Tricky Balance Transfer Question

Anonymous · ‎01-04-2020

Happy New Year Everyone. Its that time of the year when every bank wants to do a balance transfer.

Right now NFCU has the best offer "1.99% with 0 Fee" Here's my question.........

A) Should I payoff the card and let it report a zero balance and then do a balance transfer? So the report would show 0 balance one month and next month show 12500.00 balance(50% util)

OR

B) Let the current balance of 7500.00 report, pay it off and then immediately balance transfer 12500.00. Resulting in only a 5000.00 dollar change on my report.

Thanks in advance.

PS: What is the best balance transfer offer out there right now?

Anonymous · ‎01-04-2020

If the current balance is due to purchases you should pay it down to zero before doing a BT to avoid interest charges. Once the account updates to show a zero balance you could make the transfer; you don't have to wait for the zero balance to report to the credit bureaus.

K-in-Boston · ‎01-04-2020

MaizeandBlue is exactly right. If the balance comprises purchases, go ahead and pay it off first then do the BT. If the existing balance is a balance transfer, it doesn't matter as much assuming the way that payments will be applied in the future won't cause you to end up with 1.99% and say 10.x% balances at the same time when the first one expires.

As for the best BT offers out there, there are typically 0% and $0 fee transfers available from a handful of credit unions, the Amex EveryDay, Chase Slate, and Bank of America BankAmericard, when the transfer is done within 30/60/90 days of opening the account.

Anonymous · ‎01-05-2020

Thanks,

My question is more about credit reporting and scoring. Which will have less of an impact on my credit score?

My statement end date is 01/15/2020. Current balance on card is 7500.00 which shows on my report now. If I pay off 7500.00 and let a zero balance report on 01/16/2019 and then do a balance transfer, my next report on 02/16/2020 will show 12,500.00. So my credit reporting would be 7500.00 > 0 > 12,500.00. Would the 0 balance cause "CreditScore Shock"?

Option b)

Let the 7500.00 balance report on 01/16/2020, pay it off on the 17th and balance transfer 12,500.00 on the 18th. Essentially my credit report would only show an increase from 7500.00 to 12500.00.

Which is better for creditscore?Showing 7500 > 0 > 12500or 7500 > 12500.00

I hope this makes the question clear.

Thanks

Anonymous · ‎01-05-2020

@Anonymous wrote:
Thanks,
My question is more about credit reporting and scoring. Which will have less of an impact on my credit score?

My statement end date is 01/15/2020. Current balance on card is 7500.00 which shows on my report now. If I pay off 7500.00 and let a zero balance report on 01/16/2019 and then do a balance transfer, my next report on 02/16/2020 will show 12,500.00. So my credit reporting would be 7500.00 > 0 > 12,500.00. Would the 0 balance cause "CreditScore Shock"?

Option b)
Let the 7500.00 balance report on 01/16/2020, pay it off on the 17th and balance transfer 12,500.00 on the 18th. Essentially my credit report would only show an increase from 7500.00 to 12500.00.

Which is better for creditscore?Showing 7500 > 0 > 12500or 7500 > 12500.00
I hope this makes the question clear.

Thanks

Narrowly addressing scoring, once transfers have taken place AND the credit issuers have reported balances to the CRA’s it would not matter how you got to the ending balances.

If this were 2009 I would be very concerned about the interim process though because you could be at a point where the balance transfer has posted and been reported by Navy but the account to be paid off has not yet reported paid to CRA’s so your score would be temporarily artificially depressed. Another creditor could soft pull you during that period and decide you are too big a risk. In 2009 creditors were looking for any excuse to balance chase or close accounts.

At least at one point Navy paid balance transfers with a physical check, so you cannot tightly control timing.

With all that said I would lean towards paying Navy to zero and paying the other card to zero when it’s time comes.

K-in-Boston · ‎01-05-2020

@Anonymous wrote:
Thanks,
My question is more about credit reporting and scoring. Which will have less of an impact on my credit score?

My statement end date is 01/15/2020. Current balance on card is 7500.00 which shows on my report now. If I pay off 7500.00 and let a zero balance report on 01/16/2019 and then do a balance transfer, my next report on 02/16/2020 will show 12,500.00. So my credit reporting would be 7500.00 > 0 > 12,500.00. Would the 0 balance cause "CreditScore Shock"?

Option b)
Let the 7500.00 balance report on 01/16/2020, pay it off on the 17th and balance transfer 12,500.00 on the 18th. Essentially my credit report would only show an increase from 7500.00 to 12500.00.

Which is better for creditscore?Showing 7500 > 0 > 12500or 7500 > 12500.00
I hope this makes the question clear.

Thanks

How balances affect you are going to depend on your entire profile and will be different for everyone. But broadly speaking, if this is your only revolving account, if the balance simply goes from $7,500 to $12,500, you will receive a penalty for increased utilization. If the balance goes from $7,500 to $0 you will receive a boost for reduced utilization, a minor boost for having fewer than 50% of revolving accounts reporting a balance, but you will also receive a minor penalty for having 0 revolving accounts reporting a balance (assuming the credit limit of the account is under around $80,000 otherwise the penalty for going down to 0% will be higher than the gain from paying the balance off). Then when the next statement closes, you will lose and gain in the opposite order of that last sentence, but likely lose more than you started with due to higher utilization unless the card has a credit limit greater than about $140,000.

No matter what, the most likely scenario is that you would lose some points going straight from $7,500 to $12,500, and by adding the $0 in the middle you would gain some for a month and then lose more than you gained the next month. Credit scores are a snapshot in time, so 2 months out you will be in the same place no matter how you get there.

If this is not your only card, there are a TON of variables that go into it, so for us to even take an educated wild guess as to what would happen with your scores, you would need to list all of your revolving accounts with balances and limits (and balances would include any estimated statement balances from new spending each month, not just any balances you are carrying month-to-month).

Since this will now be about scoring, I'm going to move this thread to Understanding FICO Scoring.