topic Re: Little Trick On Avoiding BT fees in Credit Cards

Little Trick On Avoiding BT fees

Jazee — Tue, 12 Nov 2024 17:52:32 GMT

If you have a card with no cash advance fees (ie USAA and NFCU) Just Cash Advance then pay the other card with it. You incur interest for a couple days but it insignificant compared to a 3-5% BT fees.

Re: Little Trick On Avoiding BT fees

mgood — Tue, 12 Nov 2024 18:25:30 GMT

I've done similar with PenFed, but I think they've stopped allowing cash advances on demand.

Re: Little Trick On Avoiding BT fees

ptatohed — Wed, 13 Nov 2024 06:58:00 GMT

Why is the interest only for a couple of days?

Re: Little Trick On Avoiding BT fees

learningtheropesofcredit — Wed, 13 Nov 2024 08:42:12 GMT

@Jazee I agree with @ptatohed - why (or rather how) do you only incur interest for a couple of days with your strategy?

You said: "If you have a card with no cash advance fees (ie USAA and NFCU) Just Cash Advance then pay the other card with it. You incur interest for a couple days but it insignificant compared to a 3-5% BT fees."

If you, let's say, have a credit card with $10k on it and you want to balance transfer that to a card with a lower APR (or, more realistically, a 0% APR for x term credit card with a 3-5% BT free) . You would balance transfer that to the other card, and the balance for the term (let's say 18 months at 5%) would be $10,500.

With your plan, you'd cash advance that from your (let's say NFCU Platinum card at the lowest APR 11.49%). Now, even with no cash advance fee, it's collecting interest from day one. This is where your idea, I (and I assume @ptatohed ) don't get it. That balance is there. Where is the money coming from to pay it off after a few days to only have a few days of interest? Basically, if you have the $10k to pay off the first card, why balance transfer or cash advance? If you don't, then your way seems way more expensive, at least compared to a 0% BT offer with a 5% fee.

What am I missing with your plan?

Thanks.

Re: Little Trick On Avoiding BT fees

md_rebuild — Wed, 13 Nov 2024 14:46:48 GMT

My thoughts exactly. I just opened a card with an offer of 0% interest on BT for 18 months, at the cost of 5% fee.

So, if I move $5K from another card to this one, then it costs me $250, but given that the card that it's been transferred from was charging 18%, then, I'm saving money after the first month or two.

Like the above poster said, the only way you're not paying interest is if you pay off the balance immediately. And if you're doing that, then why not just pay the first credit card.

Re: Little Trick On Avoiding BT fees

FicoMike0 — Wed, 13 Nov 2024 16:54:33 GMT

@Jazee

I think you have a lot of us interested. I'm a little slow on the uptake, could you give more detail? Is nfcu or USAA the bt target, or an intermediary? Maybe you could give us an example? Much appreciated.

Re: Little Trick On Avoiding BT fees

AzCreditGuy — Wed, 13 Nov 2024 19:45:59 GMT

Ive done this with Cap 1 and actaully had the money deposited into my bank account. They are terrible though the interest starts right away with them

Re: Little Trick On Avoiding BT fees

Kforce — Wed, 13 Nov 2024 20:20:10 GMT

I played with the math for fun:

BT of = $5000 (Amount makes no diff)
BT Fee = 3,4,5% : F = [(B*0.03),(B*0.04),(B*0.05)] = 150, 200, 250
Daily Int Loss 20% rate : D= (B*(0.2/360)) = $2.78
Day's interest loss <= fee's: F/D = 54, 72, 90

So one has month's not a few day's that can be less than BT fee's.

Re: Little Trick On Avoiding BT fees

Jazee — Thu, 14 Nov 2024 01:06:57 GMT

@AzCreditGuy wrote:
Ive done this with Cap 1 and actaully had the money deposited into my bank account. They are terrible though the interest starts right away with them

That is standard. I know if know back that doesn't have that policy with cash advanced. BT in a lot of cases take 5 business days or less. Even if they took 10 days, 10 days of interest at 30% is 0.83% and most BTs cost minimum 3% if not 4 or 5%.

Re: Little Trick On Avoiding BT fees

Jazee — Thu, 14 Nov 2024 03:01:28 GMT

@Kforce wrote:
I played with the math for fun:

BT of = $5000 (Amount makes no diff)
BT Fee = 3,4,5% : F = [(B*0.03),(B*0.04),(B*0.05)] = 150, 200, 250
Daily Int Loss 20% rate : D= (B*(0.2/360)) = $2.78
Day's interest loss <= fee's: F/D = 54, 72, 90
So one has month's not a few day's that can be less than BT fee's.

You misunderstood my post unless you are replying to someone else. I wrote you incur interest for a few days just to acknowledge interest is charged in cash advanced immediately but even at 30% APR even if it takes a few days to pay the target card the intersest charge is essentially insignificant. Thanks for posting the math.

Re: Little Trick On Avoiding BT fees

Jazee — Thu, 14 Nov 2024 01:13:19 GMT

@AzCreditGuy wrote:
Ive done this with Cap 1 and actaully had the money deposited into my bank account. They are terrible though the interest starts right away with them

That is standard. I know if know back that doesn't have that policy with cash advanced. As @Kforce points out if you pay the target card right away you incur a pretty insignificant interest charge.

Re: Little Trick On Avoiding BT fees

Anonymous — Thu, 14 Nov 2024 01:20:27 GMT

@Jazee wrote:
@AzCreditGuy wrote:
Ive done this with Cap 1 and actaully had the money deposited into my bank account. They are terrible though the interest starts right away with them
That is standard. I know if know back that doesn't have that policy with cash advanced. As @Kforce points out if you pay the target card right away you incur a pretty insignificant interest charge.

I think what we (most of us!) don't get is what happens next....

You have CC1 with a balance you want to pay

You have CC2 which normally you would use for a BT to pay off CC1 but you do a cash advance instead. Yes, a few days interest can accrue on CC2 before CC1 is paid off, but then you still have a CA on CC2 getting charged interest on a daily basis. I guess if the APR for CA on CC2 is less than the normal interest on CC1 this might be a win.

Re: Little Trick On Avoiding BT fees

mgood — Thu, 14 Nov 2024 01:31:36 GMT

@Anonymous wrote:

I guess if the APR for CA on CC2 is less than the normal interest on CC1 this might be a win.

That's what I've done, and what I meant when I said I'd done similar with PenFed. Paying off a higher interest card with a lower interest PenFed card, because they had no cash advance fees.

The slower method without cash advances or BTs would be to put all your spend on the lower interest card while putting all your spare change into paying off the higher interest card. Balance gets "transferred" over time.

Re: Little Trick On Avoiding BT fees

Kforce — Thu, 14 Nov 2024 02:06:45 GMT

@Jazee wrote:
You misunderstood my post

Yes I did.

Still don't understand.

Very confused by what you are doing

Re: Little Trick On Avoiding BT fees

Kforce — Thu, 14 Nov 2024 02:07:41 GMT

@mgood wrote:
@Anonymous wrote:

I guess if the APR for CA on CC2 is less than the normal interest on CC1 this might be a win.
That's what I've done, and what I meant when I said I'd done similar with PenFed. Paying off a higher interest card with a lower interest PenFed card, because they had no cash advance fees.

The slower method without cash advances or BTs would be to put all your spend on the lower interest card while putting all your spare change into paying off the higher interest card. Balance gets "transferred" over time.

This I understand, why !

Re: Little Trick On Avoiding BT fees

Jazee — Thu, 14 Nov 2024 03:06:08 GMT

@Anonymous wrote:
@Jazee wrote:
@AzCreditGuy wrote:
Ive done this with Cap 1 and actaully had the money deposited into my bank account. They are terrible though the interest starts right away with them
That is standard. I know if know back that doesn't have that policy with cash advanced. As @Kforce points out if you pay the target card right away you incur a pretty insignificant interest charge.
I think what we (most of us!) don't get is what happens next....

You have CC1 with a balance you want to pay
You have CC2 which normally you would use for a BT to pay off CC1 but you do a cash advance instead. Yes, a few days interest can accrue on CC2 before CC1 is paid off, but then you still have a CA on CC2 getting charged interest on a daily basis. I guess if the APR for CA on CC2 is less than the normal interest on CC1 this might be a win.

Yes that is how a balance transfer always works whether you do a direct BT card to card and pay the BT fee or you do a cash advance on the target card you want to transfer to and just pay the other card manually with the cash. The key is the majority of banks also charge a cash advance fee so I'm that case this strategy doesn't work but some banks have a balance transfer fee but no cash advance fee. USAA is one example.

Re: Little Trick On Avoiding BT fee

Spotsy — Sat, 16 Nov 2024 21:57:39 GMT

I think the OP should mention the 'trick' is useful if you need to transfer a balance from a card, lets say a Synchrony card, that has an soon expiring promo purchase and the balance is going to back charge/accrue interest from date-of-purchase , you haven't paid it off in full, AND only need a few more months to pay it off....I can see this 'trick' being of use. The interest rate on cash advances is so much higher then a BT rate with a fee...the 'trick' only makes sense in specific scenarios....not as a governing principal to avoid a BT fee.

Even if the cash advance rate is only 18%, but a BT fee is 4% with the BT rate at 0% to 5%...it only benefits you use the 'trick' in a scenario mentioned above...else pay the BT fee and BT to the lower rate and keep paying it down asap. Overall this 'trick' is only useful for BTs that you simply need a couple to 4 months of the cash....definitely not long term. Also remember that cash-advances are a red flag to many issuers...may get an AA after the dusts settles.