Balance Transfer Calculation

[Anonymous]

You're all wrong.  Sorry.    But kinda right at the same time :-)

APR is "Annual Percentage Rate" not 15 month percentage rate so any calculations using anything other than 365 days or twelve months is wrong.

Also, "nominal APR' does not include the fee, but the effective APR or EAR does include the fee, so it depends what you are calculating.

Either way, if you are paying higher than 3.2% interest on your current balance, you should take the offer.

[Anonymous]

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@Cleanmachine wrote:

Wolf3

Try again.

The offer is for 15 months not 12

I should have indicated the fee would be 4% divided by 15 months equals 00.0266 percent for the 15 months.

marty56, is correct if you pay the balance in equal installments for the 15 months.

Remember, the FEE is not considered in the ARP. It is separate.

Your fee will be deducted from you first payment.

Your monthly statement will reflect a certain percentage of the balance.

Depending on your Credit Card policy your monthly payment would be anywhere from

1% of balance or as high as 5% of balance.

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Clearmachine, before you publicly "correct" someone, it's usually good to have a grasp of basic arithmetic. Type 0.04 (4%) into a calculator/spreadsheet and divide it by 15. The answer is 0.0026 (0.2667%). So you are wrong.

"Remember, the FEE is not considered in the ARP. It is separate." It's pretty clear from what the OP said that he's asking for the effective APR. The whole point of an EAR is that it incorporates fees to allow for an easy comparison of loan terms.

cashnocredit had the best answer in this thread.

[oracles]

Thanks everyone for chiming in, i do appreciate it.

What is EAR?

Also can we roughly say the 4% fee is like paying 3.25% - 3.5% as an APR on the account until the balance transfer offer is over?

[Anonymous]

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@oracles wrote:

Thanks everyone for chiming in, i do appreciate it.

What is EAR?

Also can we roughly say the 4% fee is like paying 3.25% - 3.5% as an APR on the account until the balance transfer offer is over?

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You don't need us... you answered your own question and didn't even know it! :-)

EAR is exactly what you are asking in the second question... Put simply, your APR is 0%, but your EFFECTIVE APR, "EAR" is your up-front fee described in terms of an equivalent APR, plus the APR (in this case +0%).  Your EAR is roughly 3.2%; your APR is 0%.

[Anonymous]

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@oracles wrote:

Thanks everyone for chiming in, i do appreciate it.

What is EAR?

Also can we roughly say the 4% fee is like paying 3.25% - 3.5% as an APR on the account until the balance transfer offer is over?

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EAR = Effective APR. It's a little complicated, but here's a good primer: http://en.wikipedia.org/wiki/Annual_percentage_rate

From the information you've shared, the EAR should be around 3.2%, which will be lower than any standard credit card APR I know of. You can complicate things further if you start to account for inflation and the time value of money since (I'm assuming) you have to pay that 4% right away instead of amortizing it over the 15 months. That being said, it's highly likely that doing the balance transfer (assuming you plan to continue holding the debt instead of paying it off soon) is in your best interest.

[oracles]

You guys are awesome, thanks so much