topic Re: Which balance transfer offer would you take and why? in Personal Finance

Which balance transfer offer would you take and why?

Technut — Sun, 07 Jan 2024 20:47:26 GMT

My bank currently is offering these balance transfer offer. Which one would you take? I can balance transfer up to $4000. I have about $6000 total credit card debt.

Offer 1

Promo APR
10.99%
on Balance Transfers

Until
Dec 1, 2025

Variable APR after
28.24%
promo ends

Promo Balance Transfer Fee
0% of each transfer ($0). Otherwise your standard balance transfer fee is 5% of transfer (minimum $5).

Offer 2

Promo APR
0%
on Balance Transfers

Until
Nov 1, 2024

Variable APR after
28.24%
promo ends

Balance Transfer Fee
5% of each transfer (minimum $5)

Re: Which balance transfer offer would you take and why?

Horseshoez — Sun, 07 Jan 2024 20:52:57 GMT

I'm not a fan of balance transfer offers, but if I needed to pick between the two, the first one with no fee and 10.49% interest would be my choice.

Re: Which balance transfer offer would you take and why?

markbeiser — Sun, 07 Jan 2024 20:55:13 GMT

Can you pay it off by November 1?

Re: Which balance transfer offer would you take and why?

CYBERSAM — Sun, 07 Jan 2024 22:17:18 GMT

I would go offer 2. Why would you want to pay 11% per month vs. 5% one time? This way you can transfer your dept and hopefully your score goes up and probably can grab a new CC like Cash+ with decent BT offer by Nov if needed.

Re: Which balance transfer offer would you take and why?

barca — Sun, 07 Jan 2024 22:40:09 GMT

I will go for option 2 too as some have suggested above

once I pay the 5% upfront - I don't have to worry about it for a year.

you can decide to pay off the balance in 1 month or 1 year - most convinient in my opinion

Re: Which balance transfer offer would you take and why?

Horseshoez — Mon, 08 Jan 2024 02:22:02 GMT

@CYBERSAM wrote:
I would go offer 2. Why would you want to pay 11% per month vs. 5% one time? This way you can transfer your dept and hopefully your score goes up and probably can grab a new CC like Cash+ with decent BT offer by Nov if needed.

That isn't how interest works; per the original post, the offer was 10.99% APR, meaning less than one percent per month on the outstanding balance.

Re: Which balance transfer offer would you take and why?

SouthJamaica — Mon, 08 Jan 2024 05:14:20 GMT

I would go for the one where you pay interest, but no balance transfer fee.

Then if you pay it off early, you're not out of pocket as much.

Re: Which balance transfer offer would you take and why?

CYBERSAM — Mon, 08 Jan 2024 05:25:25 GMT

@Horseshoez wrote:
@CYBERSAM wrote:
I would go offer 2. Why would you want to pay 11% per month vs. 5% one time? This way you can transfer your dept and hopefully your score goes up and probably can grab a new CC like Cash+ with decent BT offer by Nov if needed.
That isn't how interest works; per the original post, the offer was 10.99% APR, meaning less than one percent per month on the outstanding balance.

If OP pays for full duration of BT offer, it would mean paying more for option 1 by the end of the offer!

Re: Which balance transfer offer would you take and why?

Horseshoez — Mon, 08 Jan 2024 12:11:13 GMT

@CYBERSAM wrote:
@Horseshoez wrote:
@CYBERSAM wrote:
I would go offer 2. Why would you want to pay 11% per month vs. 5% one time? This way you can transfer your dept and hopefully your score goes up and probably can grab a new CC like Cash+ with decent BT offer by Nov if needed.
That isn't how interest works; per the original post, the offer was 10.99% APR, meaning less than one percent per month on the outstanding balance.
If OP pays for full duration of BT offer, it would mean paying more for option 1 by the end of the offer!

And if the OP pays it off by the end of October this year, assuming he or she has been making payments all along, then less interest will be paid.

Re: Which balance transfer offer would you take and why?

Kforce — Tue, 09 Jan 2024 01:10:37 GMT

All above post are true but only give one point of view

It is all dependant on how much you plan on paying every month.

A 5% fee on 4k transfer cost $200 and equal payments of the now

4200 balance over 11 months would be 382/month

A rate of 10.99 for 11 months of equal payments would be 384/month

and interest loss of ~$223 (23 dollar loss)

However if one is paying more than $430 per month less interest is paid with 10.99% deal.

Large payments, early pay off favor 10.99%, stretching it out full term favors 5% fee.

$500/month would be ~$173 interest a savings of $27 over the fee

Re: Which balance transfer offer would you take and why?

iced — Tue, 09 Jan 2024 15:23:02 GMT

@Technut wrote:
My bank currently is offering these balance transfer offer. Which one would you take? I can balance transfer up to $4000. I have about $6000 total credit card debt.
Offer 1
Promo APR
10.99%
on Balance Transfers
Until
Dec 1, 2025
Variable APR after
28.24%
promo ends
Promo Balance Transfer Fee
0% of each transfer ($0). Otherwise your standard balance transfer fee is 5% of transfer (minimum $5).

Offer 2
Promo APR
0%
on Balance Transfers
Until
Nov 1, 2024
Variable APR after
28.24%
promo ends
Balance Transfer Fee
5% of each transfer (minimum $5)

First one since there's no transfer fee, then pay it off immediately before interest can accrue.

If paying off immediately isn't an option, then the first one will (almost) always win. Here's why:

- The second offer has a transfer fee of 5%, which means you're out $200 immediately on that $4000. You also only have about 10 months to pay it off, but...

- The first offer has no transfer fee and a rate of 11%, which means it will take about 8-10 months to accrue $200 in interest, depending on how much you pay and how quickly.

- This means there's a very, very small window where the second offer is better (take around 9-10 months to pay off with more paid off later than sooner) and even then it's barely better. If you need more than 10 months to pay it off, option 1 becomes better because it maintains a lower APR longer.

Re: Which balance transfer offer would you take and why?

Kforce — Tue, 09 Jan 2024 19:13:17 GMT

@iced wrote:
First one since there's no transfer fee, then pay it off immediately before interest can accrue.
Most people use a balance transfer because they don't have funds to pay immediately.
If paying off immediately isn't an option, then the first one will (almost) always win. Here's why:
Not True
- The second offer has a transfer fee of 5%, which means you're out $200 immediately on that $4000.
You also only have about 10 months to pay it off, but...
True
- The first offer has no transfer fee and a rate of 11%, which means it will take about 8-10 months to accrue $200 in interest, depending on how much you pay and how quickly.
If one is making minimum payments, assuming minimum of 2.5% of balance.
Starting payment would be ~$100/mo, = $211 interest lost in first 6 months and $308 interest paid by month 9.
Could pay remaining balance month 10 and save over $110 dollars

- This means there's a very, very small window where the second offer is better (take around 9-10 months to pay off with more paid off later than sooner) True some what, depending it could be as early as 6 or 7 months with minimum payments
and even then it's barely better. Some would call $110+ more than barely.
If you need more than 10 months to pay it off, option 1 becomes better because it maintains a lower APR longer.
One month at end of loan between 11% and 29% of the max remaining balance of ~3000 would be $44 dollars.

However if one did have funds to pay off the loan in 6 months with nice $800 payments,

then the 10.99% would save the $100+ over taking the 5% fee offer.

It is just math and how much money is paid at what point in time.

Either method could save a minimum of $100 depending on how one pays the debt back.

Re: Which balance transfer offer would you take and why?

iced — Tue, 09 Jan 2024 19:32:19 GMT

@Kforce wrote:
@iced wrote:
First one since there's no transfer fee, then pay it off immediately before interest can accrue.
Most people use a balance transfer because they don't have funds to pay immediately.
If paying off immediately isn't an option, then the first one will (almost) always win. Here's why:
Not True
- The second offer has a transfer fee of 5%, which means you're out $200 immediately on that $4000.
You also only have about 10 months to pay it off, but...
True
- The first offer has no transfer fee and a rate of 11%, which means it will take about 8-10 months to accrue $200 in interest, depending on how much you pay and how quickly.
If one is making minimum payments, assuming minimum of 2.5% of balance.
Starting payment would be ~$100/mo, = $211 interest lost in first 6 months and $308 interest paid by month 9.
Could pay remaining balance month 10 and save over $110 dollars

- This means there's a very, very small window where the second offer is better (take around 9-10 months to pay off with more paid off later than sooner) True some what, depending it could be as early as 6 or 7 months with minimum payments
and even then it's barely better. Some would call $110+ more than barely.
If you need more than 10 months to pay it off, option 1 becomes better because it maintains a lower APR longer.
One month at end of loan between 11% and 29% of the max remaining balance of ~3000 would be $44 dollars.
However if one did have funds to pay off the loan in 6 months with nice $800 payments,
then the 10.99% would save the $100+ over taking the 5% fee offer.

It is just math and how much money is paid at what point in time.
Either method could save a minimum of $100 depending on how one pays the debt back.

So do you think it's true or not true that option one almost always wins? You said not true but then go to to agree that there's a window of only a few months where option two comes out ahead (I'll agree to disagree on labeling that amount "barely"). Whether that window is two months or four months doesn't really change the fact that the conditions under which option two results in less expense are much fewer in number than the opportunities where option one results in less expense.

I agree it's all math, which is why I applied math to my choice.

Re: Which balance transfer offer would you take and why?

ptatohed — Tue, 09 Jan 2024 21:17:30 GMT

What's not being talked about here is the $2,000 balance that OP won't be able to get onto this BT. I have to assume that interest rate is higher, probably notably higher, than the 10.99%. In which case, I think the OPs initial large payments should be directed toward the higher APR $2,000 balance while making minimum payments on either option 1 or 2. This delay in being able to direct large(r) payments to options 1 or 2 should be factored into the choice.

Re: Which balance transfer offer would you take and why?

Kforce — Wed, 10 Jan 2024 01:11:41 GMT

Loan: 4000.000
Rate: 10.990 %
Pmt : 2% of Balance (Minimum Pmts)

Payment Principal Interest Balance yyyy/mm
--------------------------------------------------------------------------------------------------
80.00 43.37 36.63 3956.63 2024 2
79.13 42.89 36.24 3913.74 2024 3
78.27 42.43 35.84 3871.31 2024 4
77.43 41.98 35.45 144.15 3829.33 2024 5
76.59 41.52 35.07 179.23 3787.81 2024 6
75.76 41.07 34.69 213.92 3746.74 2024 7
74.94 40.63 34.31 248.23 3706.11 2024 8
74.12 40.18 33.94 282.17 3665.93 2024 9
73.32 39.75 33.57 315.74 3626.18 2024 10
3659 39 36 33.21 348.95 0 2024 11
-----------------------------------------------------------------------------------------------------
Plan 1 could cost up to = $348.95 (Loss of ~$149)

Plan 1 total savings by monthly payment's

500/mo = $27 9 months
700/mo = $73 6 months
900/mo = $97 5 months
1100/mo = $112 4 months
2500/mo = $149 2 months

Monthly payments of $2500 would be required to save as
much as possible loss.

The question is are more or less people likely
to have the money to pay the loan back in 3-5 months or
need the 8-10 ?

My opinion is most need the time, and most need smaller payments at the start.
The fee would have smaller payments and allow lower starting payments and let one

pay more as you go.

As @ptatohed pointed out, paying off the extra 2k might be best, and would lower

payments on this loan for a few extra months. Making plan 2 look even better.

I think plan 2 can save more people money, however it is also more dangerous.

Stretching out the payments and needing to play catch up is not easy.

Hard to have the necessary funds to pay all at the end and/or re calculate payments mid

way in a loan term.

Math would have me lean for plan 2 for those in short term financial trouble,

that should have better funds in a few months time.

(Just can't lie to your self and wish it to happen)

Not sure the savings outweighs the danger between plans, but

don't think number of days out of the 11 months that a plan

has smaller loss than the other means it is best.

I would do plan 1, because of the dangers with plan 2 ...

Re: Which balance transfer offer would you take and why?

Citylights18 — Wed, 10 Jan 2024 01:52:16 GMT

In my shoes if I had to pay 10.99% interest I'd rather just pay that off with a line of credit.

The BT game has some advantages IMO. One of which is that by using the credit on the cards it helps them grow over time. Build your credit line and AoA up with time.

I keep close track of when my BT offers are due which is very important and plan to pay them off when due, or find another BT card.

Staggering the BT offers out is best. Pay them off last second and open a new one for maximum amount of months under the promotion.