Credit Card Balance Transfer Savings Calculator
Results Summary
Balance Transfer Fee:
Total Debt (New Card):
Estimated Interest Saved:
Months to Pay Off:
How a Credit Card Balance Transfer Works
A credit card balance transfer involves moving debt from a high-interest credit card to a new card with a lower introductory interest rate, often 0% for a period of 12 to 21 months. This strategy is primarily used to consolidate high-interest debt and accelerate the payoff process by ensuring every dollar of your payment goes toward the principal rather than interest charges.
Calculating the Cost of a Transfer
While moving debt can save you thousands in interest, it is rarely free. Banks typically charge a balance transfer fee, usually ranging from 3% to 5% of the total amount transferred. For example, transferring a $10,000 balance with a 3% fee adds $300 to your total debt immediately.
To determine if a transfer is worthwhile, you must compare the cost of this upfront fee against the total interest you would pay on your current card during the same time period. If the interest savings exceed the fee, the transfer is a sound financial move.
Key Terms to Understand
- Introductory APR: The temporary promotional interest rate offered on transferred balances.
- Current APR: The interest rate you are currently paying on your existing credit card debt.
- Intro Period: The number of months before the promotional 0% rate expires and reverts to a standard (higher) rate.
- Transfer Fee: The one-time percentage cost applied to the amount you move to the new card.
Practical Example
Suppose you have $5,000 in debt at a 20% APR. On your current card, you would pay approximately $83 in interest in the first month alone. If you transfer this to a 0% APR card for 15 months with a 3% fee:
- The transfer fee would be $150.
- Total debt becomes $5,150.
- If you pay $345 per month, you clear the debt in 15 months.
- Total interest paid on the old card over 15 months would have been roughly $700 – $800 (depending on your payment speed).
- Net Savings: Approx. $550 – $650.
FAQs
Does a balance transfer hurt my credit score?
Initially, applying for a new card triggers a hard inquiry, which may cause a temporary dip. However, by lowering your credit utilization ratio on the old card and paying down the debt faster, your score often improves significantly in the long run.
What happens if I don't pay it off before the intro period ends?
Once the intro period expires, the remaining balance will be subject to the card's standard purchase or transfer APR, which is often 18% to 29%. It is critical to pay the full balance before this date.