When debt is concerned, a balance can be defined as the amount of money that remains to be paid before the debtor’s obligation is satisfied. When a checking or savings account is concerned, a balance can be defined as the value of the account. An account holder in any of these instances could decide to transfer the debt or assets to a different account. When she does this, she may have to pay a cost known as a balance transfer fee. These costs are most common, however, when a person is transferring debt to a credit card.
There are several reasons why people opt to do balance transfers. One of those reasons is because many have debts that are saddled with high interest rates. If these individuals transfer the balance to a low-interest account, it may be easier for them to pay their bills. One thing that must be calculated when this decision is made, however, is the balance transfer fee.
Some credit card companies and financial institutions use free balance transfers as an incentive to gain new clients. This can be a benefit as long as the rest of the terms and conditions for the new account are reasonable. On the contrary, some creditors offer incentives such as low or no interest for a certain period of time after a balance transfer. Many of these offers are not as attractive as they may seem, however, because of the balance transfer fee that will be incurred.
This is why it is important for a person to fully understand the terms and costs before moving a balance. In some instances, a transfer may be subject to a fixed balance transfer fee. In other instances the fees may be charged as a percentage of the amount that is transferred, which is generally less in favor of the client because it can result in significant costs. People should also be aware that even when percentages are charged, some companies have a policy that requires a minimum fee. This means that no matter the amount of the balance transfer, the company is entitled to a certain amount.
A balance transfer fee is not always charged, so people who are looking to move their debts should compare account terms. If the other terms and conditions of a new account are favorable, some financial professionals advise consumers not to let the opportunity for a balance transfer to pass without trying to make a deal. Some companies have been known to negotiate.
