Balance Transfer Calculator

A balance transfer moves revolving debt from an existing card to a new account carrying a promotional rate, usually 0 percent for a stated number of billing cycles. The economics are a direct comparison: the interest that would accrue on the old card at its ongoing APR versus the up-front transfer fee plus whatever interest accrues on the new card during and after the promotion. Transfer fees are typically 3 to 5 percent of the amount moved, so 5,000 dollars costs 150 to 250 dollars. Promotional windows commonly run 12 to 21 months, and go-to rates after expiry generally fall between 18 and 28 percent. The break-even point is the number of months of avoided interest needed to recover the fee. At 22 percent APR a 5,000 dollar balance accrues roughly 92 dollars in the first month, so a 150 dollar fee is recovered in under two months, which is why transfers are usually worthwhile above roughly 15 percent APR. The decisive variable is whether the balance clears before the promotion ends, because any residual is re-priced at the go-to rate and much of the benefit evaporates. Approval for the longest promotional windows generally requires a FICO score near 700 or above, and issuers do not permit transfers between two cards they themselves issue.

Promotional teaser rates on credit cards became possible in the United States after the Supreme Court decision in Marquette National Bank v. First of Omaha Service Corp. in 1978, which let a bank export the interest rate rules of its home state nationwide. Issuers relocated card operations to states such as South Dakota and Delaware that had removed usury ceilings, and price competition shifted toward introductory offers. Balance transfer solicitations spread widely in the early 1990s as issuers competed for the balances of existing revolvers rather than only for new cardholders. The product was reshaped by regulation. Before 2009 issuers commonly applied payments to the lowest-rate portion of a balance first, so cardholders who made purchases on a transfer card watched those purchases accrue interest at the standard rate while their payments retired the 0 percent portion. The Credit Card Accountability Responsibility and Disclosure Act of 2009 required that payments above the minimum be applied to the highest-rate balance first and restricted retroactive rate increases on existing balances. Transfer fees, which were frequently capped at 50 or 75 dollars in the 1990s, were converted to uncapped percentage fees as issuers replaced the lost interest revenue, producing the 3 to 5 percent structure that prevails today.