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There was a time, mostly prior to 2008, when you couldn’t open your mailbox without a barrage of No Fee Balance Transfer offers from practically every bank and lending institution spilling to the floor.For consumers who didn’t move their money around, who kept their same old cards and paid them off dutifully every month, these advertisements were mostly bothersome.
The idea of transferring balances to another card to save a bit of interest hardly seemed worth the effort.
Of course, there were those who lived for such offers. Not only did these No Fee Balance Transfer deals lower your interest rate, it could also reduce the number of card payments you had to think about each month if you eliminated one high APR card altogether. Many people also were interested in these offers for other perks such as bonus points earned with that particular bank’s rewards program or some extra frequent flyer miles.
But then these offers slowed – almost to a halt. Today, No Fee Balance Transfer can be nearly impossible to find. Instead, most financial institutions are offering low fees on a balance transfer ranging anywhere from 3 per cent of the amount to be moved, up to 5 per cent at the higher end of the spectrum. While consumers will certainly miss having the ability to dance their debt from card to card, all for no cost, lenders are offering other benefits which may be of equal or greater value. The paradigm has changed from simply picking which no fee balance transfer to accept to one of looking for the best balance transfer offers.
To offset the elimination of these No Fee Balance Transfer offers, many card issuers are offering 0% or 1.99% APRs. This, of course, can provide much more in savings than the 0% fee to move the balance. However, the 0% APR is for a limited time, usually expiring within a year. Cash back bonuses are another way lenders are making up for the cost of the transfer fees.
While no fee transfers certainly do sound great, as does anything dubbed “No Fee”, consumers may actually do better without them, or at least not fret in their absence. After all, a 3 to 5 per cent fee is not all that high an amount when compared to the money one can save by having a 0% APR on a credit card. Though some promotional APRs are limited to six or nine months, many extend for a full year. That can add up to a lot more in savings than a simple one-time exemption from a transfer fee.
For example, you could save $700 in interest payments over 12 months by switching a $5000 balance from a card on which the APR is 13.99 per cent to a card with a 0 per cent APR. If the transfer fee were 4 per cent on the $5000, which would be $200, still giving you a $500 savings. Just make sure the APR on the new card doesn’t go up to a rate, after the 0 per cent promotion ends, that is higher than the APR on the card you are transferring from. That will quickly erase the savings enjoyed by the transfer, and you may be looking to do another switch at that point.