What a balance transfer costs

A balance transfer pays one creditor with a new line, usually a credit card offering a promotional APR for a stated number of months. The promotion is a contract term with a start, an end, and a fee. The fee is often a percentage of the amount transferred, charged immediately, so the new balance is larger than the balance you moved. A 3 percent fee on $4,000 is $120 of principal that was not owed yesterday.

The promotional rate applies only to the transferred balance, until the date in the agreement. Purchases may accrue at a different APR immediately. Excess payments above the minimum generally go to the highest APR balance under Regulation Z, which can leave the transferred balance sitting at the promotional rate.

When the promotion ends, the remaining transferred balance reprices at the go-to APR disclosed in the offer. Deferred-interest promotions are harsher than an ordinary low rate: if any of the transferred amount is unpaid at the end, some agreements charge interest back to the transfer date. Those are different products. Read which one the Schumer box is describing.

A transfer can be cheaper than leaving a balance at a high APR, and it can be more expensive once the fee and the step-up are included. Compare the total you pay if the balance is gone before the promotion ends with the total if it is not.