My card issuer offered me the opportunity to transfer a balance at a zero percent interest rate for 12 months. I did a balance transfer and they charged me a 5 percent fee. Can they do that?

Yes, so long as the card issuer told you the fee they charge for making a balance transfer before the transfer.  Card issuers are allowed to charge a fee on balance transfers, even if the balance transfer itself has a zero percent rate for a period of time.

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