Quick reference
What a balance transfer is and how it works
A balance transfer is the process of moving an outstanding debt from one credit card to another. The new card issuer pays off the old balance and the debt appears on the new card. The incentive is a promotional interest rate — typically 0% for a fixed period of 12 to 24 months — which allows you to pay down the principal without accumulating further interest.
The mechanics are straightforward. You apply for a balance transfer card, request the transfer of your existing balance, and the new issuer pays the old card directly. From that point, your debt sits on the new card at the promotional rate. Every payment you make during the promotional period reduces the principal directly because no interest is accruing.
The cost of a balance transfer is the transfer fee — typically 3 to 5 percent of the amount transferred, charged once at the start. On a 5.000 balance at 3% fee, the cost is 150. If your existing card charges 22% APR, you would pay approximately 91 per month in interest. The transfer fee pays for itself in under two months of interest saving.
Balance transfers are most powerful when: the promotional period is long enough to clear the debt, the transfer fee is lower than the interest you would otherwise pay, and you do not make new purchases on the transfer card.
The break-even calculation
What happens when the promotional period ends
The most important aspect of a balance transfer that borrowers underestimate is what happens at the end of the promotional period. When the 0% period expires — whether that is 12, 18 or 24 months — any remaining balance immediately starts accruing interest at the card's standard APR. This standard rate is typically 20 to 25%, which is often higher than the card you transferred from.
If you transferred 5.000 and paid down 3.000 during a 12-month 0% period, the remaining 2.000 will start accruing interest at the standard rate from month 13. At 23% APR that is approximately 38 per month in interest charges on the remaining balance.
The correct approach is to calculate from day one how much you need to pay each month to clear the entire balance before the promotion ends. Divide the transferred balance by the number of months in the promotional period. For a 5.000 balance over 18 months: 5.000 / 18 = 278 per month. If you cannot commit to this payment, the transfer may still help but you must plan for the reversion rate.
Worked examples
Transfer fee = 4.000 x 3% = 120. Monthly interest on old card = 4.000 x (22% / 12) = 73,33. Break-even = 120 / 73,33 = 1,6 months. Interest saved over 18 months = 73,33 x 18 = 1.320. Net saving after fee = 1.320 - 120 = 1.200. Required monthly payment to clear balance = 4.000 / 18 = 222 per month.
Transfer fee = 800 x 5% = 40. Monthly interest saved = 800 x (18% / 12) = 12. Over 6 months interest saved = 72. Net saving = 72 - 40 = 32. Break-even = 40 / 12 = 3,3 months. On a small balance with a short promotional period and high fee, the saving is minimal. It may not be worth the credit application for a 32 saving.
Payments during promotion: 300 x 12 = 3.600 cleared. Remaining balance: 6.000 - 3.600 = 2.400. Interest from month 13 at 23% APR: 2.400 x (23% / 12) = 46 per month. To avoid this, the required monthly payment was 6.000 / 12 = 500 per month. Paying only 300 means 200 per month shortfall, leaving 2.400 exposed to the standard rate.
Balance Transfer Calculator
Enter your current balance, APR, transfer fee and promotional period to see exactly how much you save and the required monthly payment to clear the debt.
Break-even months by balance and fee rate
| Balance | 3% fee | Monthly interest at 20% APR | Break-even at 3% | Break-even at 5% |
|---|---|---|---|---|
| 1.000 | 30 | 16,67 | 1,8 months | 3,0 months |
| 2.000 | 60 | 33,33 | 1,8 months | 3,0 months |
| 5.000 | 150 | 83,33 | 1,8 months | 3,0 months |
| 10.000 | 300 | 166,67 | 1,8 months | 3,0 months |
| 20.000 | 600 | 333,33 | 1,8 months | 3,0 months |
Common mistakes that eliminate the saving
Methodology
Break-even calculations use the formula: transfer fee divided by monthly interest saved at the existing APR. Monthly interest uses simple division: annual rate divided by 12. Total interest saving uses monthly interest multiplied by the promotional period in months. All calculations assume the balance remains constant and no new purchases are made on the transfer card.
Transfer fees, promotional periods and standard APRs vary by card issuer and applicant credit profile. The rates used in examples are illustrative. Always check the specific terms of the card you are applying for.
Calculate your balance transfer saving
Enter your current balance, APR and transfer fee to see exactly how much you save and the monthly payment needed to clear the debt before the promotion ends.
Frequently asked questions
Formula based on standard mathematical and financial methods. Results are for informational purposes. Last reviewed May 2026. Version 1.