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| Credit Card Balance Transfer Formula: Solve for when (transfer fee + new rate * x) < (current rate * x) where x is the number of months. This equation is more complicated if the time required is greater than the introductory rate period. If this is the case, the left hand side of the equation would be: (transfer fee + (initial rate * initial rate period) + (final rate * (initial rate period - x))) Which accounts for the time already past. | |||
Credit Card Balance Transfer Definition The credit card companies are offering thousands of Americans the opportunity to transfer their high interest rate credit cards to a lower APR. This may seem like a great thing, but you really need to make certain that you know what you are getting into before you transfer balances. Most lenders will introduce a teaser rate for you to sign up with. In many cases, this low APR will only last for a set amount of time. The amount of time that the low rate lasts is usually from 6-18 months, depending on the company. These rates can help you to pay down your debts faster, but you need to make sure you will not pay more money in the long run. The biggest selling point for these cards is the low interest rate. The credit card company will likely also charge you a fee for the balance transfer. This is usually 3-4 percent of the amount that you transfer. If you transferred $10,000 at three percent, the company would add $300.00 to the principal. You need to figure out if you will save that much money in interest before you take the deal. A credit card balance transfer calculator is one of the best ways to figure out if a balance transfer is a good option for you. The calculator is easily accessible online, so get your current credit card information and the information from the company that you want to transfer balances to. Once you have all of the information together, begin the process. Amount to Transfer This is the first step with the calculator. You need to know exactly how much you want to transfer. If you want an exact amount, you should contact the company via telephone and speak with a customer service agent. The agent should be able to tell you the exact payoff amount. Current Interest Rate This is the rate that you are being charged by your current credit card company. The rate should be broken down onto your monthly statement, but contact the lender if you are unsure of the interest rate. Remember that you want to have the lowest interest rate possible to save the most money. Balance Transfer Fee This is the percentage that the new company will charge you for taking over your debt. The fee is usually from 3-4 percent. Introductory Interest Rate The introductory rate is the “teaser” rate. This is the rate that you will have to pay for a set amount of time. When that timeframe expires, your rate will change. You want to get the introductory interest rate for as long as possible to maximize your savings. Introductory Rate Period This is the number of months that you will have the introductory rate. Again, get the longest possible term. Once this period of time expires, you will have to begin paying the regular interest rate. Do all that you can to pay off as much debt as possible during this period of time. Final Interest Rate The final interest rate is how much you will pay in interest each month once the introductory rate expires. You want to get the lowest rate possible. Lenders are hoping that you will still have debt once this time comes because that is when they will begin to make more money. Transferring your debt can be a good idea. You need to use the online calculator to help you make that decision. Regardless of your decision, the calculator will help you to better understand the true cost of your debt. How to Calculate Credit Card Balance Transfer Let's be honest - sometimes the best credit card balance transfer calculator is the one that is easy to use and doesn't require us to even know what the credit card balance transfer formula is in the first place! But if you want to know the exact formula for calculating credit card balance transfer then please check out the "Formula" box above. |