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Ever Encountered this with Any of Your Cards with a Balance Transfer?

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Jahmakan
Valued Member

Ever Encountered this with Any of Your Cards with a Balance Transfer?

A friend of mine did a balance transfer to her Discover Card back in August.  She made a purchase in the amount of $30 in September and claims she paid the full $30 plus her minimum as per the transfer agreement.  Since then, every month she has been charged a monthly $2 "minimum interest fee".  Is this normal? Any experiences with this? Is this a Discover only thing?

Message 1 of 7
6 REPLIES 6
DeeBee78
Valued Contributor

Re: Ever Encountered this with Any of Your Cards with a Balance Transfer?


@Jahmakan wrote:

A friend of mine did a balance transfer to her Discover Card back in August.  She made a purchase in the amount of $30 in September and claims she paid the full $30 plus her minimum as per the transfer agreement.  Since then, every month she has been charged a monthly $2 "minimum interest fee".  Is this normal? Any experiences with this? Is this a Discover only thing?


Yes, she needs to read the terms and conditions for her card. It's recommended you don't add charges to cards you have active balance transfers on because the payment is usually applied to the lowest interest balance first, aka the BT. 

 

If you don't have the luxury of choosing how your payments are applied, you'll end up paying interest on all new charges until the BT is paid off. This is why she was hit with an interest charge. 

Message 2 of 7
Kevin86475391
Frequent Contributor

Re: Ever Encountered this with Any of Your Cards with a Balance Transfer?

This is exactly what I expect to happen on cards carrying a balance transfer; although, anecdotally some lenders don't do this. There are different ways lenders may approach this type of situation and from what I understand a lot of lenders nowadays do take the "pay all new charges in full PLUS your minimum and you're good" approach, but as I understand it the way Discover is doing it with your friend used to be standard, so it certainly doesn't seem even the least bit unusual or dodgy to me.

 

As DeeBee says, it simply comes down to which balances the lender applies the payments to.

 

My rule of thumb would be if I use a card for a balance transfer to make sure not to use it again under any circumstances until the balance transfer is 100% paid off. I'd also personally only do a balance transfer onto a card with a $0 balance, because I'd expect any pre-existing balance to be difficult to pay off once the BT hits - and it would thus accrue interest every month.

 

My advice would be to have your friend call Discover and ask them what, if anything (short of paying off the full BT) she can do to get the $30 charge paid off and prevent anymore interest.

Message 3 of 7
Chris679
Established Contributor

Re: Ever Encountered this with Any of Your Cards with a Balance Transfer?


@Jahmakan wrote:

A friend of mine did a balance transfer to her Discover Card back in August.  She made a purchase in the amount of $30 in September and claims she paid the full $30 plus her minimum as per the transfer agreement.  Since then, every month she has been charged a monthly $2 "minimum interest fee".  Is this normal? Any experiences with this? Is this a Discover only thing?


These companies have all kinds of sneaky tricks to get your money.  They will offer 0% balance transfers but charge a fee.  Then on top of that they can take away your grace period on new purchases.  I'm not sure if they can apply the payment to the 0% balance transfer before the purchases at a higher apr though.  I thought that was a no no after the card act.  I suspect the loss of grace period is the cause of the interest. 

Message 4 of 7
Kevin86475391
Frequent Contributor

Re: Ever Encountered this with Any of Your Cards with a Balance Transfer?


@Chris679 wrote:

@Jahmakan wrote:

A friend of mine did a balance transfer to her Discover Card back in August.  She made a purchase in the amount of $30 in September and claims she paid the full $30 plus her minimum as per the transfer agreement.  Since then, every month she has been charged a monthly $2 "minimum interest fee".  Is this normal? Any experiences with this? Is this a Discover only thing?


These companies have all kinds of sneaky tricks to get your money.  They will offer 0% balance transfers but charge a fee.  Then on top of that they can take away your grace period on new purchases.  I'm not sure if they can apply the payment to the 0% balance transfer before the purchases at a higher apr though.  I thought that was a no no after the card act.  I suspect the loss of grace period is the cause of the interest. 


I agree. After I made my original post above I remembered the CARD act and started thinking part of it might cover something like that too. I think perhaps nowadays payments above the minimum are legally required to go to higher interest debt first. Perhaps it is just a matter of the grace period not having been in tact.

Message 5 of 7
Jahmakan
Valued Member

Re: Ever Encountered this with Any of Your Cards with a Balance Transfer?

Wow... did not know it worked like that.  Thank you for all the replies.

Message 6 of 7
UncleB
Credit Mentor

Re: Ever Encountered this with Any of Your Cards with a Balance Transfer?

Capital One has an option where you can pay the new purchase total in addition to the minimum payment on a BT and avoid interest, but with Discover that's not an option.

 


 

 

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Message 7 of 7
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