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Senior Contributor
youngandcreditwrthy
Posts: 6,242
Registered: ‎08-16-2012
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The Balance Transfer habit

So I've read various things online about banks dubbing certain customers as "rate surfers" and cutting their 0% offers off from said customer.

Does this really happen? And is it really bad that I continuously refi my cc debt when a good offer comes a long?

Personally, I have enough cash/liquidity to solve this problem if it were to ever occur. I'm just curious to know if I am being watched with reference to my cheap credit habit. I know I have to pay; I always do. At what point though, do I just pay it off in full and not rack it back up with a 0% offer?

Keep in mind, I strive to maintain my credit, and ceterus parabis(all things equal), keep my util low, limit inqs and new accounts.

I have $10k+ in cc debt, but the weighted avg rate is literally like 1.25% lmao.

Obviously, debt mgmt is important.
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Established Member
BornSupercharged
Posts: 85
Registered: ‎02-08-2013
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Re: The Balance Transfer habit

[ Edited ]

The APR is not posted in your credit report so there's no way for them to know you're a 0% "rate surfer". In fact, your credit report and score are snapshots taken at a point in time - like if you apply for a new card right now they request your report  &score right now. So they see you as you stand right now, they dont see every report for every day of the last 10 years. So there's no way for them to say, a year ago today your AMEX balance went from 10k to 0k, and you opened a new Chase card which appeared with a 10k balance. ETC. 

 

So no I don't believe it for a second because it's not possible.

 

Edit: To clarify, in 1998 First USA (now Chase) started charging a balance transfer fee to discourage rate surfing. It caught on with almost all companies, so you're already likely to be paying to do the transfer anyway. So 1) I don't believe they can stop you from taking advantage of an offer they are making publicly available because there's no way to know you rate surf. And 2) They're making money when you transfer the balance over anyway so if you move it away after the 12mo are up, it doesn't matter they already made their 3-5% off you up front AND got some minimum payments from you along the way so they didn't lose out at all. 


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Valued Contributor
navigatethis12
Posts: 1,943
Registered: ‎01-24-2012
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Re: The Balance Transfer habit

Unless the balance transfers have no fee, they really are not 0%. If the fee is 4% then the rate is really 4%, since you have already paid that much. I don't believe a lender can change the rate of a balance already on the account with the new laws, so you don't have to worry about that. I don't think lenders care if you do balance transfers with them since you pay a fee to them. If you are one of the people that gets approved for five 25000 limit cars and "balance transfer" them into  a chequing account, they may get upset.

 

Anyway, since you have the money to pay off the balances in full, why do the balance transfer? As I stated earlier, the rate is not really zero unless there is no fee.

Valued Contributor
FinStar
Posts: 6,108
Registered: ‎10-21-2012
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Re: The Balance Transfer habit


youngandcreditwrthy wrote:
So I've read various things online about banks dubbing certain customers as "rate surfers" and cutting their 0% offers off from said customer.

Does this really happen? Yes, mostly with some conservative lenders.  And is it really bad that I continuously refi my cc debt when a good offer comes a long? Yes.  You are simply debt-pyramiding.  Not a sound financial solution for managing credit in the long term.  If you claim to have the substantial income to pay it off, then pay it off.  Unless your return on any alleged "investments" is substantial to offset your current habit then paying any balance transfer fee(s) for any long term balance "rollovers" really translates into a loss, not a positive investment gain. 

Personally, I have enough cash/liquidity to solve this problem if it were to ever occur.   You have made such assertions in previous posts.  Simply "bouncing" your debt from one lender to another is not good a credit management habit in the long term.  I'm just curious to know if I am being watched with reference to my cheap credit habit. I know I have to pay; I always do. At what point though, do I just pay it off in full and not rack it back up with a 0% offer?  Some lenders maintain a RAP (risk assessment profile) based on the historical nature of your revolving debt (if subject to any monthly or quarterly credit review).  If the economy were to tank (say for instance during 2008) then most, if not all, lenders will tighten their "lending" reins and closely monitor their portfolios for high risk "rate surfers" which can translate to potential losses and you can kiss that low APR goodbye.

Keep in mind, I strive to maintain my credit, and ceterus parabis(all things equal), keep my util low, limit inqs and new accounts.  Your utilization appears low on the surface since you have artificially inflated your revolving lines of credit to maintain such low utilization ratios to support the balance transfer "habit".  While commendable that most creditors have granted your self-initiated credit line increases, and unless the latter supports your current monthly spending habits commensurate with your income, I doubt there is much supporting evidence that justifies spending $10K-$14K on a BR Visa Card (given its high APR) or any other revolving lines that you may currently have with high APRs - unless paid off monthly (or once the low intro APR term offer has ended).

I have $10k+ in cc debt, but the weighted avg rate is literally like 1.25% lmao.  Weighted average rate is null if you carry long term revolving debt and factor in any costs associated with transferring such debt from lender to lender.

Obviously, debt mgmt is important.

 

Frequent Contributor
frugalQ
Posts: 484
Registered: ‎03-23-2012
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Re: The Balance Transfer habit

Actually, it is healthy to maintain some debt as long as it's manageable. It's not debt pyramiding if you transfer balances from one place to another as long as you are not adding to said debt.

And from a financial perspective, if the debt is carried at 0% and you have the assets to pay off the balance, it's better to not pay it off immediately. Invest your $$$ (even if its in a cd) and pay your debt over the 0% time period.

I'm not saying to go out and purchase 10k worth of stuff, make minimum payment, transfer balance to another 0% card, add another purchase to that card (wash, rinse, repeat). But, if done in a disciplined and responsible way, it may work out better for you.

Of course, you also have to weigh the BT fee against your asset return on investment...but that's another topic. :-)
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tennisfan78
Posts: 630
Registered: ‎09-18-2011
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Re: The Balance Transfer habit


frugalQ wrote:
Actually, it is healthy to maintain some debt as long as it's manageable. It's not debt pyramiding if you transfer balances from one place to another as long as you are not adding to said debt.

And from a financial perspective, if the debt is carried at 0% and you have the assets to pay off the balance, it's better to not pay it off immediately. Invest your $$$ (even if its in a cd) and pay your debt over the 0% time period.

I'm not saying to go out and purchase 10k worth of stuff, make minimum payment, transfer balance to another 0% card, add another purchase to that card (wash, rinse, repeat). But, if done in a disciplined and responsible way, it may work out better for you.

Of course, you also have to weigh the BT fee against your asset return on investment...but that's another topic. :-)

Sorry OP for the off topic.

I have noticed in your signature that you have a LOC with Discover. May I ask your apr on it and also, did you get an offer to apply for it?

 

 


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FutureBillionaire
Posts: 647
Registered: ‎12-12-2012
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Re: The Balance Transfer habit


navigatethis12 wrote:

Unless the balance transfers have no fee, they really are not 0%. If the fee is 4% then the rate is really 4%, since you have already paid that much. I don't believe a lender can change the rate of a balance already on the account with the new laws, so you don't have to worry about that. I don't think lenders care if you do balance transfers with them since you pay a fee to them. If you are one of the people that gets approved for five 25000 limit cars and "balance transfer" them into  a chequing account, they may get upset.

 

Anyway, since you have the money to pay off the balances in full, why do the balance transfer? As I stated earlier, the rate is not really zero unless there is no fee.



I disagree with this.  You pay a one time fee vs a monthly interest rate that is normally double or triple the amount of that one time fee.  Balance transfers are a way for the banks to make money off the folks that don't carry much of a balance.  They hope to catch someone slipping up who doesn't pay.

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FutureBillionaire
Posts: 647
Registered: ‎12-12-2012
0

Re: The Balance Transfer habit


frugalQ wrote:
Actually, it is healthy to maintain some debt as long as it's manageable. It's not debt pyramiding if you transfer balances from one place to another as long as you are not adding to said debt.

And from a financial perspective, if the debt is carried at 0% and you have the assets to pay off the balance, it's better to not pay it off immediately. Invest your $$$ (even if its in a cd) and pay your debt over the 0% time period.

I'm not saying to go out and purchase 10k worth of stuff, make minimum payment, transfer balance to another 0% card, add another purchase to that card (wash, rinse, repeat). But, if done in a disciplined and responsible way, it may work out better for you.

Of course, you also have to weigh the BT fee against your asset return on investment...but that's another topic. :-)

I 200% agree with this.

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Hotels and other travel: Discover Escape, CSP
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Senior Contributor
Walt_K
Posts: 3,065
Registered: ‎11-02-2009
0

Re: The Balance Transfer habit


FutureBillionaire wrote:

navigatethis12 wrote:

Unless the balance transfers have no fee, they really are not 0%. If the fee is 4% then the rate is really 4%, since you have already paid that much. I don't believe a lender can change the rate of a balance already on the account with the new laws, so you don't have to worry about that. I don't think lenders care if you do balance transfers with them since you pay a fee to them. If you are one of the people that gets approved for five 25000 limit cars and "balance transfer" them into  a chequing account, they may get upset.

 

Anyway, since you have the money to pay off the balances in full, why do the balance transfer? As I stated earlier, the rate is not really zero unless there is no fee.



I disagree with this.  You pay a one time fee vs a monthly interest rate that is normally double or triple the amount of that one time fee.  Balance transfers are a way for the banks to make money off the folks that don't carry much of a balance.  They hope to catch someone slipping up who doesn't pay.


Not sure why you disagree.  Navigate is not saying that a BT can't make sense or that it isn't reducing the rate for someone who has a high interest rate.  The point is that it isn't 0%.  It's whatever the BT fee is.  This is important for people to understand when looking at a BT.  Especially if you are looking at a short time to payoff.  For example, if you are paying a 3% BT fee, but you expect to pay the balance off in 6 months, then BT fee represents the equivalent of a 6% APR on that balance.  For alot of people that are paying 20%+ APRs, it's still going to be a good deal if they are transfering to a card with a 0% APR.  But there are a lot of people that just assume that if they are lowering the rate, it must be a good deal.  And they don't properly account for the BT fee.  Especially those that are looking to BT to a card that isn't 0%. 


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Croselx
Posts: 139
Registered: ‎07-31-2012
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Re: The Balance Transfer habit

So I've read various things online about banks dubbing certain customers as "rate surfers" and cutting their 0% offers off from said customer.

Does this really happen?

**I doubt that any bank does this because it would require constant SP/monitoring of your credit and then they have to analyze that information - too much trouble IMO.

 

And is it really bad that I continuously refi my cc debt when a good offer comes a long?

**Depends. If you are truly getting 0% offers then it isn't bad, if you are paying balance transfer fees while you have the cash in-hand to pay off it isn't a good thing unless you have some other investment that is pulling a higher return rate.


Personally, I have enough cash/liquidity to solve this problem if it were to ever occur. I'm just curious to know if I am being watched with reference to my cheap credit habit. I know I have to pay; I always do.

**See answer #1.

 

At what point though, do I just pay it off in full and not rack it back up with a 0% offer?

**Depends on your goal. For me if it is a true 0% and I can PIF at anytime I would go with the 0% offer. I wouldn't do it to refinance CC debt unless it were a true 0% offer with no fees. I hate carrying debt, but if I am not paying a cent in interest and have the cash backup to PIF, then it isn't so bad (you can do low-risk investment and still come out ahead).


Keep in mind, I strive to maintain my credit, and ceterus parabis(all things equal), keep my util low, limit inqs and new accounts.


I have $10k+ in cc debt, but the weighted avg rate is literally like 1.25% lmao.

Obviously, debt mgmt is important.

**$10K in CC debt at a 2-5% transfer fee = $200-$500. You would be saving if your original CC was higher than this and if you pay it on the last month of the BT. My goal is to use my CC to replace cash and get rewards in the process. Paying any kind of interest or fee nullifies my efforts and makes the CC an expensive replacement/alternative to a debit card.

***I would play the BT game only if I cannot PIF and if my interest rate was something ridiculous like 20%-25%. OR if it is a true 0% offer which allows me to invest the cash someplace else.

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