Balance Transfer Credit Cards

Interest rates are so low these days getting a balance transfer credit card with a zero percent interest rate for a year is common. Another common offer these days is a zero percent balance transfer for a credit card you already have.

A third common theme for balance transfer offers these days is the fee a bank will charge for the transfer. There used to be a maximum fee charge for the transfer in the range of $75, depending on the bank issuing the credit card. Then the average fee was raised to three percent of total dollar amount for balance transfer with no maximum dollar amount for the fee. Now some banks have raised the fee to four percent without a maximum dollar amount.

When you factor in the fee you are paying for the balance transfer your interest rate isn't zero percent anymore. If you pay a four percent fee on a $10,000 balance transfer the first year's annual percentage rate is actually four percent. Some banks offer a 0 percent rate for only six months, this will make the actual rate you are paying even higher. 

If you decide to take advantage of 0 percent balance transfer offers from  credit card issuers make sure to read the fine print on the balance transfer fee, do the math and make sure the transaction is worth it. Since most credit card rates are higher than four percent doing the transfer will probably still make financial sense, but don't be fooled into thinking you are receiving a 0 percent interest rate.

Best Practice: For a better credit score be sure to keep your debt to credit available ratio to around 25% on your credit cards, this is the ratio experts recommend.