by Elizabeth Renter
When you're whittling away at credit card debt, a high interest rate can make it seem like the balance barely budges from month to month. Balance transfer credit cards offer a solution, but not all of these cards are the same. Some come with a transfer fee, and depending on your current balance and interest rate, moving the debt to a new 0% credit card may not be worthwhile.
Determining when a balance transfer fee makes sense involves a little bit of math, but it's nothing you can't handle.
How much does it cost to transfer your balance?
Balance transfer credit cards offer consumers a way to roll their debt onto a card with a lower interest rate than they're currently paying. Generally, these cards offer a 12- to 18-month period during which the debt doesn't accrue interest at all. Smart consumers use this time to pay off a balance and save considerably over what they would have paid on a card with an average interest rate.
Some, but not all, of these balance transfer cards charge a transfer fee. That fee is usually a percentage of the debt you transfer. The average balance transfer fee is 3% to 5%.
So, if you have a nice round credit card balance of $10,000 and you want to move it to a 0% interest balance transfer card with a 3% balance transfer fee, it would cost you $300 to make the switch. While that may seem like a lot of money, it still could be worthwhile.
When to move your debt
All other things being equal, if the interest your debt would accrue on your current card is more than what you'd be charged in a balance transfer fee, it makes sense to open the new account and move your balance over.
For example, if you carry an average daily balance of $10,000 for the entire year, at 15% interest, you'll have accumulated about $1,500 in interest by the end of the year. Because this is significantly more than the $300 balance transfer fee, even if the introductory 0% interest only lasts for 12 months on your new card, transferring the balance would be worthwhile.
Need help calculating the interest earned on your credit card balance? See here.
Getting the most out of a balance transfer
Getting the most out of your new balance transfer card means paying down your debt to make the move worthwhile. This likely means you'll need to allocate more than the minimum payment toward the balance each month, especially if you're dealing with a large debt.
Keep in mind that if you don't fully pay off the transferred amount by the end of the 0% interest period, some issuers retroactively apply the interest you would have accrued to your balance. For these cards, failing to pay it off in time could negate any benefits of moving the balance.
Ideally, you'll pay off the balance by the time your interest-free period expires, saving some money in the long run and potentially boosting your credit score.
Elizabeth Renter is a staff writer at NerdWallet. Email: elizabeth@nerdwallet.com. Twitter: @ElizabethRenter.
This story originally appeared on NerdWallet.