CC Balance Transfer

[Bob B.]

I'm looking in to transfer the balance of a 16.99% APR credit card to a card with a 6 month 0.0% introductory rate. The balance is at around $2,300. The cards I've been looking at all appear to have a 3% or a 4% balance transfer fee. And there's also potential for the rate to jump higher than I'm paying right now.

What I'm looking for is confirmation that my calculations are right, and that a 4% balance transfer would wipe out my first three months of interest savings from my current card, and that with the potential of any unpaid balance at the end of the 6 month intro spiking up to 19.9% or 21.9%, that I'm better off sucking it up and sticking with my current 16.99% fiasco.

Hopefully I've explained myself clearly enough. If not, let me know,and I will try to clarify.

[riverwed070707]

How long will it take you to pay the full balance? You are correct that you probably don't want to switch it over unless you can pay it off before the introductory rate ends. Can you find a card with 0% for 12 months?

[Hector]

dont do it if you cant pay it off soon.
let say you do a balance transfer and pay 4% transfer fee. after 6 months new rate is 22% which is 5% more than your current rate which is a lot. at that time if you think about transferring back to your current card, you will need to pay 4% transfer fee to do so.

[Fizgig]

I've never been a big fan of the balance transfer game. A few interest percentage points won't change your life - it's simpler and easier in the long run to just roll up your sleeves and pay the sucker off.

[jpg7n16]

Well, I just did some calculations to see how well the strategy would work for you. Here's what I found: (worst case assumed on fee and interest costs)

If you had an extra $100/month available to pay on the debt, paying regularly would take you 28.024 months to remove the balance @ 16.99% interest. Total you'd pay would be $2802.42 to remove a debt balance of $2300, which means 2802.42 - 2300 = 502.42 paid in interest.

If you took the 6 month 0% offer you'd pay $92 up front (4% fee). Your first 6 months would get $0 interest, and would then be charged 21.9% interest afterwards. At the same $100/month, it would take 6 + 20.537266 months = 26.5373 months = $2653.73 to remove the same $2300 balance. 2653.73 - 2300 + 92 = 445.73 total cost.

By accepting the offer, you would save $56.70 on interest.


Doing another calculation (goal seek function in excel), I was able to determine that, as long as you pay MORE than $70.72/month, but LESS than $502.50/month, you will save on overall interest costs.

If you plan to pay more than $502.50/month or less than $70.72/month, you should not take the offer.

[Bob B.]

[quote=jpg7n16;298836]

Doing another calculation (goal seek function in excel), I was able to determine that, as long as you pay MORE than $70.72/month, but LESS than $502.50/month, you will save on overall interest costs.

QUOTE]

Wow, thanks, JPNG! I'll have to take a look at that goal seek function.

[jpg7n16]

no problem

here are some links that could help you do what I did. Financial functions, aka time value of money functions (nper, rate, pv, pmt, fv). I use these all the time!

Excel functions for personal financial decisions: the PV, FV, PMT, PPMT, and IPMT functions - Excel - Office.com

And the 'goal seek' function: Excel 2007/2010 Tutorials - Goal Seek

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It took a little bit to set up the spreadsheet to pull everything from the right cells, but in the end, it worked.

Though I can't seem to post the file, so if you truly want the file, PM me your email address and I'll recreate it and send it to you.

[scot184]

There are balance transfers with 0% APR for as long as 21 months right now...why go with the six month card? Also, these same offers have a 3% balance transfer fee. Chase also has a balance transfer credit card that gives you $100 cash back when you transfer $500...so that could offset your entire fee.

[naomibatac]

Balance transfer may help, but I still believe in paying off the debt without any transfer. If you will pay the total amount due per billing and refrain from frequent use of your credit card, then it will pay off eventually without you paying for extra interest in the case of balance transfer.

[JoshuaHeckathorn]

Originally Posted by naomibatac

Balance transfer may help, but I still believe in paying off the debt without any transfer. If you will pay the total amount due per billing and refrain from frequent use of your credit card, then it will pay off eventually without you paying for extra interest in the case of balance transfer.

Why pay the debt off at a higher interest rate, if you can save money by transferring to a 0% interest credit card and paying it off within the promotional period? There are plenty of balance transfer cards out there that offer 0% interest for 21 months.

Just paying the "total amount due", or minimum payment, per billing cycle will take a very long time to pay off any credit card debt. Balance transfers can be a great money-saving tool for those that are willing to stick to a plan and get the debt paid off at 0% interest within the promotional period.

[Bob B.]

I transferred the balance back in August based in part by the advice given by JPG. Hence, this issue, from my point of view is over, and this thread can float down into the archives.

[Lindsey28]

I have two credit cards. One with $8,000 debt and the other at $2,000 debt. I am paying a high interest rate on each, roughly 16%. The interest on both cards totals to around $200 a month. I want to transfer to a zero balance cc or a low interest cc, but no one wants to accept me. I was wondering why don't they accept me, so I can do a balance transfer and close out my two old accounts. They say I have too much credit. Technically, it would be the same, if I close out the other two. I'm not asking for $20,000 for a credit limit.

[JoshuaHeckathorn]

Originally Posted by Lindsey28

I have two credit cards. One with $8,000 debt and the other at $2,000 debt. I am paying a high interest rate on each, roughly 16%. The interest on both cards totals to around $200 a month. I want to transfer to a zero balance cc or a low interest cc, but no one wants to accept me. I was wondering why don't they accept me, so I can do a balance transfer and close out my two old accounts. They say I have too much credit. Technically, it would be the same, if I close out the other two. I'm not asking for $20,000 for a credit limit.

What are your FICO Scores, and what are the credit limits on your 2 existing credit cards?