A balance transfer moves high-interest credit card debt to a new card with a lower (often 0%) introductory rate. This calculator helps you determine if a balance transfer will save money or cost more than staying put.
How This Calculator Works
This calculator compares your current situation to a balance transfer by analyzing:
- Current Balance: How much debt you want to transfer
- Current APR: Your existing interest rate
- Transfer Fee: Typically 3-5% of the transferred amount
- New APR: The promotional rate (often 0%)
- Promotional Period: How long the low rate lasts
- Payoff Timeline: Your planned repayment schedule
The Formula Explained
Interest Saved = Interest Without Transfer - Interest With Transfer
Net Savings = Interest Saved - Transfer Fee
For a balance transfer to make sense: Transfer Fee < Interest You Would Pay
Step-by-Step Example
Should Sarah Do a Balance Transfer?
| Current Situation | Value |
| Balance | $8,000 |
| Current APR | 22% |
| Monthly Payment | $300 |
| Time to Pay Off | 33 months |
| Total Interest | $1,877 |
| Balance Transfer | Value |
| Transfer Fee (3%) | $240 |
| Promo APR | 0% |
| Promo Period | 18 months |
| Post-Promo APR | 20% |
If Sarah pays $445/month for 18 months:
- Pays off entire balance during promo period
- Total cost: $8,240 ($8,000 + $240 fee)
- Savings: $1,637 vs. keeping current card!
Frequently Asked Questions
What is a balance transfer and how does it work?
A balance transfer moves existing credit card debt to a new card, typically with a promotional 0% APR for 12-21 months. You pay a one-time transfer fee (3-5%) and your payments go toward principal instead of interest during the promo period. After the period ends, a regular APR (15-25%) applies to remaining balances.
What is a good balance transfer fee?
Balance transfer fees typically range from 3% to 5% of the transferred amount. A 3% fee on $10,000 is $300; a 5% fee is $500. Some cards occasionally offer no-fee transfers, but these are rare. The fee is added to your balance, so you'll owe $10,300-$10,500 after a $10,000 transfer.
Will a balance transfer hurt my credit score?
It may cause a small temporary dip due to the hard inquiry and new account. However, if the new card increases your total available credit, your credit utilization ratio drops—this typically helps your score within a few months. The improved utilization often outweighs the new account impact.
What happens when the promotional period ends?
When the 0% period ends, any remaining balance starts accruing interest at the card's regular APR, which is often 18-25%. This is why having a payoff plan is crucial. If you can't pay off the balance during the promo period, calculate whether you'll still save money overall.
Can I transfer balances from multiple cards?
Yes, most balance transfer offers allow transfers from multiple cards up to your credit limit. If your new card has a $15,000 limit, you could transfer a $6,000 balance from one card and $8,000 from another. Each transfer incurs the transfer fee.
What if I have a large balance I can't pay off in time?
For very large balances, strategies include: (1) Transfer what you can pay off in the promo period, (2) Do another balance transfer before the promo ends (serial transfers), (3) Consider a personal loan with a fixed rate and term. Avoid minimum payments—you'll face steep interest when the promo ends.
Are there balance transfers I should avoid?
Avoid transfers when: (1) You can't pay off the balance before the promo ends AND the post-promo rate is higher than your current rate, (2) The transfer fee exceeds interest you'd save, (3) You're tempted to spend on the old card again, (4) You'll need credit soon (the new account temporarily lowers your score).
What's the difference between balance transfer and debt consolidation?
A balance transfer moves credit card debt to a new card with a temporary promotional rate. Debt consolidation typically refers to personal loans or home equity loans that pay off multiple debts with a fixed-rate loan. Consolidation loans have fixed payments and terms; balance transfers have variable payments and promotional periods.
Key Points to Remember
- Do the math first: Use this calculator to confirm savings before applying
- Have a payoff plan: Calculate monthly payments needed to reach $0
- Don't add new debt: Avoid using the old (now empty) credit card
- Mark your calendar: Know exactly when the promotional rate ends
- Read the fine print: New purchases may not get 0% APR