Direct Deposit Balance Transfers

[Anonymous]

Looks like the balance transfer card for Discover is 0% interest for 18 months with a 3% transfer. How does that even work? Do you send them a statement from the credit card you've used the funds for?

Or are you essentially getting an 0% 18 month personal loan for a 3% fee?

I can't even wrap my head around that, it boggles the mind. 

[Anonymous]

It is essentially a 3% fee 0% APR short term personal loan. 

[K-in-Boston]

Yep, that's exactly what it is.  An 18 month loan at 0% with a 3% fee up front.  (Which is exceptional, I might add.  I usually only see 12 months at 0% and 18 months at 4.99% from them.)  You can use it for whatever you want.  The "catch" is that if you don't pay it off or transfer it elsewhere before the promo period ends, you'll begin to accrue interest at a high APR.

[Anonymous]

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@K-in-Boston wrote:

Yep, that's exactly what it is.  An 18 month loan at 0% with a 3% fee up front.  

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Basically a cash advance with no catches beyond the regular not paying it off pitfall.

That sounds literally insane. I know it's not, but it sure does feel like it. 

[K-in-Boston]

They're great for us as consumers, but for the credit card issuers it's also profitable.

If you have $5000 sitting on Amex, Discover's not making anything from that.  If you pay a 3% fee, that entices you to pay them a $150 fee to move it over to them.  Consider that they likely have hundreds of thousands of people doing so each year and that adds up to a lot of money.

A majority of people will either not pay the entire balance off by the end of the promotional period or transfer it to another card (many people are not in a position to do so), so there's interest to be made from many consumers at a high APR on the remaining balance. 

Finally, if you did not pay your previous statement balance in full including any balance transfers you have lost your grace period on new purchases.  So any new purchases will start accruing interest from day one.

[Anonymous]

If you want your mind boggled even more, how about a 0% for 12 months and no transaction fee,  up to your total credit line, direct deposited into your checking account.  That wasn't uncommon in 2007 and 2008. I've done it several times. As a matter of fact you could call a CSR for something totally unrelated, and the CSR would say, anything else I can help you with, how about a 0% APR, no transaction fee, for 12 months,  direct deposit into your checking account. We can do it right over the phone. BoA was great for that line. I've done 35.5K on BoA twice, Citi for 31K once or twice, and another card.

But then the financial crisis came, the CARD act became law, and that's all she wrote. 

[K-in-Boston]

A few notable lenders still make those $0 fee and 0% APR offers from time to time. Navy Federal Credit Union and Comenity (on V/MC cards) come immediately to mind. Also available with new accounts on BankAmericard, EveryDay, and Slate.

[Anonymous]

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@K-in-Boston wrote:
A few notable lenders still make those $0 fee and 0% APR offers from time to time. Navy Federal Credit Union and Comenity (on V/MC cards) come immediately to mind. Also available with new accounts on BankAmericard, EveryDay, and Slate.

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I'm hoping we see more of them again with existing cards. But I'll never do what I did back then. Have them going on 2 or 3 cards at once,  and have a total utilization of 70-80% and risk AA. I was lucky that didn't happen. But I could earn 5% on that money, I can get only 2.3% now.

[redheadtempe36]

Wells Fargo offered something similar to me once.  15 months at 0% with a 4% fee.  I could have the money just transferred to my checking account.

[AverageJoesCredit]

This is my favorite method of Bt. Straight to your account, YOU can then pay off your lender you want to bt away from as if it were a regular payment. No need to wait a week or more for them to send check out to a lender. Comenity is well known for 0% apr $0 fee, though that is unobtainable for me