What a balance transfer actually buys
A balance transfer does not reduce what you owe. It moves the debt to a card that charges a lower rate for a fixed number of statement cycles, and charges you a fee for the privilege. The fee is added to the transferred balance, so you start the promotion owing more than you owed before. Everything after that is a race: you are trying to retire the balance while the cheap rate lasts.
Three quantities decide whether the trade pays. The fee is a certain, immediate cost, normally 3% or 5% of the amount moved with a small dollar floor. The interest avoided is the interest your current card would have charged during the promotional window, which depends entirely on how fast you pay the balance down — a balance that halves over eighteen months accrues far less than a static one. The residual is whatever is left when the window closes, which is then charged the go-to rate and can quietly undo the saving.
This calculator settles all three by simulating both cards month by month at the same payment. Holding the payment constant matters: if you compare a $400 payment on the new card against a minimum payment on the old one, you are measuring your own discipline, not the offer. For the minimum-payment path on its own, use the credit card payoff calculator.
The arithmetic behind the comparison
A credit card charges interest on the balance carried, at a monthly periodic rate equal to the APR divided by twelve. On a 24% card that is 2% a month. Each cycle the card adds balance × APR ÷ 12 and subtracts your payment, so the balance next month is:
B₁ = B₀ × (1 + APR/12) − P
Iterate that until the balance hits zero and you have the total interest for one path. Run it twice — once at your current APR on the original balance, once on the new card at the promotional rate for m months and the go-to rate afterwards, starting from the balance plus the fee — and the difference between the two interest totals, less the fee, is the net saving.
The payment that clears the transferred balance inside the promotional window is easy when the promotional APR is 0%, because nothing compounds: divide the transferred amount by the number of months. At a promotional rate above zero the same job needs the amortising-loan payment formula, P = (B+F)·r ÷ (1 − (1+r)−m), with r the monthly promotional rate. This calculator uses whichever applies.
The break-even fee is the harder question, and it is the one worth asking of any offer. It is the fee F* at which the two paths cost exactly the same over the full payoff. Raising the fee hurts twice — you pay it, and you carry it as extra balance — so the net saving falls steadily as the fee rises and there is exactly one crossing point. The calculator finds it numerically rather than approximating it with the promo-window interest, because those two figures only coincide when the go-to rate happens to equal your current rate.
Worked example: $6,000 at 24% moved to an 18-month 0% offer
You carry $6,000 at 24% APR and can pay $400 a month. A new card offers 0% for 18 months with a 3% transfer fee and a 24% go-to APR.
- Fee. 3% × $6,000 = $180, which beats the $5 floor. The new card starts at $6,000 + $180 = $6,180.
- The transfer path. At 0% nothing accrues, so each $400 payment retires $400 of balance. Fifteen payments clear $6,000 and the sixteenth clears the remaining $180. The balance is gone in month 16, two months inside the window, and the interest charged is $0.
- The stay path. The monthly rate is 24 ÷ 12 = 2%. Iterating
B × 1.02 − 400from $6,000 has the closed formBₘ = 20,000 − 14,000 × 1.02ⁿ. At m = 18, 1.0218 = 1.428246, so 14,000 × 1.428246 = $19,995.45 and the balance is $4.55. - Interest avoided in the window. Over those 18 months you paid 18 × $400 = $7,200 and reduced the balance by $6,000 − $4.55 = $5,995.45. The difference, $1,204.55, is interest.
- Full payoff. The $4.55 attracts $0.09 in month 19 and clears, so the stay path costs $1,204.64 in interest all told.
- Net saving. $1,204.64 − $0 − $180 = $1,024.64.
- Break-even fee. A fee F above $1,200 leaves F − $1,200 outstanding after 18 payments, which then costs 2% for one month, so the condition
1,204.64 = F + 0.02(F − 1,200)gives1.02F = 1,228.64and F* = $1,204.55, or 20.08% of the balance.
The margin here is enormous: a 3% fee against a 20.08% break-even. That is what an offer looks like when the payment is large enough to clear the balance inside the window.
How to read the result
Compare your fee against the break-even fee, not against zero. Every transfer costs something, so "the fee is $180" tells you nothing on its own. If the break-even fee is 20% and you are being charged 3%, the offer has a wide margin of safety and would still pay even if you fell behind your plan. If the break-even fee is 4% and you are charged 3%, the transfer is worth doing but a single missed month can flip it.
Watch the residual line. A residual above zero means the promotion expires with debt still on the card, and that debt is charged the go-to APR, which is often higher than the rate you left. The calculator reports the payment that would clear the balance inside the window; if that number is out of reach, you are not buying eighteen months of free money, you are buying a smaller amount of interest relief and then rejoining an expensive card. Consider a shorter promotion with a smaller fee, or a fixed-term personal loan whose payment is set for you.
A negative net saving is a real answer, not an error. It happens when the balance is small relative to the fee floor, when the promotional window is short, or when the go-to rate is well above your current rate and a large residual survives the window. The edge case shipped with this calculator — $150 moved with a $10 minimum fee and no promotional months — loses about $10.82.
The saving is contingent on behaviour the calculator cannot see. It assumes you make the same payment every month on either card and add no new spending. New purchases on the transfer card usually carry the go-to rate immediately, and under the payment-allocation rule in Regulation Z any amount above the minimum is applied to the highest-rate balance first — so the extra payment you intended for the debt goes to the purchases instead, and the promotional balance sits still.
Interest cost per $1,000 of card balance
| APR | Monthly periodic rate | Interest per month | 12 months | 18 months |
|---|---|---|---|---|
| 15.00% | 1.2500% | $12.50 | $150.00 | $225.00 |
| 17.99% | 1.4992% | $14.99 | $179.90 | $269.85 |
| 19.99% | 1.6658% | $16.66 | $199.90 | $299.85 |
| 22.99% | 1.9158% | $19.16 | $229.90 | $344.85 |
| 24.99% | 2.0825% | $20.83 | $249.90 | $374.85 |
| 27.99% | 2.3325% | $23.33 | $279.90 | $419.85 |
| 29.99% | 2.4992% | $24.99 | $299.90 | $449.85 |
These figures hold the balance flat, so they are the ceiling on what a transfer can save over that window. A balance you are actively paying down accrues less, which is why the calculator simulates the real declining balance instead of using this table.
Where the promotion can end early
Regulation Z, which implements the Credit CARD Act of 2009, constrains when a card issuer may raise a rate on an existing balance, and a promotional rate disclosed for a stated period must generally run for at least six months. The protection is not unconditional: an issuer may end a promotional rate early if a payment goes more than 60 days past due. A single late payment can therefore convert an 18-month plan into a five-month one at the go-to APR, on a balance that now includes the fee.
Two more timing details bite people. The promotional clock usually starts when the transfer posts, not when you apply, and transfers can take one to two weeks to settle — keep paying the old card until you see the balance move. And most issuers refuse transfers between cards from the same bank, so check before you plan around an offer.
What this calculator does not model
- New purchases on the transfer card. They usually carry the go-to rate from day one, and under the Regulation Z allocation rule payments above the minimum go to the highest-rate balance first, so the promotional balance stops falling while you clear them.
- Deferred interest. A handful of promotional offers, mostly on retail cards, are "no interest if paid in full" deals rather than true 0% rates. If any balance survives the window, interest is charged retroactively from day one. This calculator models a true promotional APR, not deferred interest, and the two are not interchangeable.
- Annual fees and rewards. A card with a $95 annual fee costs that much again in year two if you keep it. Add it to the fee field if it materially changes the comparison.
- Credit-score effects. Opening a card adds a hard inquiry and lowers your average account age, while the extra limit usually reduces overall utilisation. Both move the score; neither is a dollar amount. See the debt-to-income ratio calculator if you are about to apply for a mortgage.
- Transfer limits. Issuers cap the transferable amount, often well below the card's credit limit, so a large balance may need splitting or may not fit at all.
- Minimum payments. The model applies the payment you enter every month. If that figure ever falls below the card's required minimum, the real schedule differs and the promotional rate may be at risk.
When a different tool fits better
A balance transfer suits a specific shape of problem: a balance you can realistically retire in a year or two, on a card whose rate is high, held by someone whose credit is good enough to be approved for a decent offer. Outside that shape, other routes usually win.
If the balance is too large to clear inside any promotional window, a fixed-rate instalment loan gives you a defined payoff date and a rate that cannot reset. Price one with the personal loan payment calculator and compare its total interest against the transfer path's total.
If you hold several balances, sequencing matters more than any single transfer. The debt avalanche method retires the highest rate first and minimises total interest; the debt snowball method retires the smallest balance first and is easier to sustain. A transfer can sit inside either plan — move the highest-rate balance and keep the sequence.
If the payment is the binding constraint, work out what payment retires the debt in the time you have before choosing a product at all. The loan payoff time calculator answers that directly. A transfer that you cannot clear inside the window is still usually better than no transfer, but the saving is a fraction of the headline and the fee is not.
Finally, treat any offer's advertised length as the maximum, not the plan. Build the payment schedule from the number of months you can actually commit to, then check whether the fee still clears the break-even the calculator reports.