Balance Transfer Tips for Newbies

[chalupaman]

There are all sorts of things I've always wanted to know about balance transfers and I also want to know if there are any risks associated with them and would it also be another HP to do? My BoA card comes with a balance transfer offer and maybe since I'm not gonna use my Discover It as much and that card is at a lower limit, maybe I can transfer that over to the BoA one but none of this is set in stone yet. Also my Discover's 0 intro APR for six months is coming to an end so there's another reason there.

[Anonymous]

No HP unless asking for CLI to do transfer with.

[chalupaman]

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@Anonymous wrote:
No HP unless asking for CLI to do transfer with.

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Alright. It's one of the reasons I've never done a balance transfer to begin with. Afraid of having to deal with another HP but I'm glad that won't typically happen. I also hope I don't scare BoA by doing this. I'm doing 100 from my Discover card and a 100 from my Newegg so the utilization on the BoA card will be about 22%.

[Anonymous]

The biggest tip I can give you is not to spend ANYTHING on the balance transfer card. Most have high interest rates for new purchases. Some might waive interest on new purchases for 6 months, but will charge you a high rate post-6 months. You don't want to be stuck with a no-interest 15-18 month balance transfer and have another 2-3k of purchases you made after the transfer that get 22% interest after 6 months. All payments will generally go towards the balance transfer first (lowest interest paid first usually), so you will be paying high interest on any new charges until the card shows a zero balance. Simply put, if it is a balance transfer card, put it in a sock drawer. It should be a zero spend card till you pay off the transferred amount. 

Also be careful with transfers. People who need them due to one time emergencies are fine. But those who make a habit of overspending could easily get themselves mired in more debt on their old cards after transferring the balance out to the newly acquired credit cards. Balance transfers with 0% interest for 15-18 months (the new range I think) are awesome if you handle them responsibly. 

[Simply827]

Wouldn't it be a better idea to just pay off the $200 instead of transferring it?

[chalupaman]

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@Simply827 wrote:

Wouldn't it be a better idea to just pay off the $200 instead of transferring it?

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Good point. Already went through with it though. My overall utilization is around 7% right now but it was just annoying having to deal with a lower limit Discover card being near 30% utilization and I wanted to have lower monthly payments for the tablet I'm financing as well. And it's 0 APR until next October.

[Anonymous]

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@Anonymous wrote:

The biggest tip I can give you is not to spend ANYTHING on the balance transfer card. Most have high interest rates for new purchases. Some might waive interest on new purchases for 6 months, but will charge you a high rate post-6 months. You don't want to be stuck with a no-interest 15-18 month balance transfer and have another 2-3k of purchases you made after the transfer that get 22% interest after 6 months. All payments will generally go towards the balance transfer first (lowest interest paid first usually), so you will be paying high interest on any new charges until the card shows a zero balance. Simply put, if it is a balance transfer card, put it in a sock drawer. It should be a zero spend card till you pay off the transferred amount. 

Also be careful with transfers. People who need them due to one time emergencies are fine. But those who make a habit of overspending could easily get themselves mired in more debt on their old cards after transferring the balance out to the newly acquired credit cards. Balance transfers with 0% interest for 15-18 months (the new range I think) are awesome if you handle them responsibly. 

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The wife and I had a spend to meet on our PRG's for the 25k pts for 2k spend. Met it within one month.

I paid half the wife's, my full balance off from our main bank account, and paid the other half of the wife's off with a BT from our Citi DP to not dip into our savings (We DO have other obligations.) That'll be paid off within a couple months (Meeting spend on a CSP, and SWA now.)

[rlx01]

Payments always apply to the highest interest first.

[jsucool76]

Not sure that is true with every lender @rlx01

I've always thought that Minimum payment always go to the LOWEST Apr balance with most lenders, and then any payment made in excess of the minimum will be applied to the higher Apr balance.

Balance transferring $200 probably wasn't the best idea, you just paid a bt fee on a balance that is mostly negligible. I understand you don't want your util up, but you don't want to get in the habit of balance transferring instead of paying. You're still responsible for that $200 (and now the BT fee which is subject to your current standard Apr, meaning your first month you need to pay your minimum payment, plus balance transfer fee).

[JSS3]

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@jsucool76 wrote:

@Not sure that is true with every lender @rlx01

I've always thought that Minimum payment always go to the LOWEST Apr balance with most lenders, and then any payment made in excess of the minimum will be applied to the higher Apr balance.

Balance transferring $200 probably wasn't the best idea, you just paid a bt fee on a balance that is mostly negligible. I understand you don't want your util up, but you don't want to get in the habit of balance transferring instead of paying. You're still responsible for that $200 (and now the BT fee which is subject to your current standard Apr, meaning your first month you need to pay your minimum payment, plus balance transfer fee).

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I spoke to a Capital One rep recently and she told me whatever is left over after meeting your minimum is applied to your highest APR.