What is a balance transfer fee?
A balance transfer fee is a transaction fee charged by your credit card issuer when you transfer a balance onto its credit card. The amount of the fee will vary by card, but they tend to range from 3% to 5% of your total transferred balance.
Balance transfer fees are charged by the issuer of the card you're moving your balance to, rather than the card you moved the balance from. For example, say you complete a balance transfer from Card A to Card B. You'll be charged a balance transfer fee by Card B but not by Card A.
LEARN MORE: Best balance transfer credit cards
How do balance transfer fees work?
Balance transfer fees are generally charged as a percentage of the amount that is transferred. However, there is a minimum fee that card issuers could impose instead.
For example, your balance transfer card fee may be equal to the greater of 3% of the amount of each transfer or a minimum fee of $5. So, if you transferred a credit card balance of $100, your fee would be $5 because 3% of $100 is only $3. However, say you transferred $1,000. In this case, 3% of $1,000 is $30. Since this is more than $5, your fee would be $30.
As far as the bank is concerned, your balance transfer fee is considered to be part of your total transferred balance. This means it counts toward your balance transfer limit. In other words, if you have a $1,000 balance transfer credit limit and a 3% balance transfer fee, you can't actually transfer a $1,000 card balance. You'll have to also factor in the cost of your fee.
Even if you have a 0% intro APR offer on your new balance transfer card, you still have to make at least your minimum payment every month (though, ideally, you'll pay more). If you don't make at least the minimum payment before your due date, you'll be charged a late fee and could lose your intro APR.
Additionally, most issuers don't offer rewards on balances from a credit card balance transfer, even if you transfer to a rewards credit card. This means you won't earn any rewards on your balance transfer fees.