Is a credit card balance transfer fee worth paying?

A balance transfer credit card is an excellent way to refinance existing credit card debt, especially since credit card interest rates can go as high as 30%. By transferring your balance to a card with a 0% intro APR, you can quickly dodge mounting interest costs and give yourself repayment flexibility.

However, there's typically a fee to complete a balance transfer, and it's usually 3%. But is it worth paying?

Below, CNBC Select calculates what the fee will look like on your balance transfer, and what balance transfer credit cards are available.

If you have a significant amount of credit card debt, the 3% balance transfer fee (or sometimes even a 5% fee) is absolutely worth paying when transferring your balance to a card that has a 0% intro APR offer, but only if you still need time to pay off a balance. The alternative option of paying high interest rates on your current card isn't a financially sound decision.

However, if you can pay off your balance immediately and in full on your current card, that is more ideal. You'll save on any new interest fees as well as a balance transfer fee.

But what do the numbers actually look like if you decide to execute a balance transfer?

Crunching the numbers

If you have the following balances, this is what a 3% balance transfer fee looks like:

• $500 balance transfer = $15 fee
• $1,000 balance transfer = $30 fee
• $2,000 balance transfer = $60 fee
• $5,000 balance transfer = $150 fee
• $10,000 balance transfer = $300 fee

Once you get into larger figures, you may want to consider a different financial product to refinance your credit card debt like a personal loan or personal line of credit. In addition, a large balance on a balance transfer credit card could negatively impact your credit score.

If you have a $5,000 balance (with a 15.99% APR) and plan on paying at least $750/month, the balance transfer fee is significantly less than the $271 in interest you'd pay. And even if you pay $1,000/month, the $150 fee is still less than the collective interest.

This goes to show how credit card debt can rack up quickly, and by paying a small fee, you can quickly dodge a bullet and give yourself more repayment flexibility.

Note that some credit cards charge a 5% balance transfer fee, so make sure to read the fine print before executing a transfer. A 5% balance transfer fee will change the math above, but can still be worth it.

Although balance transfer credit cards are ideal for helping you bring down your debt, they do come with some caveats:

Pros

• You can pay less on interest: With the introductory 0% APR offer, you can save significantly on monthly interest charges.
• You can consolidate your debt payments: Some credit cards allow you to consolidate multiple balances onto one card, simplifying your payments.
• Your credit score may improve: Paying down your credit card can ultimately boost your credit score, especially by lowering your credit utilization rate.

Cons

• You may have to pay a balance transfer fee: Transferring your balance from one credit card to another typically costs a fee calculated based on the percentage of the transferred balance.
• You're on a time limit: The 0% APR offer is temporary, so failing to pay off the balance during this period can lead to paying higher interest rates depending on the balance transfer card.
• You may need good credit to qualify: Many balance transfer cards require a good to excellent credit score (or a FICO score of at least 680).

If you can repay your credit card debt quickly, a balance transfer credit card may not be worth it — especially if the balance transfer fee exceeds the interest you'd pay.

For example, let's say you have a credit card with 21.99% APR and a balance of $2,000 and you're able to pay it off within two months. That means you may have to pay interest for one month, which would cost you about $36.65. If you were to transfer that balance for a 3% balance, you'd be charged about $60.

A balance transfer may also not be worth it if the 0% APR introductory period doesn't give you enough time to pay off your card. If you fail to pay off the balance before that period ends, you might be stuck with a higher APR than your previous card, negating the benefits of the balance transfer.

There are several balance transfer credit cards available, and many of them offer nearly identical benefits. However, you should pick a card based on your personal needs. When you're comparing balance transfer cards, keep these few points in mind:

• Length of intro offer: How long do you think you will need to pay off your balance in full? Based on that, you'll be able to find a card that offers a 0% intro APR on balance transfers that works for you. For example, if you think you can pay your balance in full in less than 18 months, the Citi Double Cash® Card offers a 0% intro APR for balance transfers for the first 18 months of card membership (19.24% - 29.24% variable after that). Balance transfers must be completed within 4 months of account opening.
• Other benefits: If you're also shopping for a new credit card, there are balance transfer credit cards with benefits like cash-back rewards on purchases and travel insurance.

One thing to look for in a good balance transfer card is a lengthy 0% APR introductory period that applies to balance transfers (and not just new purchases). The Wells Fargo Reflect® Card offers an introductory 0% APR period for 21 for both purchases and qualifying balance transfers and then a variable 18.24%, 24.74% or 29.99% APR applies. This card also comes with a balance transfer fee of 5% of each transfer with a $5 minimum.

Another one of our favorite balance transfer credit cards is the Discover it® Balance Transfer card. New cardholders pay an introductory balance transfer fee of 3%, then up to 5% on future balance transfers. You also get an 18-month introductory 0% APR period on the transferred balance (after which a variable 17.24% to 28.24% APR applies).

In almost all cases, a 3% balance transfer fee is worth paying, and sometimes even a 5% fee. Credit cards have extremely high interest rates, and because of that, credit card debt can be very difficult to get out of. A way to avoid spiraling credit card debt is to do a balance transfer on a card with an introductory 0% APR offer, but this is not a sustainable practice.

Before you spend on credit cards, it's extremely important to have a solid budget in place, as well as sound financial habits. Without these in place, you could find yourself in steep debt.

At CNBC Select, our mission is to provide our readers with high-quality service journalism and comprehensive consumer advice so they can make informed decisions with their money. Every credit card review is based on rigorous reporting by our team of expert writers and editors with extensive knowledge of credit card products. While CNBC Select earns a commission from affiliate partners on many offers and links, we create all our content without input from our commercial team or any outside third parties, and we pride ourselves on our journalistic standards and ethics. See our methodology for more information on how we choose the best credit cards.

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