The fee is smaller than the interest saved
Do not focus on the headline 0%. The transfer fee is part of the cost and is usually added to the balance.
When a balance transfer is doing a useful job
The old card is not reused
If the old card fills again, the transfer has converted one debt into two debts.
The balance is clear before expiry
If the monthly payment needed is impossible, treat the offer as breathing room, not a solution.
How the planner works
The planner adds the transfer fee to the balance and divides that total by the promotional months to find the monthly payment needed to clear it in time. It treats the promotional rate as 0%, so the amount left when the offer ends is the transferred total minus the planned payment multiplied by the number of months. Any balance left is then run for 12 months at the post-promotion APR, still at the planned payment, to show the interest that could follow.
Worked example with the default figures
The defaults are £4,000 moved with a 3% fee and a 24-month offer, paying £175 a month. The fee is £120, so £4,120 lands on the new card. Clearing it in 24 months needs £171.67 a month, shown as £172. Paying £175 a month puts £4,200 towards it, so the plan clears before the offer ends and no post-promotion interest appears.
Lower the payment to £150 and £3,600 is paid over the 24 months, leaving £520 when the 24.9% rate starts; the planner shows about £26 of interest before £150 a month clears it. Keep £175 but shorten the offer to 18 months and the payment needed rises to £228.89, leaving £970 and about £71 of interest. By the same monthly method, keeping £175 a month on the old card at 24.9% for 24 months would cost about £1,375 in interest and still leave about £1,175 owing.
Limits of the result
- The fee is a flat percentage of the balance. MoneyHelper says fees are often around 2% to 4% and are added to the balance.
- Every payment is assumed to be made on time. MoneyHelper warns that a missed payment usually means a late fee and can mean losing a promotional rate.
- New purchases, cash withdrawals and the rates they carry are ignored, and the offer is assumed to start on the day of the transfer; the card's terms set the real dates.
- The card provider decides eligibility, the credit limit and how much can be transferred, so the whole balance may not be accepted.
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