How to Perform a Credit Card Balance Transfer

The balance transfer card market finds itself in a “sweet spot” these days, as steadily rising credit card debt levels, a burgeoning economic landscape and a growing number of zero interest credit card deals continue to create a good environment for consumers who are looking to transfer their credit card balances. The numbers suggest those consumers should act sooner rather than later, though — especially considering the average U.S. household is burdened with $7,126 in credit card debt, according to a recent CardHub analysis.

The analysis found that a decent balance transfer credit card can save the average household $1,000 in fees and finance charges, enabling those consumers to get on the “fast track” to pay down their card debt sooner than they anticipated.

Seems like a good deal, right? Not really, if you get stuck high fees and charges that can really add up. According to CardHub, it costs $326 to transfer a $5,000 credit card balance that will be paid off over two years.

There are number of steps you can take if you want to keep those costs low while still getting a great deal on a balance transfer. But first, you need to learn everything there is to know about balance transfer cards and the fees that come along with them.

Related: Is a Credit Card Balance Transfer Right for Me?

What Is a Balance Transfer Credit Card?

To keep your costs low, make sure you understand what a balance transfer credit card is and what’s at stake. Basically, this card allows you to pay down the balance on a current credit card with a higher interest rate by transferring that balance to a new card with a lower or zero rate. Keep in mind, however, that many cards will only give you 90 days to take advantage of the lower rate.

With a balance transfer card, you can only transfer the cash amount on your existing credit card to the new one. In many cases, transferring a balance to a lower-rate credit card comes with a fee. Fees vary from lender to lender, but CreditCards.com reports that 54 of 85 balance transfer cards it surveyed charge either a 3 percent fee or a $5-to-$10 minimum fee. Additionally, the company found that most balance transfer fees are no longer capped – only three of the 85 cards surveyed capped their fee rates.

Read: 9 Best Low-Interest Credit Cards for Shopaholics 

Know the Total Cost of the Balance Transfer Card

Many balance transfer card offers come with balance transfer fees that are around 3 percent of the balance that you transfer. So, if you transfer a $10,000 balance, the fee will total $300. With that said, the fee shouldn’t be the only cost to consider.

Before accepting any balance transfer credit card offer, you should also analyze the interest rate you pay now, the balance card’s introductory rate as well as the rate that kicks in once the introductory period is over. In other words, it’s the total cost of the card that counts — not just the fee.

The “Fee-Free” Trap

The CreditCards.com data shows that, in many cases, there’s no such thing as a free lunch when it comes to credit card balance transfer deals. In the analysis, 10 balance transfer cards tracked by the company did not charge any fee for a balance transfer, but eight of them didn’t offer discounted interest rates. And those rates can be as low as 9.24% APR to as high as 26.99% APR, depending on your credit health. If the balance transfer card doesn’t offer a discounted interest rate, your total cost might be higher.

If you’re offered a card that that has zero or no fees but an unbelievably high rate, shop around for one that boasts lower rates and fees. Even better: Look for a balance transfer card that has a 0% introductory APR and no fees.

Keep reading: All You Need to Know About No-Interest Credit Card Rates

Best Credit Cards for Balance Transfers

Finding the right balance transfer credit card is no easy feat. Check out these three credit cards that don’t charge you for balance transfers and offer relatively low interest rates.

1. PenFed Promise Visa Card: This card offers a 4.99% APR promotional balance transfer rate for 12 Months on transfers made between April 1, 2015 and June 30, 2015. After the promotional period, the APR ranges from 7.99% to 16.99% based on your credit health. In addition to the no balance transfer fee, the credit card comes doesn’t have an annual, foreign transaction, cash advance, late and over-credit-limit fee.

2. Alliant Visa Platinum: Also boasting a no-balance-transfer fee, this card offers an introductory promotional rate that’s between 0% APR and 5.99% APR, depending on credit status. There is no annual fee, and standard variable rates start as low as 9.24% APR.

3. PriorityONE Visa Platinum Credit Card: The PriorityONE Platinum VISA credit card is touted by Visa as “a card with real savings, no gimmicks, just value and convenience.” There is no balance transfer or annual fee, and there is a 25-day interest-free grace period on purchases. After that, standard rates are as low as 7.99% APR.

Whether you are looking to eliminate credit card debt or just obtain lower fees, you can take advantage of a balance transfer card that offers low or zero fees and interest rates. Just make sure you find the best deal possible by doing your research and comparing cards.

Photo credit: varandah / Shutterstock.com

This article originally appeared on GOBankingRates.com: How to Perform a Credit Card Balance Transfer

This article by Brian O’Connell first appeared on GoBankingRates.com and was distributed by the Personal Finance Syndication Network.