# Balance transfer fee

I am getting my first credit card ever and I am trying to learn how it works. I got through most of the documentation but I am trying to understand this:

0% Intro APR for 15 months from account opening on purchases and balance transfers.† After that, a variable APR of 17.24-25.99% applies.† Balance transfer fee is 3% of the amount transferred with a minimum of \$5.

Can someone tell me what APR means?
Also, I am guessing that I will be paying off the credit using my checking account so I don't think that a Balance Transfer Fee would apply, right? (If someone has a quickstart guide for credit card use or something, that'd be really helpful!)

A "balance transfer" is when you use one credit card to pay off another.

Say you get credit card A with a 24% interest rate. You put \$5,000 on this credit card. Later you get credit card B with an interest rate of only 12%. So you get company B to pay off what you owe on card A and put that amount on card B. Now you are paying only 12% on your \$5,000 instead of 24%.

There is often a one-time fee to do this, the "balance transfer fee". In your case, 3% or \$5, whichever is more. So in this example, you'd have to pay 3% of \$5,000, or \$150, to transfer the balance. But the interest is now 1% per month (12%/12), or \$50, instead of 2% per month (24%/12), or \$100. If you paid zero on the principle for 3 months, you'd break even. (Which you surely couldn't do because of minimum payment amounts, but I'm trying to make a simple example.) If it's going to take you a long time to pay off the debt, it might be worth paying the balance transfer fee.

Oh, and credit card companies often describe their rates in terms of "annual percentage rate". Most credit cards bill you monthly, so the interest you actually pay is the APR divided by 12 times your average daily balance for the month. And usually there's a "grace" clause that if you paid your balance in full last month and you pay in full this month, that you pay zero interest.

APR == Annual Percentage Rate. Investopedia definition.

If you intend for using your card for purchases, then no, the balance transfer fee would not apply.

Even if you were not under the promotional rate, if you pay the balance off, in full, each month you will not incur interest rate expenses.

For example, if you make a bunch of charges over the next couple of weeks, and you will receive the statement. You will have the option to pay a minimum payment, the statement balance, the current balance, or a different amount.

Provided you pay the statement balance prior to the next statement, there will be no interest charges.

Good luck to you. Despite the marketing credit cards are a really poor choice for the majority of the population.

• This is a good answer. I think it would be better if it included an explanation that a “balance transfer fee” is only applicable if you transfer a balance from an existing credit card to this new one - for example, if you already owed \$1234 on Card X then you could open Card Y, transfer the \$1234 balance from Card X to Card Y, and then close Card X. This would be done typically if Card Y had better rates or terms than Card X. Feb 26 '19 at 20:20
• In regards to paying the statement balance, "prior to the next statement" should really say "prior to the due date for the current statement" Feb 27 '19 at 20:41
• @Pete thanks for your anwer. It was really helpful. I don't want to take on a credit card but I need to build my credit. Do you think there are any other better ways to do that?
– Raj
Feb 28 '19 at 21:27