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Balance Transfer question...

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Anonymous
Not applicable

Balance Transfer question...

Hello everyone,

 

I was recently approved for a Discover it Card that offers 0% APR for the first 14 mos and 19.99% after the 14 mos and states the APR will vary with the market based on the prime rate. First off let me say I wasnt too stoked to receive that 19% APR even though i have a spotless credit file and 720 FICO score ( i know i know, the APR is based on may other factors not just score). So I inquired about possibly lowering the APR and the CSR stated I would have to call back on monday and speak to a different dept in hopes that they can lower it based on my good credit file. Once I do call, how should I approach this in hopes that they can reconsider lowering the APR?

 

Now, on to the main question.... I was considering doing a balance transfer of my 3 CC balances totaling $372 (bal $25/ CL$300, bal $148/ CL$500, bal $200/ CL$1500) to my new Discover card but since I am new to the whole balance transfer thing, wanted to know if its a smart thing to do and or if its even logical. The other 3 cards have APR's of 25.99% and 29.99% (im assuming they are high due to my AAoA which is 1.7 yrs). The main reason I was even considering this Balance transfer was to simplify my monthly payment schedule hence having to only worry about a single date to pay my CC debt on instead of 4 dates.

 

I have the $ to pay off all this debt at once, but have simply decided to make payments on it to perhaps build a steady relationship with the creditors (low balances/perfect payment history). Having said this, what do you experts recommend? Should I go with a balance transfer or simply keep things the way they are and pay each creditor on their respective dates?

 

Thank you in advance for any and all input, you guys here rock!!!

Message 1 of 11
10 REPLIES 10
core
Valued Contributor

Re: Balance Transfer question...

I'm a little bit confused.  You say essentially that you're intentionally carrying these small balances to build payment history with the 3 cards, but yet you want to balance transfer all of them to the Discover and zero them out?  Those are mutually exclusive.

 

What is the balance transfer fee on your Discover offer? You'd have to factor that in.   I honestly can't believe you'd even consider going through the effort of a balance transfer on a $25 balance, and pay the associated fee.  Why not just pay that one off?  It's not even worth the paperwork.

 

In fact, since you said you had the money to pay it all off, and it's only $372 in total, I'd just pay them all off and stop carrying balances just to try to get brownie points with the credit card companies.  Not at 25-29% interest, no way.  

 

Paying interest to credit card companies just to get them to like you is a poor strategy.  You may get an fee waived here and there because of it, but it's not going to help you a whole lot with anything else.  All you were doing is lining their pockets and hurting your credit score by showing balances on 3/3 of your cards.

 

So what I would do in your situation is:  1) Pay everything off today.  2)  Alternate my spending between the Discover and BofA card depending on the category bonuses for where you were going to shop anyway.  3)  Always pay in full, every month.  4)  Every 3-4 months put a small charge on the Old Navy or Walmart card and immediately pay it off.  Just to keep them open.  5) For optimal scoring only allow one card to report a balance each month.

Message 2 of 11
Anonymous
Not applicable

Re: Balance Transfer question...

As far as my initial comment of wanting to transfer all my accounts to to the discover card as a balance transfer was to simplify my calendar, I have already established my good payment history with all my creditors.

 

I was always confused about the "Paying in full at the end of each month" and "maintain a small balance and pay off in small time increments" ideas. I was getting mixed reviews from people and was once told that paying all your balance off at once at the end of each month would not sit good with the creditors since they also want to make interest off of you, so I decided to pay small amounts at a time and allow them to make small interest dividends off me (not much really) in order that I may get what I want at the end. It actually helped because most of the credtiors gave me CLI's and the one account that I payed off every month has yet to give me a CLI.

 

I know it makes no sense to carry a balance over, I was just doing what seemed to be working for my credit to soar. 

 

I appreciate your input and I think I will take your recommendations into consideration, as I am seeing more and more people here paying off their balances in full at the end of each month Smiley Happy 

Message 3 of 11
NRB525
Super Contributor

Re: Balance Transfer question...

Regarding the $25 balance, leave that where it is. You likely have a BT fee to Discover, probably 3% or 4% with a minimum charge of $10 or so. The math don't work Smiley Happy I also think you should be near the point with that card where the minimum payment is going to pay it off for you anyway. Minimum is usually something like $20.

 

The other balances though, go ahead and do the BT. There may be a fee involved, but that is up front, and then you have a year or so of 0% APR. The $300 balance isn't costing you a lot of interest today, so the 0% offer isn't going to save you a whole lot while you milk it, but it's fun and educational to do the BT anyway.

 

Now, the flip side of this is, if you want to maintain that 0% balance and not pay it off right away, it's going to mean you have to either not use the Discover card for new charges, or if you do use it for new charges, pay that amount over the minimum payment. The minimum monthly payment will apply to the lowest APR first, your BT amount, and then amounts over the minimum payment are applied to the higher rate balances: the new charges you might put on the Discover card.

 

For your other cards, let's get some terminology clear. You have the ability to charge each card up to it's credit limit only. If you are charging for daily spend, not for large purchases that you intend to pay off, then your best path is to pay that statement amount in full by the due date on the statement. You can continue to add new charges in the new month, until the payment due date, and as long as you pay that prior statement amount in full, you won't start the interest rate clock on all your new charges.

 

If, however, you let even $1 from that prior statement go unpaid, then the interest starts on all your new charges. At 25% and 29%, that's not wise. With those APR, and with 19%, you should be paying new charges in full each month, full stop. The 0% APR offer from Discover is an opportunity to carry some balances, but only during the 0% term, and as noted above, without polluting it with any new charges that are not part of the 0%. (Point of clarification, is the 0% APR offer only for balance transfers, or does it also apply to new charges during that same time period?)

 

If you do get a large purchase you need to make, and have payments over time, none of these cards are appropriate for that. The APR is just too high. Special financing may be available if you pay the entire balance within some time period, and don't leave even $1 oweing at the end of the time period. Often these financing deals back-charge all the prior interest if you don't pay it all off by the end of the 0% period.

 

You can call Discover tomorrow, and they may lower your APR, but it likely will go from 19.99% to 18.24%, not a noticeable drop. The APR on these cards typically starts out quite high, unless the applicant has a high FICO and long history already.

High Bal Jan 2009 $116k on $146k limits 80% Util.
Oct 2014 $46k on $127k 36% util EQ 722 TU 727 EX 727
April 2018 $18k on $344k 5% util EQ 806 TU 810 EX 812
Jan 2019 $7.6k on $360k EQ 832 TU 839 EX 831
March 2021 $33k on $312k EQ 796 TU 798 EX 801
May 2021 Paid all Installments and Mortgages, one new Mortgage EQ 761 TY 774 EX 777
April 2022 EQ=811 TU=807 EX=805 - TU VS 3.0 765
Message 4 of 11
core
Valued Contributor

Re: Balance Transfer question...


@Anonymous wrote:

I know it makes no sense to carry a balance over, I was just doing what seemed to be working for my credit to soar. 


You've certainly got some very decent scores relative to the cards you've got.  Your FICO score though doesn't know (nor care) about your carrying balances in the past nor how many months you had to actually cut a check to the CC companies.  Past history, as long as it's not negative, doesn't help you.  For a month in the past, whether you had the card sock drawered with $0 balance, or were slowly paying the balance down, it doesn't matter because it's the same good history for those months.  "Pays as agreed".  No difference in scoring whatsoever.

 

Obviously where it does matter is the current snapshot in time.  Having 3/3 balances reporting is not exactly great.  Now that you have 4 cards, having 1/4 reporting a balance will be ideal.  "Reporting" is of course not the same as "carrying" a balance.

 

Sure, credit card companies are in business to make money, and they make that money on interest and fees.  If you pay them neither, then you are costing them money and you are not the "ideal customer".  But don't think $10 a year in interest is going to cause them to give you huge credit limits.  Some here (not many) will claim that it does, but it's all just voodoo and it all depends on the creditor anyway.  I think your money would probably be better spent getting the name of a credit analyst and sending her some doughnuts or roses if it's CLI's you're after.  If it's stellar scores you want, on the other hand, then now all you need is time.  Making payments on a carried balance will not help you in the least.

 

You just have to decide what is your end goal, and why.

 

For what it's worth, I got all the cards in my sig without paying anyone a dime in interest nor fees, EVER.  No, I don't have $20k limits but that's because I request CL decreases when I'm approved for so much.  (As a bonus chaser I can't afford a decline because of "too much available credit").  If I wanted em I could have them tomorrow.  Paying interest is just not the answer to anything except getting your AF or late fee waived once or twice, and that's if you're lucky.

Message 5 of 11
ParadoxD
Valued Member

Re: Balance Transfer question...

Core has it right. Don't waste your time with this as you're only hurting your score by having multiple cards with a balance, and paying balance transfer fees on this amount of money is ludicrous.

You don't have to carry a balance each month to build payment history. Just make sure you use each card every few months for something to keep them open and the rest will build itself.
Message 6 of 11
Anonymous
Not applicable

Re: Balance Transfer question...

great stuff guys!! thanks alot I feel like I see a new light now with all this education on credit....man where was this site 13 years ago lol

Message 7 of 11
core
Valued Contributor

Re: Balance Transfer question...


@Anonymous wrote:

man where was this site 13 years ago lol


Right where it was.  13 years ago.  Like totally wow.

 

Just think:  If you had gone here even 5 years ago, you would have saved all that interest.  It's really kind of sad. 

 

Thank God for Al Gore inventing that internet thing just not too long ago.

Signed,

-1989

 

Message 8 of 11
takeshi74
Senior Contributor

Re: Balance Transfer question...


@Anonymous wrote:

So I inquired about possibly lowering the APR and the CSR stated I would have to call back on monday and speak to a different dept in hopes that they can lower it based on my good credit file. Once I do call, how should I approach this in hopes that they can reconsider lowering the APR?


Doesn't really matter.  Either your credit qualifies for an APR reduction or it does not.  All you can do is politely ask.

 


@Anonymous wrote:

Now, on to the main question.... I was considering doing a balance transfer of my 3 CC balances totaling $372 (bal $25/ CL$300, bal $148/ CL$500, bal $200/ CL$1500) to my new Discover card but since I am new to the whole balance transfer thing, wanted to know if its a smart thing to do and or if its even logical. 


On a total of $372?  Are you unable to pay off that amount?  Have you done the math to compare the interest you acrrue over the time it would take you to pay off that amount to the balance transfer fee?

 


@Anonymous wrote:

I have the $ to pay off all this debt at once


Oops, didn't see that.  It make no sense to me to BT if you can pay it off.

 


@Anonymous wrote:

I was always confused about the "Paying in full at the end of each month" and "maintain a small balance and pay off in small time increments" ideas.


Always pay the statement balance in full by the due date.  You never need to carry a balance for scoring purposes.  The advice you're thiking about is "allow one balance to report at 10% or less".   Reporting and carrying are two entirely different things.  Most cards report on statement date.  If you pay in full after the report date then the balance has already reported.  Paying in full does not affect the balance that has already been reported.

 

If you're trying to reduce a reporting balance then you'd pay before the statement date.  After the statement date you'd pay any remainder on the statement balance.

 


@Anonymous wrote:

I was getting mixed reviews from people and was once told that paying all your balance off at once at the end of each month would not sit good with the creditors since they also want to make interest off of you


While creditors do make money off of interest it is not their only source of revenue.  You do not need to pay interest on credit cards for good credit.

 

Always consider your sources. validate, corroborate, etc.  The internet is full of bad information.  I don't even recommend taking my word on anything by itself.

 


@Anonymous wrote:

It actually helped because most of the credtiors gave me CLI's and the one account that I payed off every month has yet to give me a CLI.


...and always be careful with causality.  Usage may help but it does not make or break CLI's on its own.  Limits, APR's and CLI's are based on your credit.  Creditors can and do have varying criteria for these things.

Message 9 of 11
core
Valued Contributor

Re: Balance Transfer question...


@takeshi74 wrote:

Doesn't really matter.  Either your credit qualifies for an APR reduction or it does not.


Yeah, I picture the phone call going like this:

 

CSR:  Hi, who am I speaking with?

You: This is George.  I'ld like to get my APR reduced please.

CSR: Yes sir, I can look right into that, please hold...

CSR: George, I'd like to take this moment to thank you for being a customer for a whole 262 seconds

You: So ummm do I get my loyal customer discount or not?

CSR: No, you can pretty much go pound sand and whine on myfico.com, sir.

 

And here we are.

 

Message 10 of 11
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