Simple Credit Card Question

[aggies]

Hi, I currently have a credit card with a balance of around 8000, credit limit of 16000, current APR of 14%. I have a balance transfer option via CITI that allows me to take advantage of 0% interest on this card thru March of next year. With the Balance transfer option, CITI allows me to take a "Extra Cash" option. I have called them and asked them and they said this extra cash would be just like a balance transfer, the same rules apply. Would it make sense for me to take extra cash and pay this same card using that money. CITI told me when a card has two different APRs on there to decide which card they apply the money to is like this: They take your minimum balance and apply that first to the lower APR and then the higher APR, anything you pay over your minimum balance goes first to your higher APR balance and the reminder goes to the lower APR. If I am understanding this correctly, doing this would save me lots of interest charges. Anyone have any experience doing this?

[disneysteve]

I'm a little confused. What is the credit limit on the Citi card? Is it enough to transfer the entire $8,000 balance? I'm not clear on where this "extra cash" option comes into play.

[sm808]

Is the "extra cash" comparable to the "Convenience Checks" some cards send out? I'm not sure - but this may be treated as a cash advance, and those come with their own set of rules/restrictions.

[aggies]

I am not transferring the 8000 anywhere, I am taking the 6000 cash that I can get with the balance transfer and apply it back to the 8000. The 8000 gets charged 14% interest while the 6000 would be 0 for a year.

[sm808]

Is there a fee for the balance transfer (either on the old or the new card?) If this fee (or a combination of the two fees) is high, it might outweigh the amount saved in interest.

[aggies]

The fee is 3%, it would be about $180 to transfer, my interest charges are around 111 this month, next month would be another 100 or so.

[disneysteve]

So you have an $8,000 balance on Card A at 14%.
You are going to use the Citi card to pay off $6,000 of the $8,000 and that will be at 0% until March 2011.

Is that correct? If so, I would also check on the balance transfer fee. It is typically 3% of the amount charged, so 3% of $6,000 would be $180. You need to use an online calculator to figure out if it is worth paying $180 fee to cut your rate from 14% to 0%. Also, will you be able to pay off the full $6,000 before the 0% offer expires in March? If not, what is the rate after that?

[aggies]

Is that correct? If so, I would also check on the balance transfer fee. It is typically 3% of the amount charged, so 3% of $6,000 would be $180. You need to use an online calculator to figure out if it is worth paying $180 fee to cut your rate from 14% to 0%. Also, will you be able to pay off the full $6,000 before the 0% offer expires in March? If not, what is the rate after that?

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Yes that is correct. I will be able to pay off the rest of the 6000, the rate after that will go back to 14%.

[disneysteve]

I think that sounds like a great way to go. It will drop your rate to 0% and allow you to be debt-free much faster. Even though you'll pay $180 to transfer the balance, it will save you a lot more than that in interest.

Just make sure that you continue paying as much or more each month than you are currently paying. Don't let the 0% lull you into making smaller payments.

[jpg7n16]

Yes that is correct. I will be able to pay off the rest of the 6000, the rate after that will go back to 14%.

So the rate on the $6k goes to 14% after March 2011? If so you'd save around 630 on interest - 180 charge = $450 gained on the deal

This is how it seems to me: Current: $8000 @ 14%

New: $2000 @ 14% ; $6000 @ 0% (until March 2011)
After March: $2000 @ 14% ; $6000 also at 14%

Is that correct? You may want to check that the rate on the $6k does not revert to 20% or something. But if it is as above, it's a good deal.

[cptacek]

This is the same card, right? Are you sure that when you make the payment it will go to the $8000 and not just pay the $6000 off again right away?