Is this balance transfer strategy effective?

Anonymous · ‎06-28-2016

Hi,

I have a capital one platinum card and a discover it card. It's been a year since opening both cards. Both have an APR of 23.4% with a $1,300 balance on capone with a limit of $2,500 and a $550 balance on the discover card with a limit of $1,900. My FICO score at the moment is 664. The $550 is actually a balance transfer that I did 3 months ago from capone for $650. It has a 0% APR for 12 months and then it is 23.4% after that. Discover is offering another balance transfer offer again at 0% APR for 12 months. I'm thinking of transfering $1,300 from capone into discover. This way, I can pay off both transfers without paying any interest. I am not going to use the discover card for any purchases, nor will I use capone card for any purchases unless it is absolutely necessary. Discover says that if I have 2 balance transfers, all payments made will go towards the first transfer balance until it is paid off and then subsequent monthly payments will go towards the second transfer balance. Is this a good strategy? How would this affect my credit score? My short term goal is to reach a score of 700 soon.

Thanks.

Anonymous · ‎06-28-2016

While the dollars and cents check out, you will still be essentially maxing out your Discover which will probably ding your score. If you think you can make quick progress on the payments, you'll be able to recover scorewise as utilization affecting score bounces right back after paying down. Are you apping for something big soon that requires the 700 score?

Anonymous · ‎06-28-2016

I do plan on paying off both transfer balances quickly within in the 12 month period. I am not planning on applying for anything that requires at least a 700 score, but I just want to achieve that goal in case I have a life changing event that may require lots of credit use such as getting married etc.

takeshi74 · ‎06-28-2016

@Anonymous wrote:
How would this affect my credit score?

It's difficult to answer such questions as it's not just a matter of the BT. The BT won't change your overall Revolving Utilization but it will impact individual Revolving Utilization. You can do the math to see for yourself. Currently you're at:

CO $1,300 / $2,500 = 52%

Disc $550 / $1,900 = 29%

Keep in mind that 30% is a generally suggested max.

You're proposing this:

CO $0 / $2,500 = 0%

Disc $1,850 / $1,900 = 97%

Anything over 90% is maxed. How quickly can you pay that down? It's not just scoring that matters but risk assessment. Keeping a card maxed or at high revolving utilization for a long period of time can lead to adverse action.

You really just need to pay these down versus relying on shuffling if you want to see improvement. You're already starting with one well above 30% and the other apporaching 30%.

@Anonymous wrote:
My FICO score at the moment is 664.

You don't have just one FICO score. There isn't just one FICO scoring model. On top of that, for most models you have a score with each of the 3 major CRA's. Make sure you're staying on top of your reports with all 3 of the major CRA's.

Any time you're referring to a score you need to be aware of both the specific model and the CRA for the score as well as the relevance of the model/CRA combo to creditors/products. Creditors and products do not all use the same scoring model.

Anonymous · ‎06-28-2016

@takeshi74 wrote:
@Anonymous wrote:
How would this affect my credit score?
It's difficult to answer such questions as it's not just a matter of the BT. The BT won't change your overall Revolving Utilization but it will impact individual Revolving Utilization. You can do the math to see for yourself. Currently you're at:
CO $1,300 / $2,500 = 52%
Disc $550 / $1,900 = 29%

Keep in mind that 30% is a generally suggested max.

You're proposing this:
CO $0 / $2,500 = 0%
Disc $1,850 / $1,900 = 97%

Anything over 90% is maxed. How quickly can you pay that down? It's not just scoring that matters but risk assessment. Keeping a card maxed or at high revolving utilization for a long period of time can lead to adverse action.

You really just need to pay these down versus relying on shuffling if you want to see improvement. You're already starting with one well above 30% and the other apporaching 30%.

@Anonymous wrote:
My FICO score at the moment is 664.
You don't have just one FICO score. There isn't just one FICO scoring model. On top of that, for most models you have a score with each of the 3 major CRA's. Make sure you're staying on top of your reports with all 3 of the major CRA's.

Any time you're referring to a score you need to be aware of both the specific model and the CRA for the score as well as the relevance of the model/CRA combo to creditors/products. Creditors and products do not all use the same scoring model.

What if I do this. I won't do the transfer but will continue to pay towards capone and discover above the minimum due of course and then transfer the balance from capone to discover when the resulting balance with discover would translate to a credit utilization of about 30%. So the CU with capone would be 0% and for discover would be 30%. This way, I can minimize the interest I pay to capone and avoid maxing out discover at the same time. How about that approach? By the way, I plan on paying off everything within about 6 months or so.

Anonymous · ‎06-28-2016

Utilization is temporary. It has no memory. So I'm in the camp that would do the BT as originally posted to save yourself the interest.

BUT first, go to the Cap1 website and click the Balance Transfer link. See if there are any BT offers on your account. Cap1 isn't as sensitive to maxed out cards or BT's. You rarely see posts on them taking AA.

When I did a BT to cap1, my scores took a hit but I didn't care because I'm not paying interest for 18 months. I'll pay it down before the promo expires. My scores inch up each month I make a payment. I'm not in the market for a house or car and its temporary.

Second, call or chat with Cap1 and ask to get rewards added to that platinum card. No need to miss out on those, it's a simple thing to get.

Anonymous · ‎06-28-2016

You're losing a lot of money in interest every month. You'll pay these balances down faster if you do the balance transfer and stop wasting money on interest.

ETA: I wish there was a way to convince people that getting married is not an event that should require using a lot of credit. I know from experience that's a bad way to start out. I also know from experience how difficult it is to listen to reason during that time. My opinion as someone who made a lot of mistakes at that age is to do the balance transfer, pay it all as quickly as possible for the better long-term credit situation, and have a wedding you can afford, so you can buy a house together someday.

Anonymous · ‎06-28-2016

Ok. Thanks for the advice everyone. I'll go ahead and transfer the balance from capone to discover and pay it off quickly within the 12 months no interest period. And I agree with the comment about marriage and credit use. Thanks.