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Greetings, Igulak, here is how to figure it out:

First of all, what is the balance transfer fee? Is there one? If so, is it capped (i.e. a max of $50 or $75 no matter the size of the balance you are transferring)? Let's assume it is $75. The numbers would only look better if it is smaller - or ideally zero.

Then you must be certain that the card on which you have such an offer has cycled with a zero balance. If ever you had used it in a prior month, be sure that it is fully paid off and that no further residual interest is going to be charged against it. Would this be a NEW card? Even better. Then you can be sure it was not used. You also must be sure that if it is not a new card that you have NO recurring charges automatically placed on the card - your mission is to use this card STRICTLY for the balance transfer and to pay it down. No new charges! They typically carry a higher interest rate and "sink to the bottom" awaiting repayment while cheaper dollars are paid off first. If the card you speak of has any sort of balance on it already, think twice for this is probably NOT an advantage to you to have nearly $9000 at 2.99% and some other balance at a likely higher interest rate that won't get paid down till the $9000 is paid off in full.

Next, you need to be sure you have the cash flow to service two balances from which were formerly one. Will your lender agree to recalculate the minimum due per month on your student loans should you transfer this balance? If so, you probably won't be out of pocket month by month any more than you are now, but you MUST understand the expected minimum payment on your credit card AND on your student loans - can you afford both?

Finally, here is how to get a rough estimate of what a year's worth of interest is on your transferred balance at 2.99% vs 4.25%: assume you will transfer no more than $8900 (leaving space for balance transfer fees as well as accrued interest - you sure don't want to run the risk of an overlimit fee!).

$8900 at 2.99% = $8900 x .0299 = $266.11 it will cost you to carry $8900 for a year. The actual finance charge will be lower because you will be paying down against this starting balance of $8900 with every monthly payment, but it will serve for now as how to compare costs. To this $266.11 must be added any balance transfer fee - say it is $75. Thus, your annual cost on $8900 at this rate would be $341.11.

If you were NOT to take out the transfer, the proposed $8900 would still be at 4.25%. Over a year (and again, ignoring paydown) this would cost you $8900 x .0425 = $378.25.

So what's the difference you would SAVE? $378.25 vs $266.11 (if no balance transfer fee) = $112.14. If there were a $75 transfer fee, the advantage is all but wiped out: $378.25 vs $341.11 = $37.14 saved in year one.

Next wrinkle: the interest on student loans is deductible up to a maximum outlay of $2500 and if you fall within certain income guidelines. If this is true, you are not required to itemize to realize tax savings. If you are in the 15% bracket, you would realize a 15% savings on your accrued student loan interest. If in the 28% bracket, you realize a 28% savings. So on the $8900, if you left it alone and did not transfer it, your actual annual interest on it is not $378.25 but, say $378.25 x .85 = $321.51 if you are in the 15% tax bracket and even less, $378.25 x .72 = $272.34 if you are in the 28% tax bracket (and are eligible by income to take the full deduction permitted you). So suddenly the advantage of transferring is thrown into doubt if there is any kind of transfer fee!

This is just a scratchpad way of running the numbers. You must run your own for you know your own circumstances about the deductibility of your student loan interest and whether the offer to transfer has a fee or not, or would be onto an empty card or not. It is still a good illustration of all the factors that have to come into play to make the economic analysis but just from the little I have done here, it looks dubious as to whether this balance transfer would really be to your advantage given that the savings is small at best and would COST YOU MORE at worst.

xraymd
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