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Schoolbuskid
Posts: 1,926
Registered: ‎10-23-2007
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Can someone explain...balance transfers?

Ive read alot where people talk about balance transfers and that helped them to get a CLI...exactly how do balance transfers work? Is it something we should have?
 
 
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haulingthescoreup
Posts: 28,115
Registered: ‎04-01-2007
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Re: Can someone explain...balance transfers?

*rolling up sleeves* What exactly do you want to know? :smileyvery-happy:

OK, that was silly of me. One of the tactics that credit card companies use to get you to open a new CC is to offer a 0% or low APR balance transfer. The deal is that when you open the card, you will move over a balance from a CC from a different company, or from a loan, or other type of debt. Almost always, they charge a fee to do this (they have to make money), and if you don't pay it off before the term is up, you have to pay at a higher rate. Some will even charge you interest on the amount that you've already paid off, so read, read, read.

They can potentially help you get a higher CL, if you can persuade them that you'd like to BT over a certain amount of money, but at the CL they have offered you, it will make your util too high, or make you nervous, or whatever.

Many banks cap the balance transfer fee at $75 or $99, but others, especially Bank of America, do not. So BofA's 3% BT fee is competitive with others with $99 caps until you transfer around $3500 or more, and then BofA becomes more expensive.

Lots of landmines to watch out for:

  • see what will happen if you don't pay off when the initial rate expires. Will you have to pay interest on the entire amount that you transfered, or only on what is left?
  • having that balance will increase your util, unless you moved it from another CC.
  • do not even remotely think of using the BT account for any purchase whatsoever until the BT is paid off! Any payments are generally applied to the lower-rate BT, and your purchase just sits there, month after month, racking up interest. And they will send you lots of enticing ads to go buy something, hoping that you'll forget this. My BT card is buried deep, deep in the back of the sock drawer.
  • you won't get rewards (points, cash back, etc) on the amount that you BT, unlike what you might earn on purchases.

    With all this said, if you're smart and you play it right, a BT can get you in with a good CC company and a nice CL. And when you have paid it off before the low rate ends (and you WILL, won't you?), you'll have an unencumbered card.
  • * Credit is a wonderful servant, but a terrible master. * Who's the boss --you or your credit?
    FICO's: EQ 781 - TU 793 - EX 779 (from PSECU) - Done credit hunting; having fun with credit gardening. - EQ 590 on 5/14/2007
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    KLaSha
    Posts: 48
    Registered: ‎07-18-2007
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    Re: Can someone explain...balance transfers?

    @Hauling,
     
    If I do a BT on from a "secured" cc and then the card all together. Hence, getting my back my deposit to pay off the unsecured cc. Would that make sense? The secured card is less than one year, I'm not ready to close and BT it right now. I'm just curious.
     
    Thanks,
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    firstinlastout
    Posts: 339
    Registered: ‎12-12-2007
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    Re: Can someone explain...balance transfers?

    yeah...the 2nd poster hit the nail on the head. I did a BT with BOA and they do charge 3%.I transferred over 6k dollars so I had to pay a transaction fee of around 180 dollars. But it is worth it though since they BT APR is 2.9%
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    Schoolbuskid
    Posts: 1,926
    Registered: ‎10-23-2007
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    Re: Can someone explain...balance transfers?

    So the idea is to transfer a balance from whatever it may be so that it will reflect a 0 balance on that account?
     
    I think i need to read like you suggested Hauling, so that i can fully understand the concept of BT.
     
     
    Thanks for your input!
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    haulingthescoreup
    Posts: 28,115
    Registered: ‎04-01-2007
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    Re: Can someone explain...balance transfers?



    Schoolbuskid wrote:
    So the idea is to transfer a balance from whatever it may be so that it will reflect a 0 balance on that account?
    I think i need to read like you suggested Hauling, so that i can fully understand the concept of BT.
    Thanks for your input!



    So that it will be $0, or lower than what it is now.

    The one thing to watch out for is to make sure that you're not just endlessly opening up more credit, but never really paying down your debts. :smileywink:
    * Credit is a wonderful servant, but a terrible master. * Who's the boss --you or your credit?
    FICO's: EQ 781 - TU 793 - EX 779 (from PSECU) - Done credit hunting; having fun with credit gardening. - EQ 590 on 5/14/2007
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    haulingthescoreup
    Posts: 28,115
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    Re: Can someone explain...balance transfers?



    KLaSha wrote:
    @Hauling,
    If I do a BT on from a "secured" cc and then the card all together. Hence, getting my back my deposit to pay off the unsecured cc. Would that make sense? The secured card is less than one year, I'm not ready to close and BT it right now. I'm just curious.
    Thanks,



    I'm not really sure what you're asking. I get the part about BT'ing off the balance from a secured card, but I got lost after that.

    Maybe you're asking about BT'ing off the balance from your secured card to a different card, and then closing the secured card and getting your deposit back, and then pay off the new card? If that's what you were asking, then I guess you could, but it would cost you money in the long run via the balance transfer fees.

    Also, what I said in my reply to Schoolbuskid, eventually you have to pay off the debt, and not just move it around. CC companies figure out what you're doing pretty quickly on that!
    * Credit is a wonderful servant, but a terrible master. * Who's the boss --you or your credit?
    FICO's: EQ 781 - TU 793 - EX 779 (from PSECU) - Done credit hunting; having fun with credit gardening. - EQ 590 on 5/14/2007
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    Schoolbuskid
    Posts: 1,926
    Registered: ‎10-23-2007
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    Re: Can someone explain...balance transfers?

    Thanks again Hauling!

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