Why Do I Have To Pay A Balance Transfer Fee? Can I Avoid Paying It?
Posted November 14th, 2009
and last modified December 2nd, 2009The short answers to these questions are: you don’t; and yes. Australians are fortunate in rarely having to face balance transfer fees when shifting a debt from one credit card to another. In many ways this is surprising, as this is an easy way for the credit card provider to recoup some of the losses it makes by offering 0% for six months.
On the other hand, a card of this type will almost certainly have an annual fee attached. It’s all down to how the credit card company decides to claw a little back. In the UK it is rare to find an annual fee on a credit card (although they may be coming), but it is practically impossible to escape a 2% to 3% balance transfer fee. Which of these works out best for the customer is down to the amount being transferred.
Where there is a balance transfer fee to be paid, this is lower than in the UK. For example, the ANZ Balance Visa credit card is currently offering 0% for six months on balance transfers, but there is a fee of 1% of the amount transferred. However, this is waived if the transfer is requested at the time of the credit card application.
Even in the absence of a balance transfer fee, there is always a need for customers to make a few calculations before carrying out a balance transfer. Possibly the main consideration is not whether a fee is involved but whether the length of the transfer period is sufficient to allow the full amount to be paid off in time. A failure to do this means that the transferred amount then reverts to the regular APR which could be anything from 11% to 20%. If your new card has a regular rate at the top end, and your old card had one at the lower end, having a significant amount of the transferred amount left at the end of the offer will mean that the savings you made at 0% are about to be quickly eroded as you could be suddenly paying 8% or 9% more than you were before.
Also remember that if you are getting a 0% balance transfer card for the six month offer period and do not intend using it after that time, then any annual fee you have paid is actually for just six months. That makes it twice as expensive per month. If you are paying a $60 annual fee, that’s the equivalent of $120, which equates to a 1% fee on a transfer of $12,000. The question then is whether you could clear $12,000 in six months.
Related posts:
- Why Should I Avoid Cash Transactions On A 0% Balance Transfer Credit Card?
- How To Avoid Balance Transfer Pitfalls
- How to Avoid Paying Credit Card Fees and Charges
- How to avoid paying bank penalty fees
- Avoid Paying Credit Card Fees
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