the transferred balance. While it’s rare to find a card without a fee, the exact amount you’ll be charged depends on the provider and card terms.
Before applying, compare cards and use eligibility checkers to see your options. Check the terms and conditions for any other fees that may apply, such as late fees or annual fees.
Is a balance transfer fee worth it?
It depends on your financial situation and goals. Most people take out a balance transfer credit card to save money on interest. But there are other things you should consider before you apply, including:
- If the potential savings on interest could outweigh the balance transfer fee. If so, then it may be worth it. This is especially likely if you're transferring a balance from a high-interest credit card.
- How quickly you can pay off the transferred balance. If you can clear your balance during any low or 0% interest period, then paying the fee can be a good idea. However, if you have the balance beyond the 0% promotional period, the fee could outweigh the savings.
- How much it could affect your credit score. Applying for a new credit card leaves a hard search on your credit report. This can cause a small, temporary drop in your credit score. Use eligibility checkers before applying to reduce the effect on your score.
Things to consider before transferring a credit card balance
- How long the introductory lasts for. Different providers offer different deals. It’s a good idea to shop around for a card that offers the longest promotional period. The longer the offer lasts, the longer you'll have to repay your debt before interest charges accrue.
- APR after the introductory period. This is important if you can’t afford to pay off the full balance within the introductory period.
APR or Annual Percentage Rate, is the yearly cost of borrowing money, including interest and fees. It helps you see how much a credit card will really cost over the course of a year. After the promotional period ends, the APR will determine how much interest you'll pay on any remaining debt. Be sure you can afford any ongoing payments before you apply. - Additional fees and time restrictions. Providers detail all fees and transfer timeframes in their terms and conditions. Many require transfers within a specific timeframe once your account is open to benefit from introductory offers. So, be mindful to check the terms before you apply.
Ocean Credit Card
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Fiona Peake
Personal Finance Writer
Fiona is a personal finance writer with over 7 years’ experience writing for a broad range of industries before joining Ocean in 2021. She uses her wealth of experience to turn the overwhelming aspects of finance into articles that are easy to understand.
