How do Balance Transfer Payments Work?

[Repairman]

It's been a very long time since I did a balance transfer. Can someone update me? If I do a 0% APR balance transfer to a card, but also post regular charges to the same card each month at a higher APR, how are payments applied? Is it that the minimum amount due will go toward the balance transfer and the rest of the payment made go toward the new charges? And if that's the case, how about payments made before the statement cuts and no minimum amount is due yet?

[NRB525]

Yes, your basic allocation is correct. 
It gets nuanced as "lowest APR set gets the minimum payment, then higher payment amounts start getting applied to the highest APR, then stepping to lower APR, within the same monthly payment cycle."

If you have a BT balance and add regular charges, then each month as soon as the statement prints, you can pay the minimum payment off that statement. This applies to the BT balance, but it sets you up to then be able to pay new charges after they have posted, since you are now paying more than the minimum payment. You basically set your payments to minimize the time new charges are incurring daily interest charges. 

It depends on the bank how close to zero interest you can get. Capital One is likely pretty easy, but others like US Bank will charge $1.50 minimum interest to the periods. I've had cases where I had to call US Bank to get the minimum interest stopped, after I had stopped using the card for new charges, because the minimum interest kept cycling itself, even after I tried paying it immediately after statement cut.  

If you have a card that earns good rewards, this can make sense, to have the BT and continue to charge. If no rewards, however, this is where the suggestion is made to use another card with interest grace period, to make it easier to avoid the interest charges, to keep the BT pristine.   

[Repairman]

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@NRB525 wrote:

Yes, your basic allocation is correct. 
It gets nuanced as "lowest APR set gets the minimum payment, then higher payment amounts start getting applied to the highest APR, then stepping to lower APR, within the same monthly payment cycle."

If you have a BT balance and add regular charges, then each month as soon as the statement prints, you can pay the minimum payment off that statement. This applies to the BT balance, but it sets you up to then be able to pay new charges after they have posted, since you are now paying more than the minimum payment. You basically set your payments to minimize the time new charges are incurring daily interest charges. 

It depends on the bank how close to zero interest you can get. Capital One is likely pretty easy, but others like US Bank will charge $1.50 minimum interest to the periods. I've had cases where I had to call US Bank to get the minimum interest stopped, after I had stopped using the card for new charges, because the minimum interest kept cycling itself, even after I tried paying it immediately after statement cut.  

If you have a card that earns good rewards, this can make sense, to have the BT and continue to charge. If no rewards, however, this is where the suggestion is made to use another card with interest grace period, to make it easier to avoid the interest charges, to keep the BT pristine.   

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If I make payments before the statement  cuts can I pay down the new charges? In other words, say I have a $3000 bt and charge $1000 on top of that in a month. Before the statement cuts, can I pay $1000 and it will be used only toward the new charges? And then after the statement cuts I can pay another $500 that will go toward the bt?

[NRB525]

Well, you can't pay only $1,000 and have all that applied only to new charges. You need to also pay the $35 or $50 minimum payment amount. 

Yes you need to pay that $1,000 prior to statement cut, but each day you leave new charges open, they will contribute Daily Interest charges.  So if you wait to pay the $1,000 the day before statement, you'll see the full month of interest on that statement.  

[Repairman]

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@NRB525 wrote:

Well, you can't pay only $1,000 and have all that applied only to new charges. You need to also pay the $35 or $50 minimum payment amount. 

Yes you need to pay that $1,000 prior to statement cut, but each day you leave new charges open, they will contribute Daily Interest charges.  So if you wait to pay the $1,000 the day before statement, you'll see the full month of interest on that statement.  

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I understand that, but what I'm asking is regarding payment when there is no minimum due. For example, say there's only a $3000 bt on the card, the statement cuts, and there's a $35 minimum due. I pay that $35. Then 2 weeks later I charge $1000 to the card. The minimum due is still at 0 because I paid it just 2 weeks prior and another statement hasn't cut yet. At that moment I immediately pay another $1000 to the card (before the next statement cuts and another minimum is due). Does that $1000 payment go completely to the new charges I made? Or will it still split with the balance transfer balance?

[NRB525]

The minimum payment is one amount for the entire "payment due" cycle. It is not for each payment. 

In your example paying the $35 right after statement cut takes care of the minimum payment for the entire period. If you charge $15 two weeks later, then pay $15 as soon as that moves from Pending Charge to Posted Charge, the entire $15 payment would be applied to this new charge. I would tend to pay $16 at that moment, just to have a better chance of canceling out the daily interest charge, but that may just be superstitious on my part. Charging $1,000 and paying $1,000, after you already paid the $35, that scenario  applies the entire $1,000 payment to the new charges. 

We are describing the same thing, I used the $15 amount to try to make the math more obvious

[Repairman]

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@NRB525 wrote:

The minimum payment is one amount for the entire "payment due" cycle. It is not for each payment. 

In your example paying the $35 right after statement cut takes care of the minimum payment for the entire period. If you charge $15 two weeks later, then pay $15 as soon as that moves from Pending Charge to Posted Charge, the entire $15 payment would be applied to this new charge. I would tend to pay $16 at that moment, just to have a better chance of canceling out the daily interest charge, but that may just be superstitious on my part. Charging $1,000 and paying $1,000, after you already paid the $35, that scenario  applies the entire $1,000 payment to the new charges. 

We are describing the same thing, I used the $15 amount to try to make the math more obvious

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Thanks. I'm trying to decide whether I will be doing the scenario I described. I just got a new cc with a killer sign up bonus, the reason I got it, so I obviously will put all my spend on it to get the bonus, but it also offers a great 0% APR for balance transfers, which would be nice to use, but as you stated in another reply that could get a little messy, so I'm not exactly sure yet what I'm going to do. 

[tcbofade]

In the past, I've used the card for purchases, hit the SUB requirement, paid it to zero, and THEN did a balance transfer if that helps you any.

It shortens your windown to complete both the SUB and the BT, but it was very, very doable for me.

Good luck!

[Repairman]

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@tcbofade wrote:

In the past, I've used the card for purchases, hit the SUB requirement, paid it to zero, and THEN did a balance transfer if that helps you any.

It shortens your windown to complete both the SUB and the BT, but it was very, very doable for me.

Good luck!

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Thanks. That's what I would LOVE to be able to do, but unfortunately, that doesn't work for my scenario. I have 12 months to put $6000 of spend on the card for the SUB, but I have to do the BT within the 1st 45 days of opening the card. 

[NRB525]

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@Repairman wrote:

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I have 12 months to put $6000 of spend on the card for the SUB, but I have to do the BT within the 1st 45 days of opening the card. 

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Which new card do you have?