If you have recently been applying for a new credit card and have hoped for a low APR and zero balance transfer fee, you were probably highly disappointed. Indeed, in today’s cautious markets, it is nearly impossible to find such a deal!

However, if you have a high balance that you would like to transfer to another new credit card, there are ways of coping with the situation. We will investigate two possibilities around it. First, request a capped transfer fee, and second, create a plan to “spread the fee”. Let’s see how this works.

Requesting a capped fee

When you are transferring balance to a new credit card, it may make sense to call the bank directly, refer to the balance transfer offer that you saw either in print or online, and request for the bank to “cap the balance transfer fee”. What this means is basically invoke a fixed transaction fee instead of a fee based on percentages. Typically, in today’s financial markets, there is little incentive for banks to lend money as the number of personal bankruptcies is growing. But with a high credit score, and through a phone call directly to the bank’s customer service, you might be able to receive a capped balance transfer fee.

“Spread the fee” over time

When the transfer fee with a brand new credit card offer is in the range of 3% – 5% as it is today, this is significant contribution to the overall cost you will have to pay to the bank for the privilege of carrying your debt. So one of the best strategies if requesting a capped fee does not work, is to simply accept the transfer fee, and allow the card issuing bank to add it to the total amount of the transfer.

But you must do the calculation first. Find the offers with the longest initial APR (usually 0%). 12 months is good, 15 months is better. Do not even bother with 6 months offers, they are not worth your time. Then look into the balance transfer fee and divide it evenly between the months of duration of the initial APR. For instance, a 4% balance transfer fee over the period of 12 months of the initial 0% APR offer makes the “0% APR” offer effectively a “4% APR” offer. This might still be much less than what you are paying on your balance today. So by carefully planning your monthly contributions toward the principal of the loan, you could be out of debt significantly by the end of the first 12 months when it would make sense again to do another balance transfer.

Warning: In the previous example, if you are looking to get out of debt over the period of the initial 0% APR, 12 months, then your average balance in the 12 months will be half of the initial amount. However, you will be paying the balance transfer fee based on the initial, original amount. So in the above example with the 4% balance transfer fee, the effective average APR will be 8% when you divide the money paid to the bank by the average amount of money borrowed. In such a case, it only makes sense to do a money transfer if your current APR is much higher than 8%.

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