Why refrain from BTs?

[yfan]

I think the answer is easier to find if you start from the opposite question. Why DOES one want to do a BT, and perhaps subsequent ones? One answer, from the leders' perspective may be that the borrower doesn't have available liquid funds to pay their debts, which can be a sign of trouble. Exactly what pattern of BT is needed for a given lender to reach this conclusion is unknown, and we know that each lender basically lets you do BT so that they earn the interest (after the intro period at least) raher than competitor. But that doesn't eliminate the risk algorithm.

[Anonymous]

Just looking at possible negatives, your utilization might take a sizeable hit until it's reported correctly. If the transfer to account reports the new balance before the transfer from account reports as paid than you will look like you have twice as much debt. But utilization has no memory so it would only be a temporary negative.

[Anonymous]

Great info! The raw credit report - that's what i was curious about. Good to know. All comments insightful and Interesting. Thanks

[Anonymous]

Is it worth noting that you couldn't transfer a balance without available credit, and especially if you transfer to long-existing available credit, you can't be that far under water, that risky, and still transfer ...
Obviously BTs aren't for folks with no balances, so saying it's better to have no balance is like skinny people telling others to just not be fat. Ha

[Anonymous]

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@Anonymous wrote:
Is it worth noting that you couldn't transfer a balance without available credit, and especially if you transfer to long-existing available credit, you can't be that far under water, that risky, and still transfer ...
Obviously BTs aren't for folks with no balances, so saying it's better to have no balance is like skinny people telling others to just not be fat. Ha

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Outstanding!

[red259]

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@Anonymous wrote:

I sense this may be a dumb question, but what are the reasons we should refrain from BTs? Assuming it's a good offer (i.e. 0% and no fee), do BT reflect badly on ones score/profile or something? I understand I should consider the rate after the 0% expires, but if it's the same or lower rate than the balance carries before the BT ....

 ... and if I don't manage to pay off balance before the 18 months (for example) then why not transfer it again? In other words, are there other factors I'm not aware of? Thanks

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There is nothing wrong with doing a BT. However, you need to look at the BT offer to see if it is worth it. Will they give you a 0% interest period? What are they going to charge for the BT? How long will the period last? etc. I would not do a number of BTs because that could indicate distress. However, an occassional BT to take advantage of a 0% apr can make sense. I have one now. Important factors are to make sure you are paying it down. I would suggest 2x the min payment at least each month. Also, I would not do a BT if its going to max out your card. Also, consider overal credit util. If you have low available credit you don't want to tie up most of your util with a BT. 

[kdm31091]

I think if you are just shuffling debt around, it's bad news. Like anything else, there should be a plan in place. If you take the BT, and get a low/no APR for x amount of time, that isn't an excuse to not pay the debt. It's just a tool to help you pay it more quickly. As long as you are disciplined, BTs can be helpful.

[Anonymous]

I take advantage of Capital One b/t offers now and then. Currently utilizing a 2% fee and 0% apr over 18 month offer. I keep the amount under 10% of my card limit, and I always have the balance paid by the end of the promo period. I've not ever balance transfered with any of my other cards though - I think I'd be a little worried then. But that's just me.

[Anonymous]

I recently took two balance transfers for the first time in my life about a month ago totalling 4k.

They were 18 month 0% with 3% transfer fee

I got them for a down payment on a new car, but a few reason I paid the $120 in BT fees:

The BTs were on cards I wanted to keep, 2 of my 3 oldest cards that I didn't use, I have the money to pay them off at any time in a liquid savings account and I really want to get a BBR from BofA in the future and I hope that evidence of paying of BTs in a timely manner would help in getting a nice SL on one when I next apply.

[Anonymous]

My experience there will be a month or two potentially both creditors post the balance… so that I can screw up your util… if you are doing transfers to try and move around to high limit cards…if one of your lenders is AA/ CLD aggressive you end up worse than just paying down a high APR.