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Established Contributor
FutureBillionaire
Posts: 650
Registered: ‎12-12-2012
0

Re: The Balance Transfer habit


Croselx 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?

**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.


The ideal situation for a BT, imo, is a payment for a credit card with a higher interest rate and a plan to pay off that balance in a few month with a bonus or other cash infusion.  I've read on another forum where a person used BT just to stay afloat.  I think you do what you have to do if your back is against the wall, but ultimately you want to avoid interest and fees when possible. 

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Valued Contributor
SnackTrader
Posts: 1,567
Registered: ‎09-15-2012
0

Re: The Balance Transfer habit


FutureBillionaire wrote:

Croselx 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?

**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.


The ideal situation for a BT, imo, is a payment for a credit card with a higher interest rate and a plan to pay off that balance in a few month with a bonus or other cash infusion.  I've read on another forum where a person used BT just to stay afloat.  I think you do what you have to do if your back is against the wall, but ultimately you want to avoid interest and fees when possible. 


But remember to look back to what Walt_K was saying - it is not ALWAYS advantageous to balance transfer just because a rate is higher if you would pay that balance off in a few months.  Remember, a 3% BT fee is applied to the ENTIRE transfer balance, so on a $1000 transfer that's a $30 fee.  If you were to pay off the BT in 6 months (assuming one lump sum payment), the APR of the card to which you transfer the balance would need to be at least 6% less than the card from which you are transferring the balance to reach any savings.  However, if the transfer is for a year, then the APRs would only need a minimum 3% difference (once again assuming minimum payments and a lump sum pay-off at the end).  So in my opinion (and I think the math supports this), a BT is a much better investment in 2 situations:

 

1) Where the interest on the BT offer is 0% for basically any period of time where there is interest savings (on most credit card interest rates this could be as little as a month)

2) When the BT is for an extended period of time

 

I would generally not advise someone to transfer a balance just to put off paying in full if they otherwise have the funds to do so.  Particularly in today's market where the BT fee of 3% is much higher than market interest rates.  If someone is able to make a guaranteed 3% back and make the investment worth it, you must be smarter than me.

 

(None of the above applies to a situation where someone is transferring under the Chase Slate's current 0% BT/0% APR offer - that is just always a good idea.)


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Established Contributor
frugalQ
Posts: 517
Registered: ‎03-23-2012
0

Re: The Balance Transfer habit

I agree that you have to weigh the BT fee vs the interest u gain by not paying off.

My point is that it's not always a bad idea to move debt around even if you have the funds to pay it off.

You can even be savvy enough to get around the BT fee by switching up which cards you put your daily spending on....because most cards' 0% offers are on BT and purchases.

It takes a lot of financial discipline and planning to make it work, though.
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Established Contributor
FutureBillionaire
Posts: 650
Registered: ‎12-12-2012
0

Re: The Balance Transfer habit


SnackTrader wrote:

FutureBillionaire wrote:

Croselx 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?

**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.


The ideal situation for a BT, imo, is a payment for a credit card with a higher interest rate and a plan to pay off that balance in a few month with a bonus or other cash infusion.  I've read on another forum where a person used BT just to stay afloat.  I think you do what you have to do if your back is against the wall, but ultimately you want to avoid interest and fees when possible. 


But remember to look back to what Walt_K was saying - it is not ALWAYS advantageous to balance transfer just because a rate is higher if you would pay that balance off in a few months.  Remember, a 3% BT fee is applied to the ENTIRE transfer balance, so on a $1000 transfer that's a $30 fee.  If you were to pay off the BT in 6 months (assuming one lump sum payment), the APR of the card to which you transfer the balance would need to be at least 6% less than the card from which you are transferring the balance to reach any savings.  However, if the transfer is for a year, then the APRs would only need a minimum 3% difference (once again assuming minimum payments and a lump sum pay-off at the end).  So in my opinion (and I think the math supports this), a BT is a much better investment in 2 situations:

 

1) Where the interest on the BT offer is 0% for basically any period of time where there is interest savings (on most credit card interest rates this could be as little as a month)

2) When the BT is for an extended period of time

 

I would generally not advise someone to transfer a balance just to put off paying in full if they otherwise have the funds to do so.  Particularly in today's market where the BT fee of 3% is much higher than market interest rates.  If someone is able to make a guaranteed 3% back and make the investment worth it, you must be smarter than me.

 

(None of the above applies to a situation where someone is transferring under the Chase Slate's current 0% BT/0% APR offer - that is just always a good idea.)


I agree. Generally, even the best rates are about 13%.  I believe the math works out in most instances. 

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

Very useful info!! I guess I didn't consider the fact that Ive used 0% for purchases and not necessarily bts, so bt fee avoided in most cases!!
So in many instances, I am effectively paying 0% interest ...And in the case of my Freedom card... Getting 5% cash on certain things!

The investments I have to back my cc debt are pretty high yielding:10-20% annual dividends . I have a time frame of at least 9-18 months before my 0% expires on a couple of my accounts!!

Thanks for all of the insight yall! Love this forum!!!
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LS2982
Posts: 15,436
Registered: ‎04-09-2011
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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? 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.

If you have the money to do it I would pay it off IMO. I'm sure you end up flagging yourself with creditors continuously moving debt, probably makes you look bad in the long run.

 




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Senior Contributor
drkaje
Posts: 3,491
Registered: ‎07-25-2008
0

Re: The Balance Transfer habit

I've never figured out why people think figuring out debt pyramiding or the B-word would take a ton of effort in a bank's behalf. It really doesn't take a ton of time or smarts to see that someone's debt hasn't decreased over time, or match up inquiries with new accounts.

 

Unless a balance transfer is no fee, the bank is making money.

 

FWIW, PenFed seems to be one of the few that really cares about pyramiding.


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Walt_K
Posts: 3,065
Registered: ‎11-02-2009
0

Re: The Balance Transfer habit


youngandcreditwrthy wrote:
Very useful info!! I guess I didn't consider the fact that Ive used 0% for purchases and not necessarily bts, so bt fee avoided in most cases!!
So in many instances, I am effectively paying 0% interest ...And in the case of my Freedom card... Getting 5% cash on certain things!

The investments I have to back my cc debt are pretty high yielding:10-20% annual dividends . I have a time frame of at least 9-18 months before my 0% expires on a couple of my accounts!!

Thanks for all of the insight yall! Love this forum!!!

Everyone has their own risk tolerance.  But I can't imagine that you're getting 10-20% on something that is a sure thing.  Back when savings accounts actually paid interest worth speaking of, and when 0% APR no-fee BT's were common, it wasn't a bad practice to park literally 100K plus of BT funds into savings accounts and earn a decent residual income.  But a lot of people got hurt that way too when they started thinking they could put that money in the market.  If you're playing around with $10K, and you have the money to pay off that balance, I don't think it's that big of a deal.  But be careful if you start thinking about leveraging these offers further. 


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Senior Contributor
youngandcreditwrthy
Posts: 6,242
Registered: ‎08-16-2012
0

Re: The Balance Transfer habit

Oh lol! I can't afford to leverage myself up to $100k!! That'd be too much!
Btw, REITs are where it's at! :-)
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Senior Contributor
Walt_K
Posts: 3,065
Registered: ‎11-02-2009
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Re: The Balance Transfer habit


youngandcreditwrthy wrote:
Oh lol! I can't afford to leverage myself up to $100k!! That'd be too much!
Btw, REITs are where it's at! :-)

Yeah, I'm not positive, but I am pretty sure REITs were exactly what this guy at fatwallet was heavily invested in with this kind of arbitrage.  He got completely cleaned.  If I find the thread, I'll post a link.


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