At this time last year, there were a number of credit card companies that offered a 0% APR on no fee balance transfers for a full year. Today, no major credit card company is offering these money saving deals. In fact, most credit card companies have raised fees on balance transfers dramatically by lifting the cap on transaction fees from the lesser of $ 75 or 3% to a full 3% with no limit. That raises the cost of a $ 5000 balance transfer from $ 75 to $ 150 with some credit cards.
Consumers looking to take advantage of balance transfer transactions may be tempted by the savings offered by the few remaining credit cards that offer a 0% APR for six months on no fee balance transfers. However, the savings on fees these offers provide is, in the major cases, quickly offset by the short term duration of the 0% introductory period.
Let me provide an example. First, we'll assume that we have $ 5000 in debt on one credit card with a 14% interest rate. By using a credit card that offers a 0% APR for 6 months and charges no fees, the initial savings will be $ 75. Over the course of 6 months, the interest savings will be $ 360. However, even if the go to APR after the introductory period is 10% and the debt has been paid down by $ 1000, the cost of interest during the next six months will still be over $ 200, bringing total yearly savings to a paltry $ 150.
Now, there is always the option of transferring the balance again once the 0% period expires. But with all the turmoil in credit markets, it may be difficult to secure a 0% rate 6 months down the road. Plus, if something adverse were to lower your credit score even a little, you may not get approved for a new card. All of these risks should be taken into consideration before relying on a plan to jump from one 0% credit card to another.
Given all these factors, not to mention the paltry savings of $ 150 a 6 month, no fee offer provides, its now time to consider the savings a low fee credit card that offers a 0% rate on balance transfers for a full year would offer. With a low fee card, the maximum balance transfer fee would be $ 75 per transaction. Thus, on a $ 5000 transfer, the fee would be $ 75. With a 0% APR for a full year, interest savings would be a very substantial $ 670 including fees. Overall, this is four times the savings you could have from a shorter duration offer without fees.
Clearly, the safest and smartest option for people looking to save money on credit card interest is to choose a credit card that offers a 0% APR for a full year and charges low transfer fees.