Balance Transfer.... a good idea?

[Cabowabo84]

Ok...my second thread... I'm serious about becoming a "Saving Guru." Here's the background info:

I just received a balance transfer offer from a CC I just recently paid off in full. The balance in question is $4339.08 which is currently on a credit card with a 10.24% APR. I was considering calling Amex and negotiating a lower APR since I've been with them for about 8 years now...

This transfer offer has all the usual crap... 3% fee... approx. $130, with 0% APR until Dec. of this year. After the promotion, the APR switches to 9.24% (which will vary with the market blah blah blah) I figure if I throw between $500 and $800 a month at this card, it'll be taken care of in a few months... I'm not even considering the APR post-promotion only because I don't plan on carrying a balance, but one never knows what's in store, right?

Regardless of the transfer, I was considering throwing that same amount towards the card and having it paid off in as little time as possible...

Here's my question: Should I transfer the balance? I've become so distrustful of CCs and large banks (and rightfully so)that I've read through the offer 10 times and still distrust it. If I pay the CC off in about 3 months, the amount of interest that I save will equal the transfer fee, which renders the transfer unecessary. However, if I decide to extend the payments (before the 0% offer is up, of course), I'll have extra money each month...

Thoughts? Suggestions?

As always, can't thank you all enough!

[bjl584]

You will have to crunch the numbers to see if it makes sense.

Assuming you can transfer the entire balance, would you save more or less in interest than the $130 balance transfer fee? That answer depends on how long it will take you to pay off the balance.

[riverwed070707]

At $500/month payments the savings would be minimal. A savings of about $16 to transfer to the new 0% card. If you're paying closer to $800 there would be no savings. The fee would cost you more than the difference in interest. I say leave it where it's at and pay it quickly.

[josephbales]

I've done lots of balance transfers (unfortunately), and I don't think the CC company is trying to screw you. I've never had any additional costs crop up, but the post promotion rate always seems to be higher than it was when the offer was made.

It really boils down to mathematics. If you think you can pay it off quickly, don't surf it. If it's going to take a while, surf the balance. Pick the cheapest route.

Just remember that if you make any additional purchases with the new card, those purchases will have interest applied and the CC company will apply all payments to the 0% portion of the balance leaving the part with interest there so it can earn them some money! Also be sure to check if the new card carries an annual fee.

[pdweaver]

If you arent saving anything, whats the point?

Once in a while I receive balance transfer offers from credit cards I have offering 0-1% balance transfer fees. Primarily from my Chase and Citi cards. I dont carry balances so have no need from them but I would suggest waiting for an offer like this.

I would say put every penny into paying your current card off. In the future if you still plan on using credit cards, use a rewards credit card. They can save you a lot of money, but ONLY IF YOU PAY IT OFF MONTHLY!

[JoshuaHeckathorn]

I never understand why people wait for card offers to come in the mail. I would never apply for something that comes in the mail because there's a strong chance you can always find better deals online.

For example, Discover just launched a "No Balance Transfer Fee" promotion for the Discover More card. You can find it all over the place online. $0 balance transfer fee, 0% interest for 12 months, and no annual fee. The card is pretty simple and there's nothing to really hide. You can transfer the balance for free and pay it off at no interest within the first year. Problem solved.

[dczech09]

Yeah look online for a good BT deal. But make sure that when you are paying off your current credit card debt, that you do not go further into debt.

There are a lot of people who refinance or BT to get a lower payment/interest rate. Then they end up charging up the balance again and actually go further into debt.

There is no balance transfer that will help you get out of debt; you have to do that yourself.

[jpg7n16]

The balance in question is $4339.08 which is currently on a credit card with a 10.24% APR.

This transfer offer has all the usual crap... 3% fee... approx. $130, with 0% APR until Dec. of this year. After the promotion, the APR switches to 9.24% (which will vary with the market blah blah blah) I figure if I throw between $500 and $800 a month at this card, it'll be taken care of in a few months...

Given your specific card offer, the break even point is $747.12/month. If you are paying more than that, you wouldn't save on interest. If less, you would.

The fee is $130.17. Compare that to how much interest you would have paid:

@ $500/month = $188.27 interest = $58.10 savings
@ $600/month = $158.74 interest = $28.57 savings
@ $747.12/month = $130.17 interest = $0 savings
@ $800/month = $122.55 interest = $(7.62) loss


But as Josh pointed out, your current offer isn't the only offer out there. Nothing says that 3% fee offer is the only chance you'll have to do a balance transfer.

For example, Discover just launched a "No Balance Transfer Fee" promotion for the Discover More card. You can find it all over the place online. $0 balance transfer fee, 0% interest for 12 months, and no annual fee. The card is pretty simple and there's nothing to really hide. You can transfer the balance for free and pay it off at no interest within the first year. Problem solved.

$0 interest and $0 fees beats any of the scenarios above.