Here is the 3rd half of questions submitted to me. Yes, 3rd half. I thought I could finish last time, but some of the comments had 6 questions within one comment 😉 Not a problem, just took another post. This should just about finish my series on How To Make Money From 0% APR Balance Transfers (index of all posts).
You show how to “just get a cheque” for the CitiBank dividend card offers. I know that balance transfers normally cost 3%, or 75$, whichever is less. I also know that the Citibank card comes with a “free” balance transfer.
Can I make that “free” Balance transfer online, or do I have to do it on the phone with a less-than-fully-informed CSR? If I can make it online, how long after getting the card do I have?
Please see Part 3: Application Tips and Getting Cash From 0% Balance Transfers. How long you have depends on the offer on the card.
I know that citibank allows to take balance transfer as personal check.. but for discover, one needs to transfer the money to other credit cards and then take extra cash back from those.. Do all cards (e.g. chase, bankone, american express, citibank) allow to take extra cash back as personal check? ..
Also can one request the balnce transefer of say $X to card A, when card A limit is less than $X.
Please see Part 3: Application Tips and Getting Cash From 0% Balance Transfers. As for your Card A scenario, that should be fine. I’ve done it myself with no problems to American Express and Citibank.
I work in the credit card industry and I remember reading sometime back that you were trying to improve your credit score (pardon me if I’m incorrect). Even though you are good at paying all your 0% loans on time, what also gets reported to the bureaus is your total remaining balance(along with the type of credit – revolving in your case) and you are interpreted by the statistical model as someone who has undertaken a lot of debt and that works against your score to some extent.
Yep, your utilization (percentage of total credit limit used) does matter, I think I talked about this in another question already (2nd Half I believe). I’m not trying to maximize my credit score right now, it’s plenty good for what I need it for right now. I’ll pay off all the balances completely when I want to max my score.
1) How does opening up another account for this affect credit report, & credit score / fico? 2) Will the credit & fico score drop once you use the BT for that acct (since you will utilize most of its line)? By how much? How long? Does your score ever increase back to where it was prior to opening the acct & using the BT to almost max of your credit line? How?
Discussed earlier in the Questions.
3) How do you request a large line of credit for opening up a new account, if each of your accounts are like only 3k x 4? Do you inflate your income/& other income sources on the new application?
Maximizing your income is one way. You can also combine credit limits from cards from the same issuer. Sometimes you just have to keep building your credit history if you’re just starting out.
4) Have you or anyone else done this BT’ thing with any existing accounts? (If yes, then how do you avoid the 3% BT fee (and while many cards have a max limit of 60-75, i saw oon almost all mbna agreements that have no max limits for BT’s)? Is it worth doing this for 6 months, 0%BT? ( i havent seen any deals where the 3%transaction fee is waived for existing accts; have you?)
For existing accounts, the deals vary widely. You may get targetted offers. MBNA hardly ever waives their fees, but it has happened. If you call to cancel you may also get a good deal. Or they may just cancel your card If you talk diplomatically you may be able to feel out if they can waive your fees or otherwise give you a good deal.
I’m about to start my last semester in college and would like to take advantage of the high current interest rates. I just got my first credit card about a month ago. Wachovia gave me $1500 in available credit. I applied for a Citi rewards card. It’s in the mail and all I know is that I have $3000 in available credit. With available credit this low it would not make much since to do the balance transfer thing as 5% effective interest on $3000 would only work out to $150 per year. Some questions I have are…
1) What are some things I can do to get them to lend me > $20,000 at 0% interest in a relatively short time frame (before interest rates go down?)
2) If I do a balance transfer into a high yield savings account that pays 5% effective interest will it pay this amount the entire year? In other words, can the bank change the interest rate change during the year?
3) What is the most $ these credit card company’s are willing to lend people? I’ve heard of people with really good credit getting $100,000 before.
4) What would keep a person with good credit from doing balance transfers on like 10 or 20 of these cards. It seems like to me that you could find enough cards to do balance transfers for a year totaling $500,000 easily. 5% effective interest on a $500,000 would be $25,000 in free money every year! Why don’t more people do this?
5) Most banks are federally insured up to $100,000. In the case of the bank defaulting, how long would it take to get your deposit back?
6) Would you for someone to try this without having enough cash on hand to pay the card off in case of some unforeseen problems over the course of a year?
1) Increase household income on apps, combine credit limits.
2) Yes, savings accounts can change interest rates. Certficates of Deposit can be used to lock in rates for various amounts of time
3) It’s harder to get above about $30k on each card, but not unheard of
4) You’ll stop being approved for credit cards and/or limits after a while, but some people DO apply for 10-20 cards on the same day (discussed previously).
5) From the cases that I have read, it was about a month? I can’t recall exactly.
6) I always recommend having a backup plan to pay off the balance in case something happens. You can break CDs if you need to, just have a way to pay it all off quickly.
you are still paying the bills for these cards each month. So do you simply pay the minimum payment? And if so, do you pay it out of the money that you borrowed?
If that’s the case, then 20K would yeild slightly less than 1K in a year, right? Because you would be taking money out of the principal amount to pay off the minimum each month.
Also – How does this affect your credit report?
I imagine that your score would go down showing that much debt.
I’m curious as to your thoughts on the long term … with each one of these balance transfers you are having to open up a new credit line. Doesn’t having that many cards on your record lower your score?
I’ve been debating doing this – but my wife and I, like you and yours, and preparing to buy a house soon and I don’t want to do anythign that is going to lower my score at the moment.
On another Note Jonathan, I just want to thank you for the blog.
Ever since I found it I haven’t missed a post – on top of that I now have my wife reading it, as well as one of my sisters (who called me one day with some questions about online savings accounts – I immediately sent her to your blog).
Yes, still paying the minimums + $1 each month. Yes, the yield would probably be less. Credit score questions previously discussed. The raw number of credit cards has little effect on your score. Thanks for the kind words, thanks for reading my blog!
What does this do to one’s credit rating and credit availability? I have one kid in college and another in two years and will probably need to do a home equity loan. Will all the outstanding debt hurt?
Credit questions addressed previously.
Also I was wondering if you knew anything about combining cards to increase my credit limit. I currently have 5 citi cards can I combine all the credit limit to one large one? Would it be best to leave the other cards open or close them? Everywhere I look they say leave them open cause the avg age on the credit score. But the accounts are generally less than one year old so is there a real benefit to leaving it open vs closing? It seems like closing would allow me to reapply in 60 days and get the promotions again plus have more credit to combine into the main CL. One last thing, on my oldest card does the limit matter on my credit score? ie say I have a card from 98 with a limit of 3K but my card from 05 has a limit of 25K , would i get a bump to combine my 05 and 98 cards onto the 98 card? Any thoughts on the best way to manage this to make my CL get LARGE FAST would be great.
You could combine your Citi limits, if you have really young cards I would go ahead and close them. Try to keep the oldest card open. I don’t think the limit on your oldest card matters very much if at all, but combining limits overall may help.
I used your advice about the free $ in the form of a balance transfer (From citi for %5500)- I always pay off all my charges on my card in the month they come due so for July my balance is $5581.11 and my current minimum payment is $83 which of course I will pay-but I am told this amount will serve to pay down the $5500 and I will have interest charges on the $81.11 since any payments go against the amount with the least interest. Maybe if you could mention something about how this works would be good.
Payments always go toward the balance at the lowest rate. This is why, if only the balance transfer is at 0%, you should have a zero balance before asking for a balance transfer. Since it seems you already have a purchase balance not at 0%, you may have to do some math to see if it would be worth it for you to continue.
Could you describe how you monitor these 0% BT’s? I imagine you have to watch them like a hawk because little details (e.g. BoA having a Sunday due date, but no bank processing on a weekend) can trip you up. I know this sounds silly, but maybe could you describe a timeline describing what you do from account open to close?
Please see Part 4: Setup And Management of 0% APR Balance Transfers. For the duration of the BT, I just pay the minimum amount like any other bill. Get a bill. Pay the bill. Get the bill. Pay the bill. Nothing special, I don’t even set automatic payments. The only somewhat hard part is to remember to pay it ALL off by the end date, for which I use multiple online reminders.
Tip on due dates: many of us set up an automatic bill pay for the zero transfer loan monthly payments, BUT WATCH the due date! My Citicard bills have had due dates that range from the 24th of the month to the 3rd of the following month. The point is that if you set an auto date for payment and its late because the card company upped the date on you, you might lose your zero interest rate.
I included this tip in Part 4: Setup And Management of 0% APR Balance Transfers. Always give yourself some slack either way if you choose to go automatic.
Unfortunately it seems all of the really good rates have caught up with me. The best available to me right now is 4.9% on my Discover card. Any suggestions you can offer me to getting a 0% rate?
You can apply for a new 0% card online, or try and call your current company to haggle. Waiting for an offer in the mail is always hit-and-miss.
I have a high yield savings account with capital one that I planned to use for this but most credit card companies will not let you pay by savings account since it doesn’t have check writing ability. Do you pull the money out of you savings and move it to a checking account and then pay the credit card?
I use a high-yield checking account myself to avoid stuff like that, but see Part 4 and also the comments for some warnings.
I just got a chase card with a 12,000 limit, and they attached a ‘balance transfer’ check as well. Fees for the transfer are %3, but they specify in the agreement that the checks can be used ‘to pay for goods and services, to transfer balances to your account, or for other uses we allow.” What I want to do is deposit $10,000 into my vanguard money market account with this check. The back of the check specifically states that the APR for the attached check is the standard rate for balance transfer checks on my account (0% till 12/07).
You can always call them up and ask, but I don’t see anything wrong with it unless they explicitly disallow it. Just be sure you are okay with the fee they charge.
I’m sure you’ve had this question many times already…what’s the best way to get money out of a BT offer and into a personal account?
I know citi let’s you just request a check to yourself, and I guess you could also do the BT to your citi card and request a Credit Refund right? eg Chase BT to Citi, refund from Citi
But what about if the credit line on the card transfered to is less than the BT amount, is that gonna set off all sorts of red flags and hassles to get a refund?
eg Citi credit limit $10k, Chase credit limit $20k. Do a $15 BT from Chase to Citi
First part covered in Part 3: Application Tips and Getting Cash From 0% Balance Transfers. Second part – I’ve done it before with no problems.
And that’s it! Thanks for all the questions, it totally helped me make the posts better. In retrospect, it would have been better for me to go through all these questions and organize them all into something more palatable, but I took the lazy way out this time. If you still have questions after reading all of these first, you can leave a comment below. But please please read through to see if it’s already been answered – thanks!