I bought a used car and got 9.24% for 6 years from Chase at the dealership. My payment ended up at $236 per month and I sent them $60 a week ($240 per month). Chase then gave me a BT offer on one of my cards of 3.99% until the balance was paid off. This card had a $20K limit, but it is now $30K.
Since I had about $11.5K left on the car and 2% of that was $230, my payment would essentially stay the same. After much internal debate and online research, I decided that the upside far outweighed the downside:
Upside:
My rate would drop 5.25%!
I'd pay off the loan in about 50 months (assuming steady payments of $240 per month)
I'd hold the title
I could sell the car and keep all the money
I could lower insurance add-ons
Should I default on the payments, my car could not be repossessed
If, after I've been paying for a while and paid down the balance, if I couldn't afford $240 that month, I could pay just the minimum due
Downside:
If I were late on ANY Chase account, my rate could go up to ~30%
My FICO score could drop
Chase COULD change the terms at any time
#1 downside could easily be mitigated by paying all my bills early. I pay them all online and have never been late. I don't plan on ever being late. I can schedule payments weeks in advance.
So about 2 months ago, I went ahead and transferred the $11.5K from the Chase card to a Citibank card with a $0 balance. I requested a credit balance refund from Citibank, deposited the check, and paid off the car loan.
For the last statement, I paid about $40 in finance charges, whereas with the car loan, $20 A WEEK ($80 per month) was going toward interest. I will pay off the car about 13 months early, saving almost $2K in interest.
FICO implications:
When Chase posted the credit card balance increase, I lost 3 points on my Equifax score
When Chase reported the auto loan as closed, paid in full, I gained 3 points on my Equifax score
Net Equifax FICO change: 0
Shortly after doing this BT, I heard of Chase changing terms on some customers' accounts. Specifically, the minimum due would be 5%, and there'd be a $10 monthly charge. Apparently, they CANNOT change the interest rate, as they said it was "for life" but they can change other aspects of the agreement. For a moment, I was terrified, as I would not be able to afford $525 a month, but I was not affected by this change.
Research (here and other boards) showed that people with BT rates "for life" below 7% initiated over 2 years ago were affected. In two years, I will have paid down my balance enough that even if they do "get" me, the 5% minimum due will put me at $300, which (hopefully) won't be very difficult.
The main motivation for me doing this was to save the $1800 I calculated, FICO be damned. However, FICO was apparently a non-issue.
Do what makes sense for you. Make sure you have a high enough CL on the card to keep your util below 50%, and preferrable below 30% (mine is at about 37%). If you have other Chase credit cards accounts, you can transfer part of your credit line from those cards to the card with the balance. The title for my car is now in a file cabinet in my home office, and I'm saving half of the interest I was paying before. And that amount will go up as the balance goes down, as more of the money goes towards principle.
