You may have heard that balance transfer credit cards are a great way to pay less on your debt. But exactly how much will it help?
To get a better idea of how balance transfer cards can help, check out our handy debt repayment calculator to see if a balance transfer card works for you. Then take a look at the following examples of debt repayment to see how it compares to other options.
How to use this calculator
- Fill out your current credit card information by inputting the balance and APR on each line.
- If you know the details about the card you’re transferring to, fill those out to see how much you’ll save. We’ll input some default values for you if you don’t have a specific card in mind.
- Hit “calculate” to see your savings.
Debt repayment calculator
Your current credit cards:
Amount Owing
APR
Card 1
Card 2
Card 3
Card 4
Card 5
Card that you are transferring to:
Intro APR
Intro Term (months)
Ongoing APR
Balance Transfer Fee
Annual Fee
At that rate you will not pay off your debt. You will need to make higher repayments.
Months that it will take you to pay off your debt:
With a balance transfer
12 months
Without a balance transfer
15 months
Money saved transferring debt to a balance transfer card:
Savings = $1,000
How much money will I save by doing a balance transfer?
The amount you’ll save depends on several factors, such as:
- The size of your debt.
- How much you want to pay on your credit card bill each month.
- The introductory APR that comes with your balance transfer credit card.
The longer you keep your debt, the more you might save by switching to a balance transfer card. That’s because the card may offer 0% APR for a significant period, giving you a long break from interest.
Basically, you save money by paying far less interest for a certain time. The savings are reduced by any balance transfer fees or annual fees, but they can add up.
Compare balance transfer to your other options
If you have debt you need to pay, you have options. One of those options is to continue paying your debt at the same rate you are paying now. Let’s compare two options to a balance transfer credit card — continuing on the same path, or getting a personal loan.
Option #1: Get a balance transfer credit card
With the best balance transfer cards, you’ll get a 0% APR on transferred balances for a long period of time.
Let’s say you’re approved for the Citi Simplicity card, which offers a 0% introductory APR on balance transfers for 21 months.
- You transfer your $5,000 balance to the Citi Simplicity card. You pay a 3% transaction fee, which comes out to $150.
- You get a 0% APR on your balance for 21 months.
- You pay $250 a month toward your balance.
Here are the results:
- You’ll pay off your debt in 20 months.
- You’ll pay $5,150 total ($5,000 in debt, $150 for the balance transfer fee).
- Compared to paying off your credit card debt at the original rate, you save $839.
Option #2: Pay off your debt at the same rate
Among a sea of choices, making no change is certainly an option! Let’s say your situation is as follows:
- You have a $5,000 balance on your credit card.
- The balance comes with an APR of 18%.
- You’re paying $250 a month toward your balance.
Here are the results of that strategy:
- You’ll pay off your debt in 24 months.
- You’ll pay $5,989 total ($5,000 in debt, $989 in interest).
There may be a better option that could save you from paying quite so much in interest.
Option #3: Get a personal loan
Instead of paying off your credit card debt the old-fashioned way, you could take out a personal loan. A personal loan gives you a set amount of cash upfront that you can use to pay off your credit card, and then you would pay off the loan over time. If you get an interest rate on the loan that’s lower than the rate you’re paying on your credit card, you can pay off your debt slightly faster and more cheaply.
Here’s an example:
- You take out a $5,000 loan, then pay off your credit card with that loan.
- Your loan comes with a 14% APR.
- You continue to pay $250 a month toward your debt.
Here are the results:
- You’ll pay off your debt in 23 months.
- You’ll pay $5,727 total ($5,000 in debt, $727 in interest).
- Compared to paying off your credit card debt at the original rate, you save $262.
Prosper
Borrow up to $35,000 for a variety of purposes, with rates starting at 5.99%.
- Recommended Credit Score: 640 or higher
- Minimum Loan Amount: $2,000
- Maximum Loan Amount: $35,000
- Loan Term: 3 or 5 years
- Turnaround Time: 1-3 business days
- Simple online application process
- No prepayment penalties
As with any debt repayment plan, it’s best to compare all of your options before making a decision that works best for you.
Compare balance transfer offers
Bottom line
If you need a break from high interest rates, a balance transfer credit card might help. By taking advantage of 0% introductory APRs, you can pay off your debt and slow the pace of interest accumulation.
Try to apply for a balance transfer card with good credit, as your chances of approval will increase.
