A balance transfer could save you nearly $9,000 — here's the math
A balance transfer can help you save money on credit card debt by giving you time to pay down your balance without accruing interest.
How much you can save depends on your current balance and interest rate, the balance transfer fee, the length of the 0% introductory period, and how much you can afford to pay each month.
Before you apply for a balance transfer card, you can estimate your potential savings using those numbers. Here's how the math works and what to consider when deciding whether a balance transfer is worth it.
How much can a balance transfer actually save you?
A balance transfer could save you thousands of dollars in interest, especially if you can pay off your debt during the card's 0% APR period.
For example, based on average credit card debt and interest rates, a balance transfer could save you between $7,220 and $9,000 compared with making only the minimum payments on your existing card.
Let's say you have a $6,600 credit card balance and an interest rate of 22%. If your minimum payment is calculated as accrued interest plus 1% of your balance, your first monthly payment would be about $165. If you continue making only the required minimum payments, it would take about 25 years to pay off the debt and cost you more than $9,300 in interest.
Now, say you transfer the same $6,600 balance to a card with a 15-month 0% introductory APR and a 5% balance transfer fee. After the introductory period ends, the card charges a 22% ongoing APR. The 5% fee adds $330, bringing your new balance to $6,930.
To pay off the entire balance before the 0% period ends, you'd need to pay at least $462 per month for 15 months. You'd pay no interest, and your only added cost would be the $330 balance transfer fee. That means you'd save nearly $9,000 compared with making minimum payments on the original card.
| Minimum payments on existing card | Balance transfer paid off during intro period | |
|---|---|---|
| Starting balance | $6,600 | $6,930 |
| Balance transfer fee | $0 | $330 (5%) |
| Interest rate | 22% | 0% during intro period |
| Monthly payment | Starts around $165 | $462 |
| Payoff period | About 25 years | 15 months |
| Total interest paid | More than $9,300 | $0 |
What if you can't pay off the balance during the 0% period?
You can still save money with a balance transfer even if you can't pay off the full balance before the introductory period ends. Say you can only afford to keep paying $165 per month. After 15 months at 0% APR, you'd have about $4,455 left on the balance.
If the card then begins charging 22% APR and you continue paying $165 per month, you'd pay off the debt in about four and a half years total and pay around $1,750 in interest. Including the $330 balance transfer fee, you'd still save about $7,220 compared with making minimum payments on the original card.
The exact amount you can save will depend on your own debt, interest rate, balance transfer offer, and monthly payments. Start by using a credit card debt calculator to estimate what your current balance will cost to pay off. Then compare that cost with the balance transfer fee and any interest you might owe after the introductory period.
How does a credit card balance transfer work?
A balance transfer lets you move debt from one credit card to another, usually to take advantage of a temporary 0% introductory APR. First, you'll need to apply and get approved for a balance transfer credit card. Once the account is open, you can request a transfer from your existing card to the new one.
Some cards require you to complete the transfer within a specified time to qualify for the introductory offer. For example, you may need to transfer your balance within 60 days of opening the account. Even without a deadline, transferring the balance sooner gives you more time to pay it down before the introductory APR expires.
You can generally request a balance transfer through your new card's online account. You'll need information about the account you're transferring the debt from, along with the amount you want to transfer.
The amount you can transfer is also limited by your new card's available credit. The transferred balance will use part of your credit line, and your available credit will increase as you pay it down.
Keep making payments on your old card until you confirm that the transfer is complete. You can still be charged interest or late fees on the old account while the transfer is processing.
What affects how much you can save with a balance transfer?
Four factors have the biggest effect on your potential balance transfer savings:
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Length of the 0% intro period: A longer introductory period gives you more time to pay down your debt without interest. Ideally, choose an offer that gives you enough time to pay off most or all of your transferred balance.
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Balance transfer fee: Balance transfer fees are commonly 3% to 5% of the amount you transfer, sometimes with a minimum fee. Factor this upfront cost into your total savings and monthly payment.
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Credit card issuer: You generally can't transfer debt between cards issued by the same bank. If your existing balance is with one issuer, you'll likely need to look for a balance transfer card from another.
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Credit limit: You can only transfer as much debt as your new card allows. If your balance exceeds your available credit limit, you may only be able to transfer part of it.
Is a balance transfer worth it?
A balance transfer can be worth it when the interest you'll save is greater than the cost of transferring the balance. The biggest question is how much you can realistically pay each month. Look at your budget and calculate how much of the balance you could pay down before the 0% introductory period ends.
Ideally, you'll pay off the entire transferred balance before the regular APR kicks in. But that doesn't mean a balance transfer only makes sense if you can get to $0. As the example above shows, even paying down part of your balance during the interest-free period can save you a significant amount of money. You just need to account for the transfer fee and any interest you'll pay on the remaining balance afterward.
A balance transfer may not be worth it if the fee wipes out most of your interest savings, you qualify for only a small credit limit, or you won't be able to make meaningful progress on the balance during the introductory period.
Balance transfer FAQs
Who qualifies for a balance transfer?
Balance transfer credit cards often require good credit to qualify. If you have a lower credit score or very little credit history, you may have fewer options.
If the issuer offers prequalification, you can check your odds of approval before submitting a full application. Prequalification typically uses a soft credit check and doesn't affect your credit scores.
How much does a balance transfer cost?
The main upfront cost is the balance transfer fee. These fees are commonly 3% to 5% of the amount you transfer, sometimes with a minimum fee of $5 or $10.
For example, if your card charges a 3% balance transfer fee or $5, whichever is greater, transferring $2,000 would cost $60.
That fee is typically added to your new card balance, so remember to include it when calculating how much you'll need to pay each month.
What's a good balance transfer intro period?
Some balance transfer cards offer introductory 0% APR periods lasting up to 21 months, though offers vary by card.
A longer introductory period can be especially useful if you have a larger balance because it gives you more time to pay down the debt before interest begins accruing.
Cards with shorter balance transfer periods may offer other benefits, such as cash-back rewards on new purchases. Cards with the longest 0% introductory periods, on the other hand, are less likely to offer rewards.
The best intro period is one that gives you enough time to pay off as much of your transferred balance as possible while keeping the monthly payment affordable.
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