topic Re: 3 Balance Transfers on One Card; APRs All Equal; Where Does an Overpayment Go? in Credit Cards

3 Balance Transfers on One Card; APRs All Equal; Where Does an Overpayment Go?

Fletcher2 — Wed, 08 Jun 2022 14:19:14 GMT

I believe legislation a number of years ago forced creditors to apply overpayments to the highest interest-bearing liabilities first; however, what happens when the interest rates are all the same and the only variable is the date on which said rates convert to insultingly high rates?

For example:

3 BTs on the books on one card, all at 3.99%
One BT promotion rate ends on August 15th
Another coverts in October, and the third in Nov/Dec

An overpayment is sent in the amount of the BT converting on August 15th (the soonest rate hike). My fear is that when interest rates are held constant/all the same, the creditor can apportion as they see fit (reads: apply to the BT converting in Nov/Dec).

Are there are rules that govern how an overpayment is applied with interest rates are equal?

After spinning my wheels trying to make this happen before interest rate D-Day in two months, I concluded the safe play is to sadly wait until the day it converts, then that BT would be the highest rate and an incoming overpayment would necessarily have to be applied to that BT, if that makes sense.

What say you? I was going to give them a call, but, in all honestly, the general collective here often knows their rules more than some random CS rep picking up the phone...but would certaintly call them before payment is sent (trust, but verify).

Re: 3 Balance Transfers on One Card; APRs All Equal; Where Does an Overpayment Go?

Kforce — Wed, 08 Jun 2022 17:47:29 GMT

Interesting question.

Have no idea, but will be following this thread.

Maybe learn something today !

Re: 3 Balance Transfers on One Card; APRs All Equal; Where Does an Overpayment Go?

SoCalGardener — Wed, 08 Jun 2022 18:03:39 GMT

@Fletcher2 wrote:
I believe legislation a number of years ago forced creditors to apply overpayments to the highest interest-bearing liabilities first; however, what happens when the interest rates are all the same and the only variable is the date on which said rates convert to insultingly high rates?

For example:

3 BTs on the books on one card, all at 3.99%
One BT promotion rate ends on August 15th
Another coverts in October, and the third in Nov/Dec
An overpayment is sent in the amount of the BT converting on August 15th (the soonest rate hike). My fear is that when interest rates are held constant/all the same, the creditor can apportion as they see fit (reads: apply to the BT converting in Nov/Dec).

Are there are rules that govern how an overpayment is applied with interest rates are equal?

After spinning my wheels trying to make this happen before interest rate D-Day in two months, I concluded the safe play is to sadly wait until the day it converts, then that BT would be the highest rate and an incoming overpayment would necessarily have to be applied to that BT, if that makes sense.

What say you? I was going to give them a call, but, in all honestly, the general collective here often knows their rules more than some random CS rep picking up the phone...but would certaintly call them before payment is sent (trust, but verify).

Who is 'them'? Which card is this?

Also, 3.99% for a BT is not a good rate! Do you have any other cards that may be offering BTs right now? Perhaps one of them has a 0% BT offer, like all of mine do.

Re: 3 Balance Transfers on One Card; APRs All Equal; Where Does an Overpayment Go?

SouthJamaica — Wed, 08 Jun 2022 18:07:07 GMT

@Fletcher2 wrote:
I believe legislation a number of years ago forced creditors to apply overpayments to the highest interest-bearing liabilities first; however, what happens when the interest rates are all the same and the only variable is the date on which said rates convert to insultingly high rates?

For example:

3 BTs on the books on one card, all at 3.99%
One BT promotion rate ends on August 15th
Another coverts in October, and the third in Nov/Dec
An overpayment is sent in the amount of the BT converting on August 15th (the soonest rate hike). My fear is that when interest rates are held constant/all the same, the creditor can apportion as they see fit (reads: apply to the BT converting in Nov/Dec).

Are there are rules that govern how an overpayment is applied with interest rates are equal?

After spinning my wheels trying to make this happen before interest rate D-Day in two months, I concluded the safe play is to sadly wait until the day it converts, then that BT would be the highest rate and an incoming overpayment would necessarily have to be applied to that BT, if that makes sense.

What say you? I was going to give them a call, but, in all honestly, the general collective here often knows their rules more than some random CS rep picking up the phone...but would certaintly call them before payment is sent (trust, but verify).

The statute is silent as to how the payments are applied if there are multiple balances with different expiration dates but the same interest rate. Here's all it says:

Upon receipt of a payment from a cardholder,
the card issuer shall apply amounts in excess of the
minimum payment amount first to the card balance bearing
the highest rate of interest, and then to each successive balance
bearing the next highest rate of interest, until the payment
is exhausted.

I would imagine they're free to do whatever they want with the overpayments, just as they are free to do whatever they want with the minimum payments. So I guess you need to be sending in overpayments, watching your statements, and comparing them monthly to figure out what the bank is doing. You won't be able to rely on any answer a CSR gives you.

Or you could do what I would do, which is to assume the worst.

Re: 3 Balance Transfers on One Card; APRs All Equal; Where Does an Overpayment Go?

Kforce — Wed, 08 Jun 2022 22:40:48 GMT

@SoCalGardener wrote:

Also, 3.99% for a BT is not a good rate! Do you have any other cards that may be offering BTs right now? Perhaps one of them has a 0% BT offer, like all of mine do.

A little off topic, but I haven't been yelled at in a while.

Depending on amount of monthly payments and other unknowns, many times a higher interest rate cost less than what looks like a lower fee.

Example: $5,000 @ 0% interest, with 3% fee for 12 months = 429.17 month payments and $150 cost. $5,000 @ 3.99, no transfer fee & 429.17/mo payments = 107.96 interest cost. A saving of ~42 dollars with the higher interest and no transfer fee. 3% fee <> 3% interest (Not the same thing)

I equate 2 times the fee as an approx interest rate if paying the loan in 11 months. 3% fee = 6% loan, 4% fee = 8% loan. If making equal monthly payments to pay in less than a year a free 3%-5% loan would save over a 3% fee zero interest with equal monthly payments.

I don't believe many existing cards are offering Zero & Zero. However many do have zero fee and low interest.

Re: 3 Balance Transfers on One Card; APRs All Equal; Where Does an Overpayment Go?

K-in-Boston — Wed, 08 Jun 2022 23:15:01 GMT

Correct. While the Credit CARD Act does stipulate how payments must be applied when it comes to fees, interest, and descending APR, there is no legislation requiring that payments be applied to the earliest expiring promotional balance. In practice, however, every lender I have had multiple balance transfers with has applied payments to the earliest expiring promo when they are at the same rate. If OP can state who the lender is, I or someone else can likely verify if they do.

What you do want to watch out for is say you have a 0% APR BT with a 3% fee for 12 months and then 6 months later do a 4.99% APR BT with no fee on the same card; by law the lender must apply all payments toward the 4.99% BT, and unless that is paid off in full prior to the original BT expiring, the 0% will revert to your purchase (or cash advance, whichever is applicable) APR - at which time that balance would then take priority.

Indeed, depending on how payments are applied and how long a BT is carried, higher APR BTs can at times save money over lower APR BTs with no fee. NFCU and BECU still offer targeted 0% APR and 0% fee BTs (and Navy's current offer for new Platinum cards is 0% for 12 months with no fee).

Re: 3 Balance Transfers on One Card; APRs All Equal; Where Does an Overpayment Go?

SoCalGardener — Wed, 08 Jun 2022 23:23:27 GMT

@Kforce wrote:
@SoCalGardener wrote:

Also, 3.99% for a BT is not a good rate! Do you have any other cards that may be offering BTs right now? Perhaps one of them has a 0% BT offer, like all of mine do.
A little off topic, but I haven't been yelled at in a while.
Depending on amount of monthly payments and other unknowns, many times a higher interest rate cost less than what looks like a lower fee.

Example: $5,000 @ 0% interest, with 3% fee for 12 months = 429.17 month payments and $150 cost. $5,000 @ 3.99, no transfer fee & 429.17/mo payments = 107.96 interest cost. A saving of ~42 dollars with the higher interest and no transfer fee. 3% fee <> 3% interest (Not the same thing)

I equate 2 times the fee as an approx interest rate if paying the loan in 11 months. 3% fee = 6% loan, 4% fee = 8% loan. If making equal monthly payments to pay in less than a year a free 3%-5% loan would save over a 3% fee zero interest with equal monthly payments.

I don't believe many existing cards are offering Zero & Zero. However many do have zero fee and low interest.

Nice breakdown! Thanks. None of my cards currently has a zero/zero BT offer; all of mine (that offer BTs) have 0% APRs right now, with fees ranging from 3-5%, and terms ranging from 12-18(?) months. I've been hoping and hoping for a zero/zero to pop up in the near future--all that remodeling/renovating I've done around here lately will soon be catching up with me!

Re: 3 Balance Transfers on One Card; APRs All Equal; Where Does an Overpayment Go?

Fletcher2 — Thu, 09 Jun 2022 09:50:09 GMT

@SouthJamaica wrote:
@Fletcher2 wrote:
I believe legislation a number of years ago forced creditors to apply overpayments to the highest interest-bearing liabilities first; however, what happens when the interest rates are all the same and the only variable is the date on which said rates convert to insultingly high rates?

For example:

3 BTs on the books on one card, all at 3.99%
One BT promotion rate ends on August 15th
Another coverts in October, and the third in Nov/Dec
An overpayment is sent in the amount of the BT converting on August 15th (the soonest rate hike). My fear is that when interest rates are held constant/all the same, the creditor can apportion as they see fit (reads: apply to the BT converting in Nov/Dec).

Are there are rules that govern how an overpayment is applied with interest rates are equal?

After spinning my wheels trying to make this happen before interest rate D-Day in two months, I concluded the safe play is to sadly wait until the day it converts, then that BT would be the highest rate and an incoming overpayment would necessarily have to be applied to that BT, if that makes sense.

What say you? I was going to give them a call, but, in all honestly, the general collective here often knows their rules more than some random CS rep picking up the phone...but would certaintly call them before payment is sent (trust, but verify).

The statute is silent as to how the payments are applied if there are multiple balances with different expiration dates but the same interest rate. Here's all it says:

Upon receipt of a payment from a cardholder,
the card issuer shall apply amounts in excess of the
minimum payment amount first to the card balance bearing
the highest rate of interest, and then to each successive balance
bearing the next highest rate of interest, until the payment
is exhausted.

I would imagine they're free to do whatever they want with the overpayments, just as they are free to do whatever they want with the minimum payments. So I guess you need to be sending in overpayments, watching your statements, and comparing them monthly to figure out what the bank is doing. You won't be able to rely on any answer a CSR gives you.

Or you could do what I would do, which is to assume the worst.

Yea, I woke up early, grabbed some coffee, and downloaded the last 6 statements and doing just that—always try to pay double the minimum, at least, when incurring interest, so I planned to see how the excess payments have been applied in the past.

HOWEVER, I realize that the past doesn't necessarily predict the future, so I can't assume they will be treated the same when they receive a sizable check...could be a trap!

This was just one of those perplexing questions that came to mind...using no-fee NFCU BT as an intermediary, so merely planning to move the money from Discover to NFCU, then back to a new DIscover at 0% to further reduce interest expense.

Re: 3 Balance Transfers on One Card; APRs All Equal; Where Does an Overpayment Go?

Fletcher2 — Thu, 09 Jun 2022 09:54:33 GMT

@Kforce wrote:
@SoCalGardener wrote:

Also, 3.99% for a BT is not a good rate! Do you have any other cards that may be offering BTs right now? Perhaps one of them has a 0% BT offer, like all of mine do.
A little off topic, but I haven't been yelled at in a while.
Depending on amount of monthly payments and other unknowns, many times a higher interest rate cost less than what looks like a lower fee.

Example: $5,000 @ 0% interest, with 3% fee for 12 months = 429.17 month payments and $150 cost. $5,000 @ 3.99, no transfer fee & 429.17/mo payments = 107.96 interest cost. A saving of ~42 dollars with the higher interest and no transfer fee. 3% fee <> 3% interest (Not the same thing)

I equate 2 times the fee as an approx interest rate if paying the loan in 11 months. 3% fee = 6% loan, 4% fee = 8% loan. If making equal monthly payments to pay in less than a year a free 3%-5% loan would save over a 3% fee zero interest with equal monthly payments.

I don't believe many existing cards are offering Zero & Zero. However many do have zero fee and low interest.

Precisely. That's how they landed at 3.99% (and no BT fee). The math made sense at the time. Now I am about to get the majority of my remaining debt to 0% where the 3% fee makes sense, given the longer time horizon to PIF before they convert to insultingly high rates (18 months).

Re: 3 Balance Transfers on One Card; APRs All Equal; Where Does an Overpayment Go?

Fletcher2 — Thu, 09 Jun 2022 10:05:55 GMT

@K-in-Boston wrote:
Correct. While the Credit CARD Act does stipulate how payments must be applied when it comes to fees, interest, and descending APR, there is no legislation requiring that payments be applied to the earliest expiring promotional balance. In practice, however, every lender I have had multiple balance transfers with has applied payments to the earliest expiring promo when they are at the same rate. If OP can state who the lender is, I or someone else can likely verify if they do.

What you do want to watch out for is say you have a 0% APR BT with a 3% fee for 12 months and then 6 months later do a 4.99% APR BT with no fee on the same card; by law the lender must apply all payments toward the 4.99% BT, and unless that is paid off in full prior to the original BT expiring, the 0% will revert to your purchase (or cash advance, whichever is applicable) APR - at which time that balance would then take priority.

Indeed, depending on how payments are applied and how long a BT is carried, higher APR BTs can at times save money over lower APR BTs with no fee. NFCU and BECU still offer targeted 0% APR and 0% fee BTs (and Navy's current offer for new Platinum cards is 0% for 12 months with no fee).

Thanks for the insight. The exercise didn't take me long this morning, as, indeed, it appears Discover has been applying every cent of overpayment to the BT whose promotional rate expires soonest. Very nice (don't tell them, though).

Re: 3 Balance Transfers on One Card; APRs All Equal; Where Does an Overpayment Go?

SouthJamaica — Thu, 09 Jun 2022 12:23:10 GMT

@Fletcher2 wrote:
@K-in-Boston wrote:
Correct. While the Credit CARD Act does stipulate how payments must be applied when it comes to fees, interest, and descending APR, there is no legislation requiring that payments be applied to the earliest expiring promotional balance. In practice, however, every lender I have had multiple balance transfers with has applied payments to the earliest expiring promo when they are at the same rate. If OP can state who the lender is, I or someone else can likely verify if they do.

What you do want to watch out for is say you have a 0% APR BT with a 3% fee for 12 months and then 6 months later do a 4.99% APR BT with no fee on the same card; by law the lender must apply all payments toward the 4.99% BT, and unless that is paid off in full prior to the original BT expiring, the 0% will revert to your purchase (or cash advance, whichever is applicable) APR - at which time that balance would then take priority.

Indeed, depending on how payments are applied and how long a BT is carried, higher APR BTs can at times save money over lower APR BTs with no fee. NFCU and BECU still offer targeted 0% APR and 0% fee BTs (and Navy's current offer for new Platinum cards is 0% for 12 months with no fee).
Thanks for the insight. The exercise didn't take me long this morning, as, indeed, it appears Discover has been applying every cent of overpayment to the BT whose promotional rate expires soonest. Very nice (don't tell them, though).

Once again @K-in-Boston hits it on the head.

Re: 3 Balance Transfers on One Card; APRs All Equal; Where Does an Overpayment Go?

markhs777 — Thu, 09 Jun 2022 21:08:06 GMT

Depends on the FI. All have to apply to the highest interest rate in excess of the minimum payment. In the same interest rate case it's up to the lender. For example PenFed will prorate the payment among the different debts. Example: 3 0% balance transters, 2 for 1k and 1 for 2k. After minimum payment $600 is left so $150 is applied to the 2 1k transfer while $300 to the 2k transfer.

Many FI's will apply all of the excess after minimum payment to the oldest same rate transaction.

if everything is the same rate on the card and only the minimum payment is made it's strickly up to FI as to where it is applied.