Discover Card Balance Transfer & Purchases

[Anonymous]

Discover has a balance transfer option for me of 0% for 12 months. I would like to take advantage of this offer by transferring a balance from my AMEX BCE card that has a 0% purchase promotion coming to an end.  I'm basically just wanting to extend the 0% out a little further into next year as I had a big unexpected expense (broken HVAC) that I'd just like to make payments towards.

My question is regarding how purchases work.  I would still like to use my card to take advantage of their 5% categories (such as Restaurants next quarter).  I contacted Discover customer service and discussed with them and this is what they told me, but I still wanted to see if anyone in the forum has had specific experience with this and can confirm what the rep told me.

She stated that when a payment is applied, it's applied to the minimum payment first, then what is over that gets applied to the higher APR categorized items (which would be purchases), then anything left in the payment amount after that gets applied back to the balance transfer "balance remaining".  

For example, here is the scenario and details of my card's setup:

FICO Scores: EQ 765 | TU 785 | EX 784

• Card brand: Discover it

• Card age: 14 months

• Credit Limit: $19,500

• Due Date each month: 2nd of the month

• Statement close each month: 3rd of the month

• No special purchase APR (expired in July)

I will use the month of August as an example.

In July, I complete a balance transfer of $2000

August 3rd: Statement closes with $2000 balance / minimum payment due is $50

August 5th - 25th: I make purchases to the card totaling in the amount of $250

August 31st: I make a payment of $500 (Due Date is Sept 2 / Statement closes Sept 3)

From my understanding from talking to the rep:

Of the $500 payment

1. $50 is first applied to the minimum payment due

2. $250 is then applied to the amount of purchases I made

3. $200 is then applied to the balance transfer "remaining balance" (in this example $2000)

On Sept. 3, my statement closes and shows a new balance of $1750 and I received 5% cashback on the $250 (we will assume it's all 5% category purchases).  

Is that scenario correct?  If I make payments large enough to cover both the minimum due and purchases made before the statement closes, then I don't pay interest on those purchases?

[K-in-Boston]

That would be correct for the first statement that you make new purchases.  After the statement has closed, if you do not pay the balance in full, including new purchases and the balance transfer, you will lose your grace period on new purchases.  So anything that posts after the statement has closed will begin to accrue interest immediately, and there will be trailing interest going forward between the time of your statement closing and the payment being made.

Depending on your purchase APR and other cards you have in your wallet, it may still work out better to keep using the card for 5% categories, but in general it is ill-advised to use a card for new purchases once a balance transfer is on there.  An exception would be if you were under a 0% balance transfer and 0% for new purchases introductory offer as offered on many credit cards when you first get them for a period of 12-21 months.

I would also double-check your statement closing and due dates.  I don't recall ever seeing a Discover card with a closing date only one day after the due date.

[Anonymous]

I understand. I think what I will do is simply do the transfer and then not use the card until the balance transfer is paid off.

I have never attempted a Discover card balance transfer, so I was cloudy on their policy. I know with my Capital One card's balance transfer offers, you can make purchases with a balance transfer on it as long as you make their "Interest Saver" payment (and that has always worked for me). I was unsure if Discover had the same feature.

To confirm, since I won't be making any purchases, that doesn't count towards any AA for inactivity, correct? I assume not, since there is a balance, but want to be sure since it will be purchase free for approximately 10 months.

Also, I double-checked and yes, since it's start, my Discover statement closes one day after my due date. The due date is always the 2nd and the statement closes on the 3rd, with the statement alert & available to view on the 4th.

[K-in-Boston]

Wow, that's cutting it close in case a payment were ever late.  Discover's BTs are pretty seamless.  I love the direct deposit option, and usually see the money in my checking account within 48 hours.  There is no interest saver option; that one is unique to CapOne.  Any activity counts as activity, including payments, so nothing to worry about.

[Anonymous]

I thought it was close too. It's the only credit card I have that closes the day after the due date.

Thank you for your advice!