Balance Transfers and CLI

[paydownin09]

Is it possible to do a balance transfer from my auto loan onto my BoA AMEX card?  I'm also thinking I would ask for a CLI on this card, and ask them to cap the transfer fee if I get the CLI I want.  Which Back Door number would I use for that?

[Anonymous]

If your loan is with BofA, then they won't do it.  I'm not sure if any credit card company will pay off a car loan with a balance transfer, but I could be wrong.  I do know you can't buy a car with a credit card (at least, not in Pennsylvania).  However, last year I was able to force Chase into transferring a Chase Auto loan at 9.24% to a Chase credit card at 3.99% ( "for life" ) with a balance transfer.  Here's how you do it: 

1.  You'll need a credit card with a $0 balance.  If you have none, a trustworthy friend's, or wife's, or parents' will work, it doesn't matter, as long as it won't be used (temporarily) for purchases. 

2.  Transfer a balance FROM that card to your BofA AMEX.  You'll now owe that amount to BofA, but that other card (I've used Citi cards for this trick) owes that amount to YOU (you have a credit balance).  See, they don't really care where the money is going.  They simply post it to the account you give them.  It doesn't have to be yours, it doesn't have to have a balance.  Just that you now owe it to them.  (I don't have to mention not to use that card with the balance for purchases, do I?)

3.  Request a credit balance refund (Citi lets you do this online).  This can take a few weeks, during which time, don't use that card or you won't get the full amount (i.e., you transferred $1000 from the card, but then made $300 in purchases.  You'll only get a refund of the remaining balance, or $700).

4.  Deposit the check you receive, then pay off your car loan!

The process took just under a month.  I started right after the car loan's due date on one month, and by the next due date, I was all done.  My interest payment went from $80 a month to less than $40, and I'm still making the same total payment.  I got in at just the right time, as I only paid $75 to transfer $11.5K.  Now, most of my Chase balance have no maximums, and the ones that do are $250!  (not to mention much less favorable rates.)

This is the basis of credit card arbitrage, but instead of paying off a higher rate loan, you'd put the money in a bank account where you'd be getting a higher interest rate than the credit card company would be charging (nearly impossible today, what with ING dropping to 1.5% a few days ago.  The 3% transfer fee alone clobbers you.)  However, it's still arbitrage, just not with showing an increase in cash but with less money to pay debt.  In fact, it's actually better, as you don't need to pay taxes on the amount you save!

I have asked BofA about transferring balances before and they always tell me they can't cap or waive the fee, but then, I'm just calling the number on the back of the card (or front, if I'm activating a new one), not a backdoor number.

[CreditAble]

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@Anonymous wrote:

last year I was able to force Chase into transferring a Chase Auto loan at 9.24% to a Chase credit card at 3.99% ( "for life" ) with a balance transfer. 

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That was last year.

Can you be sure that Chase will not increase your interest rate, add a monthly fee, or chase your balance down this year or next?

I am not so sure exchanging a fixed interest installment loan for a temporary lower interest rate on a credit card is wise in today's credit climate.  

You may be able to survive possible AA on the Chase card, but the OP might not be so fortunate.

For starters do you know where he can get a "for the life of the loan" deal today?

Have you heard about the monthly fees Chase is charging some people who have an old "life of loan" deal?  I hope you are able to continue saving the $40 a month. If you are still making the same monthly payment as the original car loan, I assume that the balance is going down much faster than it did with the old loan.

I would also assume that you are making much more than the minimum payments on the Chase card. People who have only been making the minimum payments on life of balance deals seem to be the ones getting hit with monthly fees and CLDs

Congrats on your smart move with Chase (last year).

With today's options

I am just not so sure that I would want to trade a fixed rate installment loan for a temporary (less than 18 months) lower interest rate and a possible substantial FICO score hit.

By the way people have received AA by playing the BT / credit balance game. They have actually had cards cancelled and in some cases funds frozen for suspicious activity. It seems the practice fits the profile of money laundering. Actually Bank of America is one of the banks that has taken adverse action as the result of suspicious activity. 

As always the "Your Mileage My Vary" disclaimer

should be considered when sharing potentially risky advice. I am not saying that you did not make a wise move in your particular case. I just don't think the OP has much of a chance playing the same game.and reaping the benefits you did.

The basic tenet of credit card arbitrage is always have the cash sitting somewhere (earning a profit) ready to be used to PIF if the credit card issuer pulls a gotcha . You may have the funds sitting somewhere to PIF the Chase card in full but you don't know if the OP has the extra cash in savings. If a person doesn't know where he can get the funds to pay off a credit card balance I would be very wary of converting installment loans into revolving loans.

Full disclosure: Over the years I have made quit a bit of money playing the credit card arbitrage game. I never endorsed using the credit balance refund technique because of the risks of AA involved. There are much safer ways of transferring balances to checking accounts. I never did an arbitrage transaction without having the funds to PIF the tradelines that were involved.

[Anonymous]

It was in October that I did this, after the "credit crunch" began.  And I'm assuming the OP already has a BT offer he wants to use; I'm just explaining a way to take advantage of it.

No, I can't PIF if Chase gets pissy, and I've heard about the fees and minimum payment increases, which started happening a few weeks after my BT.  I even called to ask if I'd be affected, but thankfully, they said no, and I have not been so far.

I'm not "saving" $40/month, I'm still paying $240/mo now, as I was before, but more and more is going to principal.  I just got a statement today and they only want $194 now, but I paid them $240 already.

To date, I've had no CLDs, just a few rate increases.

My EQ FICO dropped 3 points when the new balance posted, but went up 3 points when the auto loan reported as cloased with a $0 balance.

Actually, converting secured debt to unsecured debt is wise.  If I stopped paying the auto loan, I would ruin my credit and Chase would take the car.  Now, if I stopped paying, I'd ruin my credit, but the car would stay mine.

How does a credit balance refund lead to AA? 

Message Edited by Mike14 on 03-25-2009 09:00 PM

[CreditAble]

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@paydownin09 wrote:
Is it possible to do a balance transfer from my auto loan onto my BoA AMEX card?  I'm also thinking I would ask for a CLI on this card, and ask them to cap the transfer fee if I get the CLI I want.  Which Back Door number would I use for that?

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Are you considering transferring the whole $10K balance that you owe on the 03 Honda? Is the current credit limit on the Amex substantially greater than $10,000? After reading your posts about the car loan and considering you credit scores I tend to believe that you would do better by paying down your existing CC balances to raise your credit scores some more. 

I would not ask BoA for more credit. You might be risking a CLD. Avoiding revolving debt at all cost in the months to come is a strategy I am encouraging people to consider.

Read some of my recent posts and you might understand a little better why I am cautioning you about your plan.

I have large credit limits with BoA and PIF every month before the statement drops. I am not calling the bank for any reason whatsoever until the FICO forum's members unanimously agree to sound the "all clear" siren.  All clear will definitely not happen this year, and possibly next. If you value your BoA credit line I strongly suggest that you chill for a while, just enjoy life, and work on paying off your debts. This time next year will not be so enjoyable for people who carry a lot of debt. Just my opinion.

I think your screen name says it all. The only real defense for what the banks are doing to the consumer who revolves balances is to PayDown a Lot in09.

EDITED to ADD: I just read that you want to buy a house 12 months from now. You definitely don't need more revolving loan balances, unless you can pay the whole $10,000 Accord balance in less than a year. Others (in the other threads) advised you to pay off your revolving balances first and then pay extra to reduce the Honda loan balance. That was good advice. Asking for a credit limit increase on a $3,000 BoA CC in order to transfer $10,000 of installment debt will not help you obtain a house in 12 months. IMHO

Message Edited by CreditAble on 03-25-2009 11:22 PM

[CreditAble]

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@Anonymous wrote:

(1) No, I can't PIF if Chase gets pissy, and I've heard about the fees and minimum payment increases, which started happening a few weeks after my BT.  I even called to ask if I'd be affected, but thankfully, they said no, and I have not been so far.

(2) I'm not "saving" $40/month, I'm still paying $240/mo now, as I was before, but more and more is going to principal.  I just got a statement today and they only want $194 now, but I paid them $240 already.

(3) To date, I've had no CLDs, just a few rate increases.

(4) Actually, converting secured debt to unsecured debt is wise.  If I stopped paying the auto loan, I would ruin my credit and Chase would take the car.  Now, if I stopped paying, I'd ruin my credit, but the car would stay mine.

(5) How does a credit balance refund lead to AA? 

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(1) I don't necessarily believe that you have to have the funds available to pay off Chase in order for the plan you implemented to make good financial sense. You did bring up arbitrage and used an example of capitalizing on the difference between market rates to earn money. If you borrow money to deposit it at a higher interest rate elsewhere you can actually lose money if the terms for the borrowed funds suddenly change such as an interest rate hike. One usually protects himself against that possibility by being able to return the funds and cancel the debt obligation. It is connected with arbitrage for profit that you would normally want to have the liquid funds to pay of a debt on short notice.

What you have done with the car loan is not arbitrage for profit. In effect you have taken a calculated risk that you could save money by managing your debt repayment in a creative manner. You have been able to save (possibly a lot of) money by taking advantage of the differences in credit card and installment interest rate (market) differences. You obviously know the risks you took when you did the deal. The rewards were so far worth the risk. I most likely would have taken similar measure if I had been your shoes.

You still must realize that you are not out of the woods yet. You may still receive some adverse action. I am sure that you have back up plans. My point was that simply providing the steps that worked for you wasn't necessarily what would work for the OP. It might just be my personal approach, but I try when ever possible to temper my advice with the possibility that others might use it the wrong way and cause themselves harm.

Based upon the wisdom shared in your many posts I am sure that you understand. I frequently have to restrain myself from sharing "tricks of the trade" involving obtaining high credit limits. Some people who want to borrow their way out of debt could really get hurt by employing some of the measures that I use.

 My response to your post was to point out that your technique for lowering debt service cost was probably appropriate in your particular case at a prior time in the credit environment. I strongly doubt that it is a good plan for the OP considering his own  particular circumstances especially in light of today's tight credit market. I chose to respond to your post instead of commenting on your advice directly to the OP because I didn't want to appear to be in disagreement with you about the soundness of your plan as it pertained to you in last year's credit environment.

(2) The bottom line is that you are saving money and you are paying your car loan balance off faster then if you had not done the BT. Of course there is no need to bank the savings or deposit some money to earn interest elsewhere. You are getting the maximum benefit from paying as much as you can to reduce your credit card debt.

(3) Just how did Chase justify interest rate increases on a life of the balance rate offer? Did Chase give you some kind of ultimatum in order to voluntarily accept a rate increase? In any event a rate increase is exactly the kind of AA that can turn the installment loan for credit card swap into a reversal of the favorable market place arbitrage advantage. How high did Chase increase your rate?

(4) Converting secured to unsecured debt is wise if a person has to consider the possibility that he might have to default on his loans. Trading one installment loan for credit card debt can however hasten default on all loans held by a consumer, especially in this era of CLDs leading to high utilization, lower credit scores and subsequent higher inertest rates on all tradelines.

(5) Some banks, especially BoA frowns upon people having large credit balances. They claim that it is suspicious activity and may be a sign of money laundering . It is common knowledge among people who play the BT for profit game that asking for checks for refunds of credit balances frequently may lead to account closings or worse. The risk of AA is just a risk factor that some people accept as part of the game. I personally do not chose to take that risk.

[Anonymous]

(4)  Sorry, I wasn't very clear about this.  Chase didn't raise my rate on the "life of the balance" offer.  Several of my other cards' rates went up due to changes in their agreements (ie, in preparation of not being able to raise the rate when I have a balance, in the future), not as AA.  But except for the Chase card with the car loan balance, and a card that's at 0% until January 2010, I never carry a balance, so a rate increase isn't much of a problem.

(5)  You just use the cards that will do a transfer directly into a bank account?  I've just been afraid it'll end up being classified as a cash advance.  Also, I've only seen Citi offer this. 

[Itsmeagain]

I just used my BoA 0% BT to pay off my car.  I called the number on the card, told them what I wanted to do and was told to simply write one of their BT checks to myself, deposit it in my checking acct. and pay of the car . . . which I did . . . ($4,000).  That was in January.  I haven't used the BoA card for anything else and am paying it down at $400/mo.  It will be paid off before the 0% BT rate changes.  The down side is that I took a 20 pt. score hit because that was my only installment acct. and now all I have are CC's.  However, BoA is the only one showing a balance since I PIF the others before statement cuts.  Good news is that in March my FICO ROSE 27 pts.  So, I'm no longer paying 21% on the car and have my score back.  Here's my cc portfolio:

BoA (7500) bal. 3600

Discover More (5500) bal. 0

Chase (5000) bal. 0

Amex Gold (no set limit) bal. 0

Hooters M/C (2800) bal. 0

Best Buy M/C (1250) bal. 0

Best Buy Store (4200) bal. 0

Macys Visa (3000) bal. 0

Macys Store (1300) bal. 0

Care Credit (5000) bal. 0

Total: (35,550) . .  bal. 3600 . . . util. 13% and headed for the 800 club (I hope).

[CreditAble]

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@Anonymous wrote:

(

(5)  You just use the cards that will do a transfer directly into a bank account?  I've just been afraid it'll end up being classified as a cash advance.  Also, I've only seen Citi offer this. 

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Whenever I transfer 0% BT funds to my checking account, I first call a CSR to verify that the BT check will be treated as a BT and not cash advance. I then call back immediately and verify with a different CSR. I make sure I get names and promo code offer numbers. I also save the written terms of the offer.

 On some occasions I found CSRs who didn't understand the written offer rules correctly themselves and disagreed with my interpretation of the permissibility of doing a 0%b BT to my checking account. I would then escalate to supervisors and eventually obtain my confirmation that the BT would not be treated as a cash advance. I have never been bitten yet.

Both Bank of America and Chase have allowed me to transfer BTs to my checking and still get 0% rates. The safest way in my opinion is to have the CSR do the transfer instead of using checks. On some occasions I have gotten the offer as a convenience check which was treated as a BT from BoA and Chase. At least once Chase would not treat the transfer as a BT if done over the phone with a CSR. That was the case when I received a convenience check for a new Chase credit card with a 0% offer for 15 months. I was definitely holding my breath until that BT convenience check from the welcome package showed up with no interest charges after my first statement posted. 

Generally Chase can be relied upon to send a convenience with the welcome package for a new credit card. Those checks are usually treated as BTs if there is a BT offer.

I like using the checks (to put funds into my checking) instead of transferring balances as 0% offers expires. The banks have records of me paying off the balances from my checking account and not as transfers of debt to other credit cards. I have not received any AA yet, although I am prepared for the inevitable. When my last 0% offer expires in November I anticipate cooling it for a while. Then again if I still get another nice offer for free money......

[YoungEntrepeneur]

This will DEFINITELY raise red flags.