The 60-Second Balance Transfer Test
Step 1: Calculate one month of current interest. Balance × (Current APR ÷ 12). Example: $8,000 × (22% ÷ 12) = $8,000 × 1.83% = $146.67. Step 2: Calculate the transfer fee. Balance × fee percentage. Example: $8,000 × 3% = $240. Step 3: How many months to break even? Transfer fee ÷ monthly interest saved = $240 ÷ $147 = 1.6 months. Under 3 months: excellent. Under 6 months: good. The transfer saves money if you plan to carry the balance more than the break-even months.
60-second balance transfer evaluation — back-of-envelope method
| Quick Check | Formula | Example ($8,000 at 22%, 3% fee) |
|---|---|---|
| Monthly interest | Balance × (APR ÷ 12) | $8,000 × 1.83% = $147 |
| Transfer fee | Balance × fee % | $8,000 × 3% = $240 |
| Break-even months | Fee ÷ monthly interest | $240 ÷ $147 = 1.6 months |
| Verdict | Break-even < 3 months = excellent deal | 1.6 months = take the transfer |
For credit card debt above 18% APR: if the transfer fee is 3%, the break-even is about 2 months. If you’ll carry the balance for more than 2 more months (you almost certainly will), transfer it. This is nearly always the right answer for high-rate debt with a 3% fee offer.
Quick Mental Math Shortcuts
- At 22% APR, monthly interest ≈ 1.83% of balance. Shortcut: multiply balance by 0.018 for quick approximation.
- A 3% transfer fee on 22% APR debt: break-even ≈ 1.6 months. Always worth it if carrying balance more than 2 months.
- A 5% transfer fee on 22% APR debt: break-even ≈ 2.7 months. Worth it if carrying for 3+ months.
- Required monthly payment to pay off in 18 months: divide (balance + 3% fee) by 18. Example: ($10,000 + $300) ÷ 18 = $572/month.
- Required payment to pay off in 12 months: (balance + 3% fee) ÷ 12. Quick payoff test.
Verify Your Quick Estimate
After using the back-of-envelope check, confirm the precise savings and required payment with the full calculator.