Does this balance transfer make sense?

[Anonymous]

Hey folks - question for you about balance transfer. I just paid for a trip with my Southwest card and I will need to carry the $1400 balance for about 4-5 months. As most of you know, this card has a 15.9% interest rate. However I just saw that i have an offer from Discover for 12months and 0% interest for balance transfer with 3% fee. However my Discover credit limit is only $2200 while the SWA limit is $3000. So my question is does it make since in your opinions to do this BT or will having this high utilization on the Discover hurt my score? I know folks say that utl doesn't matter because FICO doesn't have memory but I just don't want to be stuck in a rut of going up and down 10-20 points until its paid. Trying to climb into the 700s by this time next year so I can apply for a mortgage. I have about 60 points to go before I get there though.

[ILBrian]

Anything more than 3 months it makes definitely sense from an interest perspective...  how old is the discover? transferring the balance might help in favor of a CLI

[DaveInAZ]

This spring I did a 15 mo 0% BT on a new Barclays NFL card to pay off a 11% Prosper loan. The BT put my utilization around 60%, it only dinged my Fico score a few points but dinged my CreditKarma Fako scores around 18 pts. While yeah, I don't like seeing that it really doesn't matter as I don't plan on app'ing for anything until at least the end of the year, and I'm saving around 40 bucks a month on interest. So I'd say yeah, you'll save a bunch of money on that 0% BT over paying almost 16% on the Soutwest card, and your score will likely be better than before by the time you pay it off and go mortgage shopping. The one downside is that you'll miss out on all those 5% cashback deals with Discover - you might consider applying for the NFL card, it has a 15 month 0% BT offer w/3% BT fee, but it also has a spend bonus of $100 cashback for charging $500 within 3 months which will more than offset that BT fee, and with your other cards you should be easily approved..

[Anonymous]

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@DaveInAZ wrote:

This spring I did a 15 mo 0% BT on a new Barclays NFL card to pay off a 11% Prosper loan. The BT put my utilization around 60%, it only dinged my Fico score a few points but dinged my CreditKarma Fako scores around 18 pts. While yeah, I don't like seeing that it really doesn't matter as I don't plan on app'ing for anything until at least the end of the year, and I'm saving around 40 bucks a month on interest. So I'd say yeah, you'll save a bunch of money on that 0% BT over paying almost 16% on the Soutwest card, and your score will likely be better than before by the time you pay it off and go mortgage shopping. The one downside is that you'll miss out on all those 5% cashback deals with Discover - you might consider applying for the NFL card, it has a 15 month 0% BT offer w/3% BT fee, but it also has a spend bonus of $100 cashback for charging $500 within 3 months which will more than offset that BT fee, and with your other cards you should be easily approved..

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Thanks so much for your thoughtful reply. It is much appreciated. I like your suggestion of the NFL card but I hear that Barclay doesn't like to see other new accounts. Is that your experience as well? My Chase cards were all obtained this year.

[NRB525]

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@Anonymous wrote:

Hey folks - question for you about balance transfer. I just paid for a trip with my Southwest card and I will need to carry the $1400 balance for about 4-5 months. As most of you know, this card has a 15.9% interest rate. However I just saw that i have an offer from Discover for 12months and 0% interest for balance transfer with 3% fee. However my Discover credit limit is only $2200 while the SWA limit is $3000. So my question is does it make since in your opinions to do this BT or will having this high utilization on the Discover hurt my score? I know folks say that utl doesn't matter because FICO doesn't have memory but I just don't want to be stuck in a rut of going up and down 10-20 points until its paid. Trying to climb into the 700s by this time next year so I can apply for a mortgage. I have about 60 points to go before I get there though.

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Your SW APR is just over 1% per month. If you leave the amount on that SW card, and pay it in 4 months, that will be declining interest expense, of just over 1% per month, on the rapidly declining balance.

If you BT to the Discover card, you have a fixed, certain, full 3% fee that is your interest cost, on the entire amount.

The difference in interest cost between the two options is nil. Only if you are letting the BT run for the full term of the BT offer, then it makes a difference in the interest costs.

I would leave it on the SW card, and use that 15.9 as an impetus to keep paying it fast.

Sometimes Discover sends out a paired BT offer. One is 0% APR but a 3% immediate BT fee. The other can be a No BT Fee, and with a 3.99% or 4.99% APR.

Capital One is also good about no BT fee, so for short term periods putting a balance on a no BT Fee card with a reasonable interest rate makes sense.

Regarding the FICO impact, you should wait for the SW to report, and then see whether there is any significant change in score. Report back, it would be an interesting data point.

Good luck!

[FinStar]

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@Anonymous wrote:

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@DaveInAZ wrote:

This spring I did a 15 mo 0% BT on a new Barclays NFL card to pay off a 11% Prosper loan. The BT put my utilization around 60%, it only dinged my Fico score a few points but dinged my CreditKarma Fako scores around 18 pts. While yeah, I don't like seeing that it really doesn't matter as I don't plan on app'ing for anything until at least the end of the year, and I'm saving around 40 bucks a month on interest. So I'd say yeah, you'll save a bunch of money on that 0% BT over paying almost 16% on the Soutwest card, and your score will likely be better than before by the time you pay it off and go mortgage shopping. The one downside is that you'll miss out on all those 5% cashback deals with Discover - you might consider applying for the NFL card, it has a 15 month 0% BT offer w/3% BT fee, but it also has a spend bonus of $100 cashback for charging $500 within 3 months which will more than offset that BT fee, and with your other cards you should be easily approved..

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Thanks so much for your thoughtful reply. It is much appreciated. I like your suggestion of the NFL card but I hear that Barclay doesn't like to see other new accounts. Is that your experience as well? My Chase cards were all obtained this year.

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OP - you're going to get dinged no matter which option you decide to choose.  If you go with the above suggestion, you'll have the HP and the AAoA impact if you add a new account to your CRs (provided you're approved and Barclays tends to report pretty fast).  The other "unknown" would be the SL if you get approved.  If it's around the same as Discover or SW, then it's going to be a moot point.

If you elect to BT to Discover, you'll be around 65% utilization (including the BT fee).  If you park/leave on SW, you'll be around 47% utilization.  The impact on your CRs and FICO will vary depending on your profile and how it absorbs the impact.  Of course, the dings will be temporary once you have the balance normalized below 30% and provide you don't add any other balances to the mix.

Chose wisely!

[FinStar]

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@NRB525 wrote:

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@Anonymous wrote:

Hey folks - question for you about balance transfer. I just paid for a trip with my Southwest card and I will need to carry the $1400 balance for about 4-5 months. As most of you know, this card has a 15.9% interest rate. However I just saw that i have an offer from Discover for 12months and 0% interest for balance transfer with 3% fee. However my Discover credit limit is only $2200 while the SWA limit is $3000. So my question is does it make since in your opinions to do this BT or will having this high utilization on the Discover hurt my score? I know folks say that utl doesn't matter because FICO doesn't have memory but I just don't want to be stuck in a rut of going up and down 10-20 points until its paid. Trying to climb into the 700s by this time next year so I can apply for a mortgage. I have about 60 points to go before I get there though.

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Your SW APR is just over 1% per month. If you leave the amount on that SW card, and pay it in 4 months, that will be declining interest expense, of just over 1% per month, on the rapidly declining balance.

If you BT to the Discover card, you have a fixed, certain, full 3% fee that is your interest cost, on the entire amount.

The difference in interest cost between the two options is nil. Only if you are letting the BT run for the full term of the BT offer, then it makes a difference in the interest costs.

I would leave it on the SW card, and use that 15.9 as an impetus to keep paying it fast.

Sometimes Discover sends out a paired BT offer. One is 0% APR but a 3% immediate BT fee. The other can be a No BT Fee, and with a 3.99% or 4.99% APR.

Capital One is also good about no BT fee, so for short term periods putting a balance on a no BT Fee card with a reasonable interest rate makes sense.

Regarding the FICO impact, you should wait for the SW to report, and then see whether there is any significant change in score. Report back, it would be an interesting data point.

Good luck!

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Another good perspective OP.

[Anonymous]

Thank you all once again for your perspectives. The Discover transfer offer does have two options, either the 0%- 12 months and 3% fee or 7.99% with no BT fee. Perhaps the second option might work. I'm still mulling it all over. I've had Discover for almost 15 years and they've never seemed to care how high my balance is (except for only giving me 2 CLI during that time LOL) however since my credit relationship is still new with Chase, and after reading more about them on the forums, I'm leery about carrying any balances with them until we get to know each other better. So that is factoring into my looking into the BT with Discover as well.