Because the fee is paid upfront, and this is assuming you make equal payments each month for 12 or 18 months. Compared with a loan that charged normal interest

Because the fee is paid upfront, and this is assuming you make equal payments each month for 12 or 18 months. Compared with a loan that charged normal interest it would only accrue on the current balance, and the interest you pay each month goes down as the principal goes down. If you had a 12 month balance transfer and made only minimum payments, then paid off the lump sum at the end it would be lower APR.