No-Balance-Transfer Fee Credit Cards: What You Need to Know

By Adam Levy Markets Fool.com

One of the best ways to pay off debt fast is to transfer your high-interest balances to a new 0% interest credit card. No interest payments mean more of your money is going toward your debt instead of straight into the pockets of the credit card issuer.

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But be careful: Some banks will hit you with a hefty balance-transfer fee just to move your debt from one credit card to another. A select few offer new cardholders $0 balance-transfer fees and 0% interest for a limited introductory period.

If you expect to be able to pay off your debts within the next year or two but you don't want to pay any more interest, a credit card with no balance-transfer fee and an introductory 0% interest rate may be for you. But before you jump on that next 0% interest credit card offer, here are some things you need to know.

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First, "What is a balance transfer fee?"

While it's hard for banks to make money charging no interest, they can make up for it by charging other credit card fees. One big fee to pay attention to is the balance-transfer fee, which typically ranges from 3% to 5%. That means if you want to transfer a balance of $10,000 to a new 0% introductory credit card, you could pay as much as $500 right off the bat. It's easy to see how a no-fee credit card could save a lot of money.

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What you need to know about no-balance-transfer-fee credit cards

  • You can transfer more than credit card debt. Don't limit yourself to transferring high-interest debt from credit cards. If you have a car loan or pay installments for new appliances, you can transfer those balances as well. The credit card issuer will provide you with checks to pay off the balances on those loans.

  • Most credit card companies don't allow transfers from the same issuer. If you're thinking about signing up for a Chase Slate credit card for the 15-month introductory 0% APR rate and transferring your credit card balances from other Chase credit cards, think again. Chase won't let you get away with that.

  • You have a limited window to transfer a balance with no fee and no interest. Make sure you transfer your balance right after you get approved for your new credit card. The Chase Slate, for example, offers a window of 60 days to transfer balances for no fee. The Barclaycard Ring MasterCard will let you transfer balances for free anytime, but its 0% introductory interest rate is only good for those made in the first 45 days. Besides, you'll want to transfer your debts sooner rather than later, so you don't pay as much interest.

  • New purchases may not qualify for the balance-transfer interest rate. Pay attention to the fine print. Some credit cards charge a higher interest rate for new purchases than on balance transfers. If that's the case, you could end up paying a lot more interest than expected. While the Credit CARD Act of 2009 requires issuers to put payments above the minimum toward consumer's highest-interest debt, they can still apply the entire minimum to the 0% balance transfer. If you make new purchases, you'll have to pay for them in full on top of your minimum payment in order to maintain 0% interest. Keep it simple and apply for a card with 0% rates on both balance transfers and new purchases.

  • Don't be fooled by the minimum payment. If you don't pay off the entire balance transfer before the introductory rate expires, you'll start accruing interest. And those sneaky minimum payments won't even come close to paying off the full debt before the 0% rate expires. If you're not good at planning ahead, set up autopay so you make payments large enough to completely abolish the debt before your introductory rate expires. If you have 15 months to pay down $12,000, for example, pay $800 per month. The minimum payment due could be less than half of that.

Credit cards with no balance-transfer fee

So you know you're ready to start paying off your debt fast, and you think a no-fee balance-transfer credit card with a 0% introductory rate is the best route to go. Here are some of our picks for the best balance-transfer credit cards.

  • Chase Slate.The Chase Slate will waive the usual 3% balance transfer fee on transfers within the first 60 days following opening the account. It also offers an introductory 0% APR for the first 15 months for both balance transfers and new purchases. Chase Slate cardholders will also have access to a free FICO credit score once a month, so they can see how their credit score is doing as they pay off their debt. (Read our full review of Chase Slate.)

  • Barclaycard Ring MasterCard.The Barclaycard Ring MasterCard will allow you to transfer any balance to the account for free anytime. If you make the transfer in the first 45 days of opening the account, it'll also give you 15 months of 0% interest. The 0% rate also applies to new purchases. This card is great if you're looking to pay off debt with Chase, since those debts probably aren't eligible to be transferred to the Chase Slate. Also, if you're unable to get approved for the Chase Slate because of too many open credit lines, you might have more luck with Barclaycard. (Read our full review of the Barclaycard Ring MasterCard.)

If you're smart about how you use a no-balance-transfer-fee credit card, it can be a great tool to pay off debt fast. Pay attention to the tips outlined in this article to make sure you use that new credit card safely and effectively and avoid paying unnecessary interest and other credit card fees.

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Adam Levy has no position in any stocks mentioned. The Motley Fool recommends Barclays. The Motley Fool has a disclosure policy.