Question: FICO imroves (or not) by BTing a high util debt to low util cards?

[Anonymous]

Background:

I have a BT offer from Discovercard. I carry no balance on the card, just use it for gas to get the 5% rewards and pay off as soon as it shows up online. The offer is 0% until May, 3% transaction fee. I have $11,000 CL. Again no balance. That puts my util at 0, or close to it even with the small balances that I pay before any statement cuts.

I have a Bank of America card where my $6600 of balances is at 0% until June. I used this card to BT all of my credit card debt into one place and at 0% interest. I predict that in May/June (when both BT rates would change to the normal APR) I will have half of that balance eliminated. (My car is paid off in December and I will put that monthly money onto that card instead of the car payment.) This card has CL of $7500. That puts my util at 88% - i know extremely high but I don't need additional credit RIGHT NOW, and the rate is 0% - doesn't make sense to change now.

I have a few other cards that I pay off balance completely each month. One I use for rewards, etc... Again I pay them off each month.

The APR terms after the BT period is up are similar between the Discover and BofA card.

At this point, I do not anticipate needing to apply for credit until possilby May/June, if that's what I have to do to keep my credit card debt at 0% or similar APR until it gets paid down by around a year from now. Having a 0% rate has been a great tool for me to reduce my CC debt by 20% in the last 5 months. (I now watch accounts like a hawk - I am truly reformed in the way I handle my money and credit.)

QUESTION:

If I would take advantage of the Discover offer to BT $3000 from the BofA card, I could have a util of 50%. I would then have a Discover util of 28%. Does that fare better for my fico score, than that high BofA util of 88% and 0% on Discover? (Or you can see that if I put even more on the Discover, my util improves more because of my higher CL on that card.)

Since I'm not applying for credit right now, I am not moving on this.
The question would be if some circumstance required applying for credit (not likely but tragedies happen), or if there are bo good BT offers on any cards when my current BT rate expires so I would apply for credit to get a good BT offer. In that case, do I have a better FICO by splitting up that balance between two cards (thus shifting and spreading the util around)?

Thanks to all!

[Anonymous]

There is no magic answer since we do not know the totality of your credit report, nor the precise FICO formulas. My guess is that it would help your score slightly, but it wouldn't be worth the 3 percent BT fee. You would gain points from lower utility on the BoA card and lose points for an increase in the number of accounts with a balance and the higher balance on Discover, I would guess the net effect would be maybe 10 points if the balance were split. I would just ride it out on BoA and pay it down as soon as you can.

[Anonymous]

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@Anonymous wrote:

I have a BT offer from Discovercard. I carry no balance on the card, just use it for gas to get the 5% rewards and pay off as soon as it shows up online. The offer is 0% until May, 3% transaction fee. I have $11,000 CL. Again no balance. That puts my util at 0, or close to it even with the small balances that I pay before any statement cuts.

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I just wanted to point out that if you do a BT to the Discover card, check the terms, but you likely will want to STOP using the card for monthly gas purchases, meaning you'd lose out on the $5 monthy bonus.  Something to consider.

Because typically the way payments are credited means that if you do the BT, and then put $100 gas charges on the card for the month, and then pay some money towards the BT and those $100 purchases, ALL OF THAT PAYMENT will be credited towards the BT and NOT towards your $100 monthly charges.

So your $100/month gas charges will sit on the card accruing interest at your PURCHASE rate (not the BT rate) for the duration of time you have the BT balance, no matter how much money you pay towards the card each month.

Just something to consider as you crunch the numbers!

[Anonymous]

You are correct - I would have to stop using my Discover for other purchases - in effect I would make both my BofA card and Discover card unusable, except for paying down the balance. Right now I feel 'blocked' by BofA that I cannot use the card for other purchases because I cannot pay for them until the BT balance is zero. Good point.

Thanks both!

[haulingthescoreup]

Also, for anyone considering a BT, be sure to see if that BT fee is capped!

In the past, Discover capped their fees at either $75 or $99 (can't remember for sure), whereas BofA doesn't cap. So my $8K BT cost me $240, which is something I factored in. It worked for me, because of the 0% for 15 months, but you should always clarify that first.

[Anonymous]

Discover cap is $75.

I always wondered if they would then cap out their BTs at around $2500 for their new(therefore possible more risky) customers, as that would be the maximum that they would collect the 3%. ($2500X3%=$75). Anyone know?