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THE SCENARIO
I recently got a balance transfer credit card offer in the mail, and I was curious so I took a look at the details.
The card has a $7,000 credit limit and 0% interest on balance transfers over the first 21 months after the transfer. The fee to do the transfer is 5% of the transferred amount, which is added to the balance on the new card.
The question: If I were to get this card and transfer a $6,500 balance to it, what would my effective annual interest rate be if I pay it all off at the end of the 21 months? Assume that no payments are due in the meantime*.
* In reality, some payments will be due, but they'll be fairly modest - usually around 1% - 2% of the outstanding balance...
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