topic Re: Avoid interest on purchases made after a balance transfer! in Credit Cards

Tips to avoid interest on purchases made after BT!

Anonymous — Fri, 12 Sep 2014 09:42:47 GMT

This thread is about interest charged on purchases made on a 0% APR balance transfer with an existing non-promotional variable APR on purchases.

Was on the phone for 30 minutes with a Chase CSR to dispute interest fee charged on my account. I am a newbie when it comes to balance transfers and I made one to my Chase Amazon Rewards card. Little did I know there are many hidden information that an average customer would not know, but I'm here to to share my experience so you guys will avoid a interest fee that may be charged. This only applies to a balance transfer on an existing credit card with a variable APR on purchases.

Example: Say you normally PIF for your credit card purchases before the due date to avoid interest being charged. Well hypothetically speaking, if you made purchases in the beginning of the statement cycle for the amount of $200, did a balance transfer for $2,000 in the middle of the cycle, made a payment of $500 a day after, and made purchases of $200 at the end of the cycle this is how a normal person would expect things to be broken down.

- Payment of $500 will knock out $400 worth of purchases and the remainder $100 will be allocated to the $2,000 balance transfer. No interest charged.

This is what really happens.

- The first $200 of the $500 payment will first be allocated to the $200 purchases in the beginning.

- The remaining $300 of the $500 payment will be allocated to the $2,000 balance transfer.

- Your remaining $200 in purchases will be charged interest.

This is where things get super complicated

(Continuing on the previous hypothethical) On the next billing cycle you made a purchase of $100 at a restaurant. You want to the avoid being charged interest so you paid $100 to cover the cost of your purchase on the same day. Unfortunately you will still not avoid interest.

- First part of the $100 payment will go towards the minimum payment for the month (for the balance transfer)

- The rest will go to your purchase at the restaurant and you will be charged interest on the remaining net purchases that was not covered.

Bottom Line

Because of the balance transfer, all purchases made from here on out WILL be charged interest. The only way to avoid interest is not to use your credit card anymore until you first pay off the balance transfer amount. After that, you can start making those purchases again and will have the option to PIF before the statement due date in order to avoid interest on those purchases.

This is what I learned just right now, and if you have time to read it, it will help you in the future! The Chase lady even rewarded $25 in statement credit for the trouble that I had to go through.

Re: Avoid interest on purchases made after a balance transfer!

Anonymous — Fri, 12 Sep 2014 09:34:15 GMT

Exactly the reason why I don't use BT's unless I start with a zero balance on the credit card and don't use the card until the BT is paid up. Most of the posts I have observed on this website obtain credit rates of 11.9% and up.so that rate would get embedded in the 0% BT and cost lots of money. Generally on an initial issue of an account the card will carry a BT rate of say 0% on BTs and 0% on purchases. This works while purchases are set at 0%.

Re: Avoid interest on purchases made after a balance transfer!

Anonymous — Fri, 12 Sep 2014 09:41:12 GMT

@Anonymous wrote:
Exactly the reason why I don't use BT's unless I start with a zero balance on the credit card and don't use the card until the BT is paid up. Most of the posts I have observed on this website obtain credit rates of 11.9% and up.so that rate would get embedded in the 0% BT and cost lots of money. Generally on an initial issue of an account the card will carry a BT rate of say 0% on BTs and 0% on purchases. This works while purchases are set at 0%.

Indeed, hence the best time to do a BT is when you are still in the 0% APR on purchases and have the 0% APR on BT. Another time I can see it will be viable to do one is if you plan on making ZERO purchases on your existing credit card and taking advantage of the 0% APR on BT. But the average Joe will never know these tidbits, hence the credit card company make extra $$$ on us.

Re: Avoid interest on purchases made after a balance transfer!

Anonymous — Fri, 12 Sep 2014 09:47:19 GMT

red_baron - you said it exactly. Over time the financial institutions have offered me lots of BTs but I am very mindful of what you have said. One can get sideswiped by the actual purchases rate embedded in the monthly costs of the BT. You get to pay a 3 to 5% fee for the BT and then get the right of the interest costs that you may not have caught in the offer (purchases apr).

Re: Avoid interest on purchases made after a balance transfer!

Creditaddict — Fri, 12 Sep 2014 14:09:38 GMT

Since the new credit card act it's been this way.

you have $1k on BT

you have $1k in purchase

lets say that makes your minimum $100

so if you wanted to avoid interest you would pay the $100 minimum and then the ENTIRE balance of your purchases = $1100 to avoid interest on your purchases.

but bottom line is you should just rarely if ever mix your BT cards with your purchase cards.

Re: Avoid interest on purchases made after a balance transfer!

JSS3 — Fri, 12 Sep 2014 16:48:07 GMT

This came just in time. Thank You!

Re: Avoid interest on purchases made after a balance transfer!

One7 — Fri, 12 Sep 2014 16:51:50 GMT

Great information

Re: Avoid interest on purchases made after a balance transfer!

Swapmeet — Fri, 12 Sep 2014 17:08:47 GMT

Good information here fellas. I was literally just thinking about this since my freedom offered me 0% bt for a year.

Re: Avoid interest on purchases made after a balance transfer!

Anonymous — Sat, 13 Sep 2014 05:49:04 GMT

@Swapmeet wrote:
Good information here fellas. I was literally just thinking about this since my freedom offered me 0% bt for a year.

I have 3 Chase cards all which I recently did a BT on. Guess all of those cards will be out of commision until I pay everything off in 2015!

Re: Avoid interest on purchases made after a balance transfer!

sexy_kitten7 — Sun, 14 Sep 2014 11:24:43 GMT

Exactly! Credit cards can be quite confusing tools!

As another poster alluded to, the CCC can put your min payment toward whichever balance it wants (hint: the lowest APR), but any payment in excess of the min must be applied to the highest APR balance.

Remember that in the 1k BT+1k purchase example, the 1k purchase balance would also accumulate interest from the day the charges posted, as the BT precludes any grace period since you are revolving 1k at 0% APR.

Re: Avoid interest on purchases made after a balance transfer!

lhcole77 — Sun, 14 Sep 2014 14:36:11 GMT

I don't think this is the case at BofA. They apply minimum payment to lowest APR, then rest of payment to highest APR.

Edit: I may have misread previous comments. Oops.

Re: Avoid interest on purchases made after a balance transfer!

trumpet-205 — Sun, 14 Sep 2014 14:36:16 GMT

@lhcole77 wrote:
I don't think this is the case at BofA. They apply minimum payment to lowest APR, then rest of payment to highest APR.

That's how every personal credit card is handling the payment. It is part of the CARD Act.

The only way to avoid paying interest on purchases on a card that is carrying BT is to pay off the purchase amount + minimum payment on day 1. Remember without grace period interest is calculated from day 1.

Re: Avoid interest on purchases made after a balance transfer!

lhcole77 — Sun, 14 Sep 2014 14:42:26 GMT

Gotcha! Thanks, trumpet.

Re: Avoid interest on purchases made after a balance transfer!

Anonymous — Sun, 14 Sep 2014 17:36:10 GMT

@lhcole77 wrote:
I don't think this is the case at BofA. They apply minimum payment to lowest APR, then rest of payment to highest APR.

Edit: I may have misread previous comments. Oops.

Chase actually follows the same methodology of first applying the minimum payment to the lowest APR (Balance Transfer) and then to the highest APR (Purchases).

Re: Avoid interest on purchases made after a balance transfer!

lhcole77 — Sun, 14 Sep 2014 18:22:29 GMT

I guess I've always just interpreted this as it not being a good idea to use a balance transfer card and make purchases at the same time because the majority of the payment would go to pay off purchases, leaving the balance transfer amount, resulting in not being able to pay that down within the promo period. And then before you know it your 12, 15 or 18 months at 0% is over and you still have a balance from the original BT offer.