topic Re: A BT dilemma in Credit Cards

A BT dilemma

too-much-time — Mon, 23 Sep 2013 03:31:43 GMT

A few months ago I picked up a nice rate on a promotional balance transfer, which posted on a card I don't use during this time, since any charges will accrue interest until the transfer has been paid. But it just occurred to me that the annual fee is coming up! So I was wondering if this fee is different from charges and will be paid before anything else.

Re: A BT dilemma

myjourney — Mon, 23 Sep 2013 04:30:21 GMT

@too-much-time wrote:
A few months ago I picked up a nice rate on a promotional balance transfer, which posted on a card I don't use during this time, since any charges will accrue interest until the transfer has been paid. But it just occurred to me that the annual fee is coming up! So I was wondering if this fee is different from charges and will be paid before anything else.

Bump for help with a very good question

Re: A BT dilemma

lg8302ch — Mon, 23 Sep 2013 05:49:02 GMT

hmm...Interesting question. Did you already call your lender ?

Re: A BT dilemma

Creditaddict — Mon, 23 Sep 2013 06:39:42 GMT

Any payment above the minimum payment will be applied to charges at the highest interest rate... in this case any purchase... so just pay your minimum for the month plus the annual fee billed and you will continue to pay no interest.

The exception to the rule is business cards... they did not get put in with the card act that made this new rule apply for new charges being barried under low interest, etc.

Re: A BT dilemma

too-much-time — Mon, 23 Sep 2013 22:45:44 GMT

Thank you, that's news to me, but good!

Then there's the nagging concept of average daily balance. Even though the BT is at 0% APR, the loan still constitutes a carried over balance, so I was wondering if you have to pay a one-time interest on the annual fee.

Re: A BT dilemma

Anonymous — Tue, 24 Sep 2013 04:21:34 GMT

@Creditaddict wrote:
Any payment above the minimum payment will be applied to charges at the highest interest rate... in this case any purchase... so just pay your minimum for the month plus the annual fee billed and you will continue to pay no interest.
The exception to the rule is business cards... they did not get put in with the card act that made this new rule apply for new charges being barried under low interest, etc.

Are you sure about this? My bet would be that the annual fee will have an interest rate less than or equal to the rate that the promotional offer will have when it ends. Even though the person is temporarily paying 0% on the balances (for the promotional period) the credit card company will look at the non-promotional rate in deciding which balance to pay. This way, they can apply the person's payment to the 0% balance, earn interest on the annual fee, and claim that they are not violating the credit card act. Tricky.

Re: A BT dilemma

Anonymous — Tue, 24 Sep 2013 04:27:11 GMT

This

@Anonymous wrote:
@Creditaddict wrote:
Any payment above the minimum payment will be applied to charges at the highest interest rate... in this case any purchase... so just pay your minimum for the month plus the annual fee billed and you will continue to pay no interest.
The exception to the rule is business cards... they did not get put in with the card act that made this new rule apply for new charges being barried under low interest, etc.
Are you sure about this? My bet would be that the annual fee will have an interest rate less than or equal to the rate that the promotional offer will have when it ends. Even though the person is temporarily paying 0% on the balances (for the promotional period) the credit card company will look at the non-promotional rate in deciding which balance to pay. This way, they can apply the person's payment to the 0% balance, earn interest on the annual fee, and claim that they are not violating the credit card act. Tricky.

This is the same reason that you should not make new purchases on a card with a 0% promotional offer, even though the Credit Card Act would lead you to believe that the new charges would be paid off first.

Re: A BT dilemma

Creditaddict — Tue, 24 Sep 2013 04:47:46 GMT

@Anonymous wrote:
This
@Anonymous wrote:
@Creditaddict wrote:
Any payment above the minimum payment will be applied to charges at the highest interest rate... in this case any purchase... so just pay your minimum for the month plus the annual fee billed and you will continue to pay no interest.
The exception to the rule is business cards... they did not get put in with the card act that made this new rule apply for new charges being barried under low interest, etc.
Are you sure about this? My bet would be that the annual fee will have an interest rate less than or equal to the rate that the promotional offer will have when it ends. Even though the person is temporarily paying 0% on the balances (for the promotional period) the credit card company will look at the non-promotional rate in deciding which balance to pay. This way, they can apply the person's payment to the 0% balance, earn interest on the annual fee, and claim that they are not violating the credit card act. Tricky.
This is the same reason that you should not make new purchases on a card with a 0% promotional offer, even though the Credit Card Act would lead you to believe that the new charges would be paid off first.

it's not lead you to believe... it is the way it is now by law on personal credit card accounts.

Now don't be confused with your minimum payment...

If you have:

$1,000 at 0% with a minimum of $100

you charge $500 at regular purchase rate

you would have to pay $600 to keep the account from billing interest on the purchases at purchase rate and pay the minimum as normal.

Re: A BT dilemma

FinStar — Tue, 24 Sep 2013 06:03:19 GMT

@Anonymous wrote:
This
@Anonymous wrote:
@Creditaddict wrote:
Any payment above the minimum payment will be applied to charges at the highest interest rate... in this case any purchase... so just pay your minimum for the month plus the annual fee billed and you will continue to pay no interest.
The exception to the rule is business cards... they did not get put in with the card act that made this new rule apply for new charges being barried under low interest, etc.
Are you sure about this? My bet would be that the annual fee will have an interest rate less than or equal to the rate that the promotional offer will have when it ends. Even though the person is temporarily paying 0% on the balances (for the promotional period) the credit card company will look at the non-promotional rate in deciding which balance to pay. This way, they can apply the person's payment to the 0% balance, earn interest on the annual fee, and claim that they are not violating the credit card act. Tricky.
This is the same reason that you should not make new purchases on a card with a 0% promotional offer, even though the Credit Card Act would lead you to believe that the new charges would be paid off first.

Check with the lender as the standard APR information for revolving balances (regardless if you pay over the minimum to cover the annual fee) will still be considered and apply for any balance/transactions under the purchase APR and would incur or be subject to finance charges. Now, if your card had an offer of 0% APR for both balances (BT & Purchases), then it would be no issue since both would be under the same terms/calculation until the expiry of such promotion. However, this is not the case.

Re: A BT dilemma

Anonymous — Tue, 24 Sep 2013 06:07:13 GMT

Wouldn't the fee be charged the regular purchase APR as it does not fall under the category of Balance Transfers, Cash Advances, etc. When you think about it, an annual fee is almost like a purchase, as you are buying the right to use the card for another year...

Re: A BT dilemma

FinStar — Tue, 24 Sep 2013 06:10:03 GMT

@Anonymous wrote:
Wouldn't the fee be charged the regular purchase APR as it does not fall under the category of Balance Transfers, Cash Advances, etc. When you think about it, an annual fee is almost like a purchase, as you are buying the right to use the card for another year...

Correct. The annual fee is billed under the standard "Purchases" category.

Re: A BT dilemma

Creditaddict — Tue, 24 Sep 2013 07:10:53 GMT

I'm pretty shocked how many seem to almost be saying you can't get a non promo balance paid before paying the promo rate because of the bank and applying payments!
Wasn't credit act passed in 2009 or something?

Re: A BT dilemma

Anonymous — Tue, 24 Sep 2013 07:20:09 GMT

@Creditaddict wrote:
I'm pretty shocked how many seem to almost be saying you can't get a non promo balance paid before paying the promo rate because of the bank and applying payments!
Wasn't credit act passed in 2009 or something?

Yes, the law was passed and the banks adapted. They have found a way to work around the rule, at least until the courts slap them down and force them to operate in another way. At some point, if their ways of profiting from balance transfer offers completely go away, you will know it because they will stop making the offers, haha.

You can read my earlier post about how they rationalize paying off the temporary 0% balance before the new purchases and fees that have non-zero APR.

Re: A BT dilemma

too-much-time — Tue, 24 Sep 2013 15:17:48 GMT

@Creditaddict wrote:

so just pay your minimum for the month plus the annual fee billed

Just not ahead of the statement date.

Chase Sets Early Payment Trap, Customer Falls Into It

@Anonymous wrote:

My bet would be that the annual fee will have an interest rate less than or equal to the rate that the promotional offer will have when it ends. Even though the person is temporarily paying 0% on the balances (for the promotional period) the credit card company will look at the non-promotional rate in deciding which balance to pay. This way, they can apply the person's payment to the 0% balance, earn interest on the annual fee, and claim that they are not violating the credit card act. Tricky.

We shall see!

Re: A BT dilemma

FinStar — Tue, 24 Sep 2013 15:41:25 GMT

@Creditaddict wrote:
I'm pretty shocked how many seem to almost be saying you can't get a non promo balance paid before paying the promo rate because of the bank and applying payments!
Wasn't credit act passed in 2009 or something?

I'm not sure why you're shocked. This is no news. Please reference the other folks' posts so you're familiar with how lenders apply specific APRs to multiple balance structures. The Card Act does not apply in these cases.

Re: A BT dilemma

Anonymous — Tue, 24 Sep 2013 18:06:01 GMT

@too-much-time wrote:
@Creditaddict wrote:

so just pay your minimum for the month plus the annual fee billed

Just not ahead of the statement date.

Chase Sets Early Payment Trap, Customer Falls Into It

@Anonymous wrote:

My bet would be that the annual fee will have an interest rate less than or equal to the rate that the promotional offer will have when it ends. Even though the person is temporarily paying 0% on the balances (for the promotional period) the credit card company will look at the non-promotional rate in deciding which balance to pay. This way, they can apply the person's payment to the 0% balance, earn interest on the annual fee, and claim that they are not violating the credit card act. Tricky.

We shall see!

Please let us know what you discover! Good luck!

Re: A BT dilemma

too-much-time — Mon, 17 Feb 2014 18:37:04 GMT

Financial institutions can be so shameless! A Chase card of mine is presently used for a convenience check. The annual fee was posted halfway through its recently completed billing cycle and accrued purchase interest to be posted for the rest of it, although before the statement date I had paid the fee and before the prior cycle’s due date its minimum payment amount. The interest was a fraction of a dollar, but what happens in a month? I hope for nothing, but cannot escape the thought that the payments may have been applied exclusively towards the convenience check.

The answer may well be found in the similar case of the Citi card that brought about this thread. No interest was charged for the following cycle. As for the then present cycle of that card, the annual fee kicked in just before the end of it and triggered a minimum interest fee, which was actually more, half a dollar, than that of the Chase card. Go figure!

Re: A BT dilemma

too-much-time — Sun, 16 Mar 2014 12:05:39 GMT

What happened the following billing cycle is that Chase keeps charging interest for the annual fee. Each full month is still less than a dollar, but the experience serves as a reminder not to charge any purchases to the card.

Re: A BT dilemma

Anonymous — Sun, 16 Mar 2014 19:12:02 GMT

@too-much-time wrote:
What happened the following billing cycle is that Chase keeps charging interest for the annual fee. Each full month is still less than a dollar, but the experience serves as a reminder not to charge any purchases to the card.

Hi, I'm curious, did you pay more than the minumum balance, and if so, was any amount applied to the balance which is not at 0% interest?

Just want to double check my understanding which is that the minimum balance can be applied to any balance (the bank would choose the lowest APR, your 0% promo, to maximize their profit). Then, for any amounts greater than the minimum payment, the Credit Card Act requires them to pay off the highest interest balance... but I think that they will still pay the 0% balance based on it's higher permanent interest rate instead of the 0% temporary promo rate.

Thank you!