topic Re: Why refrain from BTs? in Credit Cards

Why refrain from BTs?

Anonymous — Thu, 09 Feb 2017 21:37:06 GMT

I sense this may be a dumb question, but what are the reasons we should refrain from BTs? Assuming it's a good offer (i.e. 0% and no fee), do BT reflect badly on ones score/profile or something? I understand I should consider the rate after the 0% expires, but if it's the same or lower rate than the balance carries before the BT ....

... and if I don't manage to pay off balance before the 18 months (for example) then why not transfer it again? In other words, are there other factors I'm not aware of? Thanks

Re: Why refrain from BTs?

gdale6 — Thu, 09 Feb 2017 21:39:03 GMT

Hi there OP,

As the thread you posted this in is nearly a year old I have created your own thread on your question. I changed the title and left everything else intact. You can edit the title if you wish by using the edit message line from the options pull down menu in the upper right hand corner of the post.

Re: Why refrain from BTs?

Anonymous — Thu, 09 Feb 2017 21:46:49 GMT

It does not reflect poorly on your reports. And if you are unable to pay it off then you certainly can transfer the remaining balance.

What's looks poorly is when someone constantly juggles around balances but never reducing the balance.

Re: Why refrain from BTs?

deltatee — Thu, 09 Feb 2017 23:06:56 GMT

From some people's experience, it sounds as though some lenders may be more sensitive to it than others. I'd imagine lenders ultimately look at whether someone's use of a balance transfer appears to reflect some sort of risky behavior. In my experience, I have used Discover and Chase for balance transfers and have never had any issues.

Re: Why refrain from BTs?

Anonymous — Thu, 09 Feb 2017 23:23:01 GMT

When I first started building credit I approved for Chase Freedom with a $4k SL. I transfered $3500 on it and paid it off in six months even though I had 15 months at 0%.

I used a $17,800.00 no hassle check at 0% with a 2% fee two months ago and have it already paid it down to $7500. I will draw the rest of it out over the next 15 months and make sure it's completely paid by the time the zero percent ends.

It's the ONLY card I keep a balance on. And I trust only Capital One to do this with. As it would be highly unlikely they would ever impose AA. I have always put good use on Capital One and pay them back quickly with large payments and that's what they love.

Every other week Cap1 offers me BT's and no hassle checks. I've used no hassles checks in the past with them and always pay back quicker than expected.

I know by treating them good, they will be there when I need them. As they always are. My favorite creditor is Capital One.

Re: Why refrain from BTs?

AverageJoesCredit — Thu, 09 Feb 2017 23:47:08 GMT

Hmm, i love to ask this Donny, but....WHATS IN YOUR WALLET LOL

Re: Why refrain from BTs?

Anonymous — Fri, 10 Feb 2017 02:23:09 GMT

Thanks! That makes me curious though: when you transfer a balance does it register somehow/somewhere - -- when you say "it looks poorly" -- what are creditors seeing exactly? Is there some running tally? Some algorithm that tracks your balance transfers over the years? How would a third party creditor, or even one party to the transfer, notice or remember a BT on varying accounts over time? Sure, never reducing a balance will look bad -- whether I had no BTs or a hundred?

Re: Why refrain from BTs?

Anonymous — Fri, 10 Feb 2017 03:12:53 GMT

Good question. Have you ever seen your raw credit reports? On those reports it lists balance and payment history from date to date under each creditor. Let's use Chase for example: When you request a balance transfer they will say it's under review. A very smart representative in the lending department could look at each line item creditor and and look at your payment and balance history. So, someone who is floating money around continuously from account to account without ever paying down the debt can be detected.

I couldn't tell you how often it is caught, but it is eventually.

Re: Why refrain from BTs?

UncleB — Fri, 10 Feb 2017 03:26:02 GMT

Good stuff here; I'll just add that there comes a point (or there did with me at least) where saving money will be more valuable than being concerned with what a lender might think when reviewing your account.

In my case I now have cards with the 'big' issuers, and I do what I need to save a dollar... if one of them were to have an issue with that they can cut me loose and I'll be fine.

That said, regardless of what anybody (lender or otherwise) thinks about moving debt around it's really not a good idea to perpetually keep the same balance for extended times, since that increases the chance of not having it PIF by the time the promo expires - that's common sense. In my opinion (and we all have one... LOL) it's a sign of money management issues if somebody has a balance on a 0% promo and the amount never goes down.

To me, the promos are useful to pay off things that I would rather not dip into savings for... like major dental work or car repairs. Even when I have the liquid funds if the fee is low enough I prefer to use somebody else's money and keep my own (that's just my preference). This also assumes somebody is doing a BT to take advantage of a no (or low) APR promotion... if there's no promotion or the APR isn't significantly lower that's an indicator of an issue, indeed.

Just my 2¢.

(Note that these are general statements, and there are of course situations that would be exceptions.)

Re: Why refrain from BTs?

noobody — Fri, 10 Feb 2017 03:50:22 GMT

Long term BT is bad news generally.
If you can not pay off or significant reduce balance on account you BT to with zero or very low APR. You have bigger financial problem than credit score.

Re: Why refrain from BTs?

yfan — Fri, 10 Feb 2017 04:28:53 GMT

I think the answer is easier to find if you start from the opposite question. Why DOES one want to do a BT, and perhaps subsequent ones? One answer, from the leders' perspective may be that the borrower doesn't have available liquid funds to pay their debts, which can be a sign of trouble. Exactly what pattern of BT is needed for a given lender to reach this conclusion is unknown, and we know that each lender basically lets you do BT so that they earn the interest (after the intro period at least) raher than competitor. But that doesn't eliminate the risk algorithm.

Re: Why refrain from BTs?

Anonymous — Fri, 10 Feb 2017 05:47:37 GMT

Just looking at possible negatives, your utilization might take a sizeable hit until it's reported correctly. If the transfer to account reports the new balance before the transfer from account reports as paid than you will look like you have twice as much debt. But utilization has no memory so it would only be a temporary negative.

Re: Why refrain from BTs?

Anonymous — Fri, 10 Feb 2017 06:01:49 GMT

Great info! The raw credit report - that's what i was curious about. Good to know. All comments insightful and Interesting. Thanks

Re: Why refrain from BTs?

Anonymous — Fri, 10 Feb 2017 06:09:59 GMT

Is it worth noting that you couldn't transfer a balance without available credit, and especially if you transfer to long-existing available credit, you can't be that far under water, that risky, and still transfer ...
Obviously BTs aren't for folks with no balances, so saying it's better to have no balance is like skinny people telling others to just not be fat. Ha

Re: Why refrain from BTs?

Anonymous — Fri, 10 Feb 2017 06:38:40 GMT

@Anonymous wrote:
Is it worth noting that you couldn't transfer a balance without available credit, and especially if you transfer to long-existing available credit, you can't be that far under water, that risky, and still transfer ...
Obviously BTs aren't for folks with no balances, so saying it's better to have no balance is like skinny people telling others to just not be fat. Ha

Outstanding!

Re: Why refrain from BTs?

red259 — Fri, 10 Feb 2017 08:03:35 GMT

@Anonymous wrote:
I sense this may be a dumb question, but what are the reasons we should refrain from BTs? Assuming it's a good offer (i.e. 0% and no fee), do BT reflect badly on ones score/profile or something? I understand I should consider the rate after the 0% expires, but if it's the same or lower rate than the balance carries before the BT ....
... and if I don't manage to pay off balance before the 18 months (for example) then why not transfer it again? In other words, are there other factors I'm not aware of? Thanks

There is nothing wrong with doing a BT. However, you need to look at the BT offer to see if it is worth it. Will they give you a 0% interest period? What are they going to charge for the BT? How long will the period last? etc. I would not do a number of BTs because that could indicate distress. However, an occassional BT to take advantage of a 0% apr can make sense. I have one now. Important factors are to make sure you are paying it down. I would suggest 2x the min payment at least each month. Also, I would not do a BT if its going to max out your card. Also, consider overal credit util. If you have low available credit you don't want to tie up most of your util with a BT.

Re: Why refrain from BTs?

kdm31091 — Fri, 10 Feb 2017 13:18:51 GMT

I think if you are just shuffling debt around, it's bad news. Like anything else, there should be a plan in place. If you take the BT, and get a low/no APR for x amount of time, that isn't an excuse to not pay the debt. It's just a tool to help you pay it more quickly. As long as you are disciplined, BTs can be helpful.

Re: Why refrain from BTs?

Anonymous — Fri, 10 Feb 2017 14:21:45 GMT

I take advantage of Capital One b/t offers now and then. Currently utilizing a 2% fee and 0% apr over 18 month offer. I keep the amount under 10% of my card limit, and I always have the balance paid by the end of the promo period. I've not ever balance transfered with any of my other cards though - I think I'd be a little worried then. But that's just me.

Re: Why refrain from BTs?

Anonymous — Fri, 10 Feb 2017 14:56:08 GMT

I recently took two balance transfers for the first time in my life about a month ago totalling 4k.

They were 18 month 0% with 3% transfer fee

I got them for a down payment on a new car, but a few reason I paid the $120 in BT fees:

The BTs were on cards I wanted to keep, 2 of my 3 oldest cards that I didn't use, I have the money to pay them off at any time in a liquid savings account and I really want to get a BBR from BofA in the future and I hope that evidence of paying of BTs in a timely manner would help in getting a nice SL on one when I next apply.

Re: Why refrain from BTs?

Anonymous — Fri, 10 Feb 2017 16:40:32 GMT

My experience there will be a month or two potentially both creditors post the balance… so that I can screw up your util… if you are doing transfers to try and move around to high limit cards…if one of your lenders is AA/ CLD aggressive you end up worse than just paying down a high APR.