0% Balance Transfers Could End Up Costing

If you qualify for a zero percent APR balance transfer, you have a chance to pay off your credit card balance with absolutely no interest. But even with a no interest promotion, your balance transfer can come with some costs. Minimizing these costs is key to making sure the balance transfer benefits you.

Balance transfer fee. Most credit cards tack on a balance transfer fee automatically when you move your balance from another credit card. The typical balance transfer fee is the greater of $5 or 3% of the transfer amount. The higher the balance you transfer, the higher your balance transfer fee will be. If you can pay off your balance before the promotional period ends, paying the balance transfer fee is just a small price to pay.

Interest charged after the promotional period. After the promotional period ends, any unpaid balance will start accruing interest at the regular balance transfer APR. The longer it takes you to pay off your balance after the promotional period, the more your finance charges will be. And if it takes too long, it can negate the interest-free benefits you got from the 0% balance transfer promotion.

Interest on a purchases or cash advance balance during the promotional period. Credit card balances with different interest rates are paid separately. When you make a payment above the minimum, the minimum payment will go toward the balance with the lowest interest rate (your balance transfer), while anything above the minimum reduces the balance with the highest interest rate (your purchase or cash advance). This payment split can lead to you paying more interest than you need to.

Losing your promotional rate and paying late fees. You can lose your 0% promotional rate if you miss two consecutive credit card payments. Instead of the regular APR being applied to your balance, you’ll have to pay the highest penalty rate. On top of the interest charges, you’ll pay $60 in late fees ($25 the first month and $35 the second month).

The goal of making a balance transfer is to save money. However, if you make decisions that increase fees and interest, you could end up paying more than you were on your old credit card. Be cautious with how you use your card to keep the cost of your balance transfer as low as possible.