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Chase recently unveiled a new version of its primary value card, Slate from Chase.This limited time promotion offers a unique benefit that sets it apart from all other 0% balance transfer credit cards: It waives the typical 3% balance transfer fee most major credit card companies charge consumers when they transfer debt.
The obvious benefit of a no fee balance transfer is the upfront savings on transaction fees which, at 3%, would cost a consumer $30 for every $1,000 transferred or a not so insignificant $150 on a $5,000 balance transfer.
However, a key difference between Chase Slate and competing balance transfer cards that should be considered is the duration of the 0% interest promotion, as consumers with substantial credit card debt may be better off paying a transaction fee to obtain a longer 0% introductory period.
Determining Whether a No Fee Balance Transfer is the Best Option
The Chase Slate no fee balance transfer card offers a 0% APR for up to 12 months on balance transfers (consumers with average credit may be approved, but only offered a 0% APR for 6 months, hence the “up to”). This promotion is nine months shorter than what is presently being offered on the Citi Platinum card, which provides a 21 month 0% period on balance transfers and purchases to approved applicants, but charges a 3% fee.
Because of the existence of significantly longer 0% balance transfer offers, consumers need to carefully evaluate their credit card debt situation before jumping at an offer that provides instant financial gratification via fee savings to determine which card will provide the most value in the long term.
A good method to ascertain whether to opt for a no fee card like Slate or a longer duration card with a fee begins with a realistic assessment of your financial situation that takes the following into consideration.
1) Is a balance transfer necessary? Consumers who need to ask this question are likely in a good financial position, but uncomfortable paying interest on debt that may have recently accumulated. Those who fit this bill may only need three to six months to re-pay debt. On a card with a 15% interest rate, carrying an average balance of $3,000 over a three to six month horizon will cost between $100 to $200.
In these situations, paying a 3% -$90- balance transfer fee erodes much of the financial benefits of a 0% APR balance transfer, but paying no fees to obtain a 0% APR can provide a nice reprieve from interest rates and generate savings.
2) What monthly payment would be needed to pay off debt before the 0% rate expires? To determine this figure, simply add up all existing credit card debt and divide the total by the length of the balance transfer offer. The key thing here is to avoid overly optimistic projections and stick with a number that is consistent with current payment levels.
For example, a person with $3,000 of credit card debt would need to pay $250 per month to be out of debt before the expiration of a 12 month no fee balance transfer. With a 21 month 0% interest period on a card with a 3% fee, the same person would need to pay $147.15 per month.
If the larger amount is unrealistic, it likely makes sense to pay a transaction fee and obtain a longer duration card.
3) Is a 0% rate on purchases needed? This is a bit of a trick question, as anyone who answers yes likely harbors uncertainty about their ability to meet future spending needs. Thus, the best option for consumers concerned about the potential need to take on additional debt is to opt for a card that offers the longest 0% rate on purchases and balance transfers.
Ultimately, while most consumers with credit card debt stand to benefit from 0% balance transfer offers, selecting a card with the right features is the key to realising the most value. This may entail paying a balance transfer fee, but this short term expense should not be avoided if saving the most money over the long run is the ultimate goal.