Balance Transfer Question

[Anonymous]

I applied for a Visa card for $5000 through my credit union and was approved. She is offering me a balance transfer for the life of the transfer at the rate of 9.90%. The interest rate on the card is 13.90%. I have never done a balance transfer before and I am trying to figure out if this is what I should do and I was hoping someone can help me with this. The only thing I don't know yet because I have to talk to the cu on Tuesday is if there is a fee to transfer. I would really like to try to get rid of cards with fees. Here are the cards that I have: Orchard Bank: APR (v) 14.99%, Balance is $411.08, Membership fee $96.00 a year (would love to get rid of the fee or if I can't do that then just get rid of them, but this is my oldest card) Capitol One: APR 19.80%, Balance $1,016.00, Payment Protection fee $9.96 monthly (is this worth it?) Best Buy store card: APR 18.99%, Balance 598.46, Annual Fee $59.00 (again want to get rid of the fee) GE Care Credit: APR 24.99%, Balance $371.05 Macy's: Balance $0 Limited Express: $0 Also, because Macy's does not report credit limit how do they affect things. I know I have a 0 balance right now but I am just wondering how it works with them. Right now my credit scores through FICO are TU 632 and Equifax 611. However, I just received an auto loan last November through the cu and they pulled TU and said my score at that time was 658, which was higher than what FICO said it was at 632. I have had perfect payments. If someone could help me with this I would really appreciate this. Thanks

[Anonymous]

I forgot to add by getting this card this will bring my utility from 72% to about 25%.

[llecs]

I've never done a BT, so I'll defer to others. I will say to look out for the languarge of the agreement and look for any BT fees or short-term rates.

Read fused's Closing Credit Cards thread if you are considering closing any. There's nothing wrong with closing fee-based CCs...just keep an eye on your mix of credit and util during this process.

Macys doesn't report CLs so the balance and CL will not factor into your revolving utilization. In other words, other than overall balances maybe, you can max out your Macys and it won't impact you like it would other CCs.

Some car lenders will use an auto-enhanced FICO. That could have happened in your case if you pull both scores at the same time and they didn't match.

[IOBA]

Read the fine print and ask questions about the balance transfer.   It sounds really good.

I would be concerned that there is small print that says if you charge anything on the card before the BT is paid off, then the zero percent rate goes away.  Also find out what the BT "fee" would be.  Usually 3-5% of the balance.  

With CITI, you have to pay the "minimum" due before the first payment is due, as well as the entire BT fee.  IF you don't pay the BT plus the minimum due, they charge interest on the BT fee until it has been paid off.

If you want to get rid of the fee cards, I would say go for it.  They will stay on your CR for about 10 yrs after closing them.

[RobertEG]

The catches  with a BT are, first  that they charge you an up-front fee, which is usually 3-4% of the amount transferred.  This may not seem like a lot, but on a $3,000 BT, this would be a flat fee of $90-$120.  Poof!  Gone!  If the car to which the BT amount was transferred had an outrageous APR of, for example, 36%, that would be the same as 36/12 = 3% that month. Of course, therafter the 36% card would benefit by the reduced balance.  It takes some math.

Second. when you do a BT, your account statements witll thereafter be segmented into two "sub-accounts," one with the BT blance and low APR, and the other with the balance on regular purchases, at its separate APR.  When you make future payments on the card, payments will first be credited to the lower interest (BT) balance, and not to the blance on the higer interest bearing segment of your account.  Thus, until the BT is paid off, you wont be able to reduce the balance on the normal purchases balance segment of your account.  They lock that balance in at its higher APR.

CCCs offer BTs because, for most consumers, they will make more money by the combined effect of the flat, upfront transfer fee, in combintion for locking your baance on the higher APR normal segment of the card until the BT blance is paid off.

I have done BTs, and found it useful to set up a spreadsheet showing the total monthly interest and fees you would pay each month with and without the BT.

It is not a simple decision.

[Anonymous]

I did find out yesterday that there is no balance transfer fee. I was thinking about doing a balance transfer of $2300. The interest on all my cards are higher than this new one so it seems to me that right there I would save money. The interest on the balance transfer is 9.90%. The other option I could do is just to transfer my highest balance and leave the other ones alone because they are only $400 and $600 balances. Any suggestions?

[cdtotten]

---

@RobertEG wrote:

The catches  with a BT are, first  that they charge you an up-front fee, which is usually 3-4% of the amount transferred.  This may not seem like a lot, but on a $3,000 BT, this would be a flat fee of $90-$120.  Poof!  Gone!  If the car to which the BT amount was transferred had an outrageous APR of, for example, 36%, that would be the same as 36/12 = 3% that month. Of course, therafter the 36% card would benefit by the reduced balance.  It takes some math.

Second. when you do a BT, your account statements witll thereafter be segmented into two "sub-accounts," one with the BT blance and low APR, and the other with the balance on regular purchases, at its separate APR.  When you make future payments on the card, payments will first be credited to the lower interest (BT) balance, and not to the blance on the higer interest bearing segment of your account.  Thus, until the BT is paid off, you wont be able to reduce the balance on the normal purchases balance segment of your account.  They lock that balance in at its higher APR.

CCCs offer BTs because, for most consumers, they will make more money by the combined effect of the flat, upfront transfer fee, in combintion for locking your baance on the higher APR normal segment of the card until the BT blance is paid off.

I have done BTs, and found it useful to set up a spreadsheet showing the total monthly interest and fees you would pay each month with and without the BT.

It is not a simple decision.

---

Someone correct me if I am wrong, but I am almost positive that one of the largest changes in last years CC reform was that payments in excess of the minimum payment per month will ALWAYS be applied to the HIGHEST interest rate balance. From what I understand, it doesn't matter if he has a BT or not - if his BT rate is 9.99% and his normal purchase rate is say 13.9%, the 13.9% balance will always have the excess of minimum applied to it first.

For the OP - 9% is very high for a promotional balance transfer right now. Yes it is for life, and that is a good deal for a large transfer you have to pay off over time (depending on the fee to transfer), I just don't know if it's that great of a deal. Just do a google search for balance transfer calculator to run the math.

General FYI: It is pretty much standard that credit unions do not charge a BT fee. I believe it is forbidden.

[DI]

Not a good deal.  9.90 APR is too high. 

[OptimalCS]

I always look at balance transfers as putting band aid on a deep wound.

It wont solve the problem in the long run. It could potentially get worst.

I am an advocate of paying debt. This is the best strategy.

[Anonymous]

i would take the 9.9% for life and BT all my balances to it.  i'd say that's a win for you in two ways.  you're consolidating debt into a lower APR% and you're making one payment per month. you'll have fewer accounts to juggle and less chance of a missed payment.

then once you have BTed your CCs to zero balance, CALL the issuers that charge annual fees and politely tell them you'd love to keep their card open and use it, but the annual fees make the card VERY unattractive to you, and you are going to close it if you can't work something out.  don't say anything for a minute.  let them offer you something.  if they don't offer something with no fee just close the card and move on.  keeping them for AAoA alone is not worth any amount of $$.  i'd bet they shift your credit line to another card with $0 fee.  

credit is getting looser, so the odds are in your favor, but you'll still have to negotiate with them.  if they do offer you a card with no fee, try your best to transfer the age and your good history to the new account.  tell them outright that you are aware of the effect of AAoA on your credit.

next, cancel the payment protection since there's no balance to protect.  fyi, that's generally a waste of $$ unless the premium is based on your balance.  ie.  0.1% of your monthly statement balance.

9.9% is a very high apr for BTs, but it's possibly the best you'll get with your fico scores.  getting a $5K initial CL is actually pretty good!

once you get your scores above 700 or so and have no recent INQs or new credit accounts for 6mo or so, you can probably get a 0%apr/3-5%fee/12-18mo BT offer.  

then you can BT some of your 9.9% balance to the 0% card, but only as much as you can pay off during the 0% intro period.

the auto lender likely pulled an auto-specific scoring algorithm, which would account for the difference in scores.