If you don't like the terms of your credit card, you can transfer your balance to a new credit card. Most people transfer balances from a high interest rate credit card to a low interest rate credit card hoping to save money on finance charges. You may save money in the long run, but the balance transfer fee and difference in annual fees on the credit cards will influence your savings.
You can use a balance transfer calculator like the one at CreditCards.com to determine whether you'll save or spend money by transferring your credit card balance.
To calculate your balance transfer savings you'll need these numbers:- interest rate and balance amount you want to transfer
- the introductory interest rate and term
- the normal APR for balance transfers
- the annual fee, if any
- the balance transfer fee
Balance Transfer Savings Example
You currently have a credit card with a $3,000 balance at 17% APR. You want to transfer to a card with a 12-month 3.9% introductory interest rate and a 4% balance transfer fee. After the introdutory rate expires, your interest rate will be 11.9%.
Transferring balances would save you $273 in interest during the introductory period even after a $120 balance transfer fee, then $13 a month after the introductory rate expires.
Without a low introductory interest rate, the balance transfer would cost an initial $120 in fees. Based on the $13/month savings, it would take you 10 months to break even on fees. You won't experience any real savings until after that time.
