Balance Transfer Break Even Calculator

Purpose and model boundary

Use this to price a credit card balance transfer against simply staying where you are. It runs the same balance to zero twice at the same monthly payment, once on the card you hold and once on the card being offered, and reports what the move is worth once the transfer fee is counted, the first month it has cost you less than staying, and the amount still owed on the day the promotional rate ends.

It prices an offer as the offer is written. It does not judge whether you will be approved for it, what credit limit it would carry, or whether a late payment would end the promotional rate early. Nothing you spend on either card after the move is modelled.

Inputs and units

Governing relationships

Both cards are followed month by month. Each month is charged one twelfth of the annual rate on the balance standing at the start of that month, then the payment is applied, and whatever is left carries into the next month. A month counts as still owing while more than half a cent remains, because a level payment leaves part of a cent behind and money is billed in whole cents.

The transfer fee is added to the balance on the new card rather than billed separately, so the new card starts from the balance plus the fee, and where a promotion ends with money still owed the fee accrues interest along with everything else.

What the move is worth is the interest you avoid by leaving the old rate, less the fee, less whatever the new card charges once its promotional rate has ended. The break even month is the first month in which the running total of what moving has cost is below the running total of what staying would have cost, compared only over the months both routes are still running.

Calculation sequence

This is the order in which the reported figures depend on one another, each step traceable to what the calculator says a figure is built from. It is not a claim about the order in which the workbook evaluates its own cells.

1. Follow the balance on the card you hold at the payment you entered, to get the months it takes to clear and the interest charged on the way.
2. Charge the transfer fee on the balance and add it to the amount carried to the new card.
3. Follow that larger balance on the new card at the same payment, at the promotional rate until the promotion ends and at the rate after it thereafter, to get the months and the interest on that route.
4. Read the balance standing on the new card on the day the promotional rate ends, and record whether anything is still owed then.
5. Add the fee and the new card's interest together to get the whole price of moving.
6. Subtract that from the interest of staying to get what the move is worth.
7. Compare the two running totals month by month and report the first month in which moving is the cheaper of the two.
8. Rerun the whole comparison across a grid of monthly payments and promotional lengths, so the part of the answer you control is separated from the part the offer decides.

Outputs and interpretation

Model Status reads OK, or explains why the inputs cannot be answered or why the move deserves a second look before you make it. It is shown alongside the results rather than in place of them.

The calculator also returns a grid that reruns the comparison across a range of monthly payments and promotional lengths at once. Its axes, corner and body arrive as separate values and are the grid's parts rather than results to read on their own; the page assembles them into the table.

Every figure above is returned by the model. The page arranges and formats them; it computes none of them.

Validation and status logic

These are the states the delivery's own recorded runs exercise, so the table records what this calculator has been observed to return rather than every branch it could take. A figure that moves with the inputs is shown as ….

Assumptions and limitations

• Interest is charged once a month, at the annual rate divided by twelve, on the balance at the start of the month. An issuer charges on the average daily balance, so a single month here can differ from a statement by the timing of payments inside it.
• The same monthly payment is used on both cards. A transfer that only looks better because you would pay more into it is not the offer doing the work.
• The fee is added to the balance rather than paid separately. A lender that instead takes its fee out of the amount it advances would leave slightly less owing.
• Nothing charged to either card after the move is counted, and no annual fee, late fee or rewards value is modelled.
• The promotional rate is assumed to run its full stated length. A promotion ended early, which a missed payment can do, is not modelled.
• A balance of nothing is answered rather than refused: moving nothing costs nothing.

Restrictions and non-computing states

This calculator enforces the numeric limits recorded above before the comparison runs, so a value outside them is refused rather than answered.

The rate after the promotion may be left blank. A blank is not a typed nothing: blank means the rate you already pay is used, while a typed nothing prices a card that charges no interest at all after the promotion. The two give different answers.

Both routes are followed for a limited number of months. Where a payment is small enough that a balance never clears, the run stops at that limit and the status line says the months and the interest shown are that limit rather than a payoff.

Errors and warnings

NOT VALID means the inputs do not describe a question this calculator can answer, and the figures beside it should not be relied on. CHECK is not an error: the arithmetic is sound and the figures stand, but something about the combination is worth knowing before the answer is used, such as a balance that does not clear inside the promotion or a fee that is never earned back. The status is shown with the results rather than in place of them, so a flagged answer is still a readable one.

A value the page itself refuses, because it falls outside the limits above, is rejected before the calculation is requested and no figures are returned at all. That is different again from a transport or service failure, where the page reports that the result could not be fetched rather than showing a stale or partial one.

The definition of a balance transfer fee, and the fact that one may be charged even on an offer at no interest, is set out by the Consumer Financial Protection Bureau in what is a balance transfer fee. That is why this model charges a fee even where the promotional rate is nothing.

On how long a promotional rate lasts, and the issuer's duty to state the rate that follows it, see the Consumer Financial Protection Bureau on how long you can keep an introductory rate. That page also notes that a promotion can end early after a missed payment, which this model does not attempt to predict.

These sources provide background; they do not supply the calculator's assumptions or certify its result. This calculator is informational and is not financial, investment, or tax advice. Results follow directly from the rates, amounts and offer terms you enter, which describe an offer as written rather than an outcome anyone is promising you.