topic Re: Why use a Balance Transfer? in Credit Cards

Why use a Balance Transfer?

Anonymous — Wed, 21 Mar 2018 20:26:57 GMT

I do have a sincere question? because i never had to use it. I see people that do get cards for a balance transfer. Why is the method valuable to a lot of consumers. I never had to do or even use it, even though my card offers it. What is the benefit of doing it, when you still got to pay it off or you pay your balance off in full every month.

Re: Why use a Balance Transfer?

UncleB — Wed, 21 Mar 2018 20:30:43 GMT

@Anonymous, I've moved your question to a new thread where it can be more easily addressed by the community.

--UncleB

myFICO Moderator

Re: Why use a Balance Transfer?

Anonymous — Wed, 21 Mar 2018 20:46:26 GMT

Say you have a project to do on your house or an expense that will cost $3,000 and you charge it on your credit card that has 20% APR. If you can't pay it in full, you will make payments until you pay it off BUT with interest at 20%. Some people would transfer that $3,000 balance (balance transfer) to a card that offers 0% APR for 12 months.

Other than paying a balance transfer fee of usually 3% ($90), you will not pay interest on that $3,000, which will be better than paying interest if you leave it on card with a the 20% APR. Makes sense? It is just a way to pay off a balance without paying any interest.

Re: Why use a Balance Transfer?

Anonymous — Wed, 21 Mar 2018 20:48:15 GMT

For me, we have only ever had one CC for the last 5 years and I have a small (500) balance on it. We pay every month but its not the best interest rate. I just transferred it to our new Chase freedom card so that I can pay it off even faster without interest. Balance transfers I am assuming are only a good deal for people who are carrying balances that they cant pay off that month.

Re: Why use a Balance Transfer?

Anonymous — Wed, 21 Mar 2018 21:05:06 GMT

Ok, so you transfer the balance to another card with 0% interest. How long will that interest rate be 0%. wouldn't that be applied to a new card or do companies offer that long term to some card as long as the account is open........

Re: Why use a Balance Transfer?

Anonymous — Wed, 21 Mar 2018 21:12:59 GMT

@Anonymouswrote:
Ok, so you transfer the balance to another card with 0% interest. How long will that interest rate be 0%. wouldn't that be applied to a new card or do companies offer that long term to some card as long as the account is open........

In a lot of cases it's going to be a new card that people got knowing about the upcoming big spend.

It doesn't have to be 0%, just significantly less than the rate on the other card, so that the fee (if any) doesn't negate the savings.

It's not only for those that cannot PIF, some people transfer to a 0% card and use the money for something more profitable for a period of time, and PIF later. Not a strategy for everyone but for some it makes sense.

Re: Why use a Balance Transfer?

Anonymous — Wed, 21 Mar 2018 21:19:31 GMT

Every bank is different, some have 0% for 12 months, sometimes 18 months. Also, some banks like Navy Fed charge $0 transfer fee if it was an offer sent to you personally.

Re: Why use a Balance Transfer?

Anonymous — Wed, 21 Mar 2018 21:23:46 GMT

Our new card is 0 interest for 15 months.

Re: Why use a Balance Transfer?

sueblue34 — Wed, 21 Mar 2018 21:27:35 GMT

I’m still in the rebuilding stage but here is my take:

To me this only makes sense if you are not charged abalance transfer fee and it has 0% interest. Also you need to be able to pay it off while your on the 0% interest time allotted. That’s the only way to save money that would otherwise go towards interest.

Sometime you may be awarded a higher credit line for doing the transfer which is a plus.

Other than thati see it as just shuffling debt around if you haven’t managed to pay it off while you under the 0% promo.

Re: Why use a Balance Transfer?

UpperNwGuy — Wed, 21 Mar 2018 22:43:23 GMT

Why use a balance transfer? Easy question! To save money and get out of debt faster. When I retired, I was carrying some hefty credit card balances. How I got to that point is a long story that I won't share here. A few months before retiring, I got the Citi Simiplicity card and transfered a $13,000 balance from another card and kept it there at 0% APR for 20 of the 21 allowable months, only paying the minimum payment each month. During that period I focused on eliminating the balances on my other cards. In the 20th month, I paid the Simplicity off in full. Citi's next statement said that I saved $1,700 in interest by using the balance transfer.

Re: Why use a Balance Transfer?

DeeBee78 — Wed, 21 Mar 2018 21:36:05 GMT

@sueblue34wrote:
I’m still in the rebuilding stage but here is my take:

To me this only makes sense if you are not charged abalance transfer fee and it has 0% interest. Also you need to be able to pay it off while your on the 0% interest time allotted. That’s the only way to save money that would otherwise go towards interest.

Sometime you may be awarded a higher credit line for doing the transfer which is a plus.

Other than thati see it as just shuffling debt around if you haven’t managed to pay it off while you under the 0% promo.

Sometimes the fees are really low, and can make for a very enticing BT offer. Over the holiday season, I put some decent spend through my Amex PRG. Capital One offered me a 0% for 9 months balance transfer with a 1% fee, so I transferred $2K from my Amex PRG. That gave me 9 months to pay off $2,020 instead of 30 days. I paid it back over three months, in chunks of $700, $700, and $620, freeing up my cashflow a bit.

It's a nice option to have sometimes.

Re: Why use a Balance Transfer?

jl4 — Wed, 21 Mar 2018 21:51:15 GMT

@Anonymouswrote:
I do have a sincere question? because i never had to use it. I see people that do get cards for a balance transfer. Why is the method valuable to a lot of consumers. I never had to do or even use it, even though my card offers it. What is the benefit of doing it, when you still got to pay it off or you pay your balance off in full every month.

I'll use my scenario as an example.

I opened an Amex BCE card and was offered 0% for 15 months on balance transfers. I opted to have them pull $1500 in balances from two of my other cards which sit at 22-24% APR. By moving the balance over to the AmEx, I can make payments on that balance without it incurring further interest, all the while those cards get paid down and my utilization stays pretty much the same.

As long as I pay off that balance transfer within 15 months, I'll never pay a cent in interest. Now, if I don't, all 15 months of interest will come barrelling in all at once.

Re: Why use a Balance Transfer?

Loquat — Wed, 21 Mar 2018 22:04:45 GMT

I had an instance where it worked out really well for me. Spent a little over $3k at Lowes...took the 5% cash back instead of the special financing...had a card that allowed balance transfer at $0 transfer fee. I got the 5% back from using my Lowes card and borrowed the money interest free via the balance transfer. It was a win-win for me. To bad I don't get any $0 balance transfer offers...many offers but all at 3% transfer fee.

Re: Why use a Balance Transfer?

Anonymous — Thu, 22 Mar 2018 00:23:57 GMT

@jl4wrote:
As long as I pay off that balance transfer within 15 months, I'll never pay a cent in interest. Now, if I don't, all 15 months of interest will come barrelling in all at once.

Really? That's often the case with some store cards, but I thought most bank cards just charge you the interest on the remaining balance.

Re: Why use a Balance Transfer?

steelers1 — Thu, 22 Mar 2018 00:32:48 GMT

It's cheap money...

If I get offered an 18 month balance transfer @ 2% its a deal of the century.

Accoring to the Wall Street Journal the prime rate today is 4.5%.

Years ago when I was a controller I would negotiate lines of credit for my employer and prime + 1.5% was a great deal.

I can make a hell of a lot more than 2% profit on lets say $15k in 18 months.

Given you user name I'm surprised that you would even ask such a question.

Re: Why use a Balance Transfer?

jl4 — Thu, 22 Mar 2018 01:15:21 GMT

@Anonymouswrote:
@jl4wrote:
As long as I pay off that balance transfer within 15 months, I'll never pay a cent in interest. Now, if I don't, all 15 months of interest will come barrelling in all at once.
Really? That's often the case with some store cards, but I thought most bank cards just charge you the interest on the remaining balance.

It might depend on the issuer, though I think you're right. I just contacted AmEx and asked them about it and they said:

Your Introductory APR for BT is 0.00% until [07/2019]. After that, the APR will be a variable rate of Prime Rate + 13.74%, which is currently at a variable rate of 18.24%. Which means you can revolve the BT balance until the July 2019 statement without interest and the statement closing on 07/19 needs to be paid in full by the payment due date. But if you revolve the balance after the payment due date the interest will be charged from the day when the July statement in 2019 closes.

I stand corrected! 🐑

Re: Why use a Balance Transfer?

ecxpa — Thu, 22 Mar 2018 02:29:28 GMT

@Anonymouswrote:
@jl4wrote:
As long as I pay off that balance transfer within 15 months, I'll never pay a cent in interest. Now, if I don't, all 15 months of interest will come barrelling in all at once.
Really? That's often the case with some store cards, but I thought most bank cards just charge you the interest on the remaining balance.

You just pay interest on the balance......or at least I did once when I was a few days late paying off a BT

Re: Why use a Balance Transfer?

Anonymous — Thu, 22 Mar 2018 03:20:52 GMT

I have to laugh because I never used to do this until I learned it from a friend. Now when I have to carry a balance for whatever reason, I use BT's to get the 0% for 12. Or sometimes a single digit APR for 18 mo. It's just easier to make a larger purchase more managable if PIF isn't possible ATM. I also like my Credit Union because they do not charge a fee for BT's, so I often transfer funds to my checking and pay off a bill with that cash. Then I transfer that amount to a 0% promo card, usually Discover as they're alwasy offering me BT deals. Then just pay it off within 6-12.