02 Jan Should I transfer my credit card balance?

Q. I have a $5,500 balance on my one credit card, and I’ve charged another $1,000 for the holidays. I can transfer the balance to a new card for a 2.5 percent fee. Is it worth it?
— Big spender

A. We hope you enjoyed the holidays because you’re sure not going to enjoy that new credit card debt.

Balance transfers can be very helpful, especially if the card you already have has a high interest rate.

If the second card is offering a zero percent interest rate promotion, and if you believe you will pay off the balance in the time that promotion is available — usually 12 or 15 months, but it can be as long as 24 months — the transfer is probably a good idea, said Alison Williams, a certified financial planner with Stonegate Wealth Management in Oakland.

You didn’t tell us the interest rates of both cards, and that’s important for the math, Williams said.

She offered two examples. For the sake of round numbers, we’re assuming you’ll pay a transfer fee of about $150.

If your existing credit card has a 29.99 percent APR and a $6,500 balance, you’ll pay $1,949.35 in interest over one year. In this case, Williams said, it would definitely be worth it. You’ll pay $150 for the transfer and if you pay off the card in one year, you save nearly $1,800 in interest payments.

If your existing credit card has a 12.99 percent APR with your $6,500 balance, the interest cost over one year is $844.35. Again, it could be worth it as you’ll save nearly $700 in interest payments.

You should take a look at your current card and calculate how much interest you will be charged over the time it will take to pay off the card, Williams said. That’s the only way to see if the 2.5 percent transfer is worth it.

But a transfer comes with some warnings.

“Be sure to take note of the interest rate on the card you’re transferring to after the promo period is over,” Williams said. “It could be very high.”

You don’t want to get socked with a nasty surprise if you don’t pay the balance in time and the transfer card’s interest rate kicks in.

Also make sure you don’t start adding to your balances.

Williams warns that you should also watch for language implying that interest is owed from the time the promo period was active. Unfortunately, this differs from card to card and even from offer to offer, she said.

Just read all the fine print and know what you’re getting into before you act.

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This post was first published in January 2017.