0% Balance Transfers Questions & Answers: 1st Half

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Ok, I’ve been thinking of ways to handle all the questions on this topic I still haven’t answered in my 4-Part series on How To Make Money From 0% APR Balance Transfers. I decided simply to answer them all, Cramer-Lightning-Round-style. Questions may have been edited for length, spelling, and clarity. Remember, the answers are from me – one imperfect man with an opinion.

Here’s the first half:

How much you have earned from no interest transfers?

I dunno exactly, between $1,000 and $5,000? It was a lot harder back when 2.5% APY bank interest was a big deal 🙂

I’ve always wanted to know how you pay these BT’s balances back… I mean what’s the procedure? Do I set the account up to “billpay” say $5 over the minimum amount (making sure to pay off a month a head of time)??

I think the bulk of this questions have been answered in Part 4, but the idea of paying slightly over the minimum payment to help your credit score has been touted in a few places. I have no proof that this is true, but adding $1 or $5 to the minimum payment can’t hurt, eh?

My main question is after the year is over do you generally look for another credit card to pay off the first credit card or do you just transfer the funds straight from the savings?

I usually just transfer the funds straight from savings, but I don’t know if that’s the ideal way to do it. I pretty much just pick up cards along the way that I like.

Also do you keep the credit cards open after they are paid off or do you close them right away? I was reading that most credit card offers you can reapply for the exact same deal after it’s been closed for about 6 months.

I personally only close cards when a card issuer asks me to. For example, some issuers like Citibank only allow you to have 3 or 4 of their cards at one time. If you apply for another, they will ask you to close one of your existing lines. You can usually get them to move over your credit limit though. So far I haven’t really been lacking in the area of good offers.

Could you explain more about about using balance transfer money with HELOCs?

If you have money borrowed on the LOC, you just pay it back to the line of credit, and then take it back out when the offer is over, yes? You could even try making the minimum payments from the LOC.

Sweet, I’ll be looking forward to it. I have about a 800 credit score and get the 0% offers all the time.
So I just need to sign up for these, check the fine print, request a transfer ( check or transfer to my bank of america acct), throw that money into Emigrant Direct, pay the monthly minimum, and sit back and collect interest, right?

Basically 🙂 See all the parts for the long version.

Ive noticed that I dont get any more 0% balance transfers any more. They are all 0% on purchases with like 7% on transfers. It cant be specific to me as my credit score has actually only gone up a little over the last 8-9 months.

Not sure about that… Lots of good 0% offers online though.

I have heard that you can set up your credit cards to directly withdrawl your minimum payments for the 0% Balance transfers from your online savings accounts, such as HSBC, Emigrant, or ING (these are the three I have). Is this true? I know that you are limited to 6 withdrawls per month. Thanks.

Yes, see Part 4: Setup And Management of 0% APR Balance Transfers and the comments for some warnings though.

How does the check to your bank account from the credit card gets treated as a balance xfer and not a cash advance?

Every check is different and should have it’s own terms attached.

I have a few cards that I bounce my balance between. I’ll usually go to the card that is offering 0% over x-amount of months. However this opportunity is not always there when I am ready to transfer. Occassionally I’ll have to settle for anywhere from 1.9%-6.9% over x-amount of months. I’d like to know the technique to regularly getting 0%. Thanks for all your hard work and research on your blog.

I don’t know a sure-fire way, but one way to keep your credit score higher (and theoretically get better offers) is borrow less than 50% of the credit line on any specific card. Also, it seems like you are ‘floating a balance’ instead of purely using the money to siphon off interest as I’m talking about. I’d never pay 6.9% interest 😉

Humor me: Could you give EXACT examples of the cards you use. “Card A” (most likely a citi bank card?) has nothing charged on it with a credit limit of 10,000. “Card B” is the 0 apr on balance transfers card, you transfer the “balance” from card a to your card b. Now card a is at -10,000/10,000 and card b is at 10,000/10,000. Next you go on the citi website and get a check for your “overpay” to card a? Making Card a have a balance 0/10,000 and card b stay at 10,000/10,000. Card b you lock up set to pay minimum payments dont use and pay off within the alloted time. Card a you can now use again?

I did exact examples in Part 3: Application Tips and Getting Cash From 0% Balance Transfers. Yes, you can now use Card a again. You could be using it the whole time, it just got a fat overpayment, that’s all.

I lied, one other question: can you talk more to how the effect on your credit score works? i.e. how it moves up and down through the cycle of borrowing, investing, repaying, and how quickly it does (or you think it does) go back to normal after you quit cycling debt/interest.

Two ways your credit score will go down – (1) Each credit application will hurt your score, estimated ~5 points each. This lasts about 6 months. (2) Credit hit due to utilization of credit lines, or how much of your available credit you are using up. This will depend on a variety of factors, including how long your current credit history is. If you have a long history of good credit, your score may be more ‘resilient’. If you just started out, it will be more sensitive to high balances. This drop could vary from 10 points to even 100 points if you went nuts and maxed every single card out. I usually try to take out balances but still stay around a 700 score. I try to keep my score decent (but maybe not excellent) at all times so if there is a nice credit card bonus or something I can still pick it up.

The thing about the 2nd way is that once you pay off the debt, your score will bounce back to what it was before. Companies report to the bureaus monthly, so it may not bounce back until after your next statement closes after paying it all off.

By the time you account for the taxes you pay as well as the interest you lose as you reduce your 20 K principal by making each month’s minimum payment each month, what would you say is your hourly wage? Can you give us some idea of what your credit score is? (Not an actual number, but poor, medium, good, or excellent.)

Hourly wage? I don’t really calculate it, but let’s try. I float $30,000. 2% minimum payment x 12 months = 24% paid off by the end. Let’s say 12% on average over the length of the loan. So 26,400 floated. Let just say 5% although I am earning more from T-Bills. $1,300 in 12 months. x75% for taxes = $990. Let’s say an hour to pay bills each month. $990/12 = $82/hour net after federal taxes. Very rough, but it’s still pretty good.

Credit score before these transfers: ~750 Credit score during these transfers: ~700.

Hi Jon, I loooove this site. I’m learning so much. I’m 24 and last week applied for my first credit card. I got the Citi Dividend Platinum Select card with a $7100 credit line. This is good for first credit card, right? So now I want to get the Discover Miles card and take advantage of that 12,000 mile deal. My question is, how do I take advantage of the balance transfer game using these 2 cards? The citi card has 0% BT but 18.24% on purchases whereas the Discover is 0% for both. I’ll be purchasing a $1000 plane ticket soon and wanted to know if it would be better to get a Discover card and buy it with that since it’s 0% and do a BT to the Citi card as well. Does that make sense? I’m sure I could pay the min. + and purchases for the month. Would this be a good idea? Any info would be greatly appreciated. Thanks!

You could put the purchase on the Discover, but I’d probably just put in a rewards card, since you can already “max out” the Discover card with a balance transfer.

I wonder how long you can keep the borrowed free money before returning it? Thanks.

Depends on each specific offer. See Part 2: Scouting For 0% Balance Transfer Offers for how to find out.

Any suggested techniques for maximizing credit lines i) for current cards, and ii) when opening new cards (or immediately thereafter)?

i) You can call and ask, but I you should decided clearly if you want to take a hard credit pull. Many cards allow you to ask for an increase w/o a hard pull every 6 months or so. I think Citibank even allows you to do it online.

ii) Make sure your credit score is decent, and also put the biggest number possible for household income.

I noticed that if I want to do a balance transfer I needed to tell them the account number of the the credit card I want it transferred to. Do I need to transfer it to another credit card or can I have it sent to my checking account.

If they only take account numbers, then you’ll need to use another credit card. But Citibank should allow it to be sent via check. Please see Part 3: Application Tips and Getting Cash From 0% Balance Transfers.

Specific question about the DISCOVER MILES CARD. I opened my account, they did a balance transfer to my chase account. I paid off $100 then made a purchase to get my free gift card (10000 miles=gift card). Is there any way to make sure that my next payment encompasses the minimum amount due and is also applied toward my purchase?

The answer is no, all payments are always directed at the balance with the lowest interest rate. However, on your card both purchases and balance transfers are at 0%, so it shouldn’t matter.

Jonathon, since I follow your blog, I know you are looking to buy a home sometime in the near future. I have read from various sources that mortgage rates you get are dependent on your credit score (+ income/other factors). By taking these 0% balance transfer opportunities (opening new lines of credit in a short time) and making a good $1000-$2000 (assuming you transfer $20000-$40000), you do reduce your credit score (atleast temporarily).

Do you think this lowering of your credit score may cost you more (than the money you earn now) in the longer term if you get a mortgage rate even .50% higher than you would if you had a higher credit score?

I have no plans to have any debt by the time I plan to apply for a mortgage (which is still at least several months away). I will pay everything off two months beforehand, and put this game on pause until the house is bought and the mortgage is closed upon. I fully plan on peaking my credit score to get the best rate possible.

maybe have a specific breakdown of which cards let you do 0% bt’s without any fees?

I don’t have an exhaustive list as they tend to change, but here’s a list of few good ones.

One thing that I never really figured out how to do was when there were offers for 0% on purchases. Has anyone ever found a good way to get cash from purchases? That would open up the playing field for a lot more cards.

Some people simply make a lot of purchases, whether for personal or business use. In the past you could buy some prepaid credit cards and cash them out with minimal fees, but I don’t know of any currently. It’s hard because in that scenario someone would have to be paying those transaction fees. I would perhaps apply for one if you were planning on making some large purchases.

Aren’t there costs associated with 0% balance transfers? For example I did this once, several years ago, and there was a balance transfer fee.

There can be, but if you look carefully there are many without any fees. Please see Part 2: Scouting For 0% Balance Transfer Offers.

Is there a way to apply for a credit card ensure that you either get denied or get a some minimum credit limit?
For example, I would like to submit an application that says give me a $20,000 credit limit or don’t bother giving me a credit card at all.

I don’t think so, at least I am not aware of one.

I have two questions – first, how long did it take for you to receive the check from Citibank? I got a message for one of the accounts that said “Before processing your refund request, we must verify your recent payments”, and was wondering how long they may take with this.

Second, do you remember if the online balance goes from negative when they cut the check, or after you cash it?

It takes between a few business days and a week, if I recall. I’m pretty sure it goes from negative when they cut the check.

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  1. You claim you will pay everything off your credit card balances before actually buying a house. Won’t that also hurt your score by having large amounts of available credit on those paid off cards?

  2. TW-

    Quite the opposite. If you have LARGE credit lines that are unused, that is VERY favorable to your credit score.

    In fact, when a lot of “veterans” do this BT “game”, many of them often pay off ALL of their balances simultaneously so they get a significant bump in their credit score. Usually the score goes up to levels as high or higher than it was before the BT investment stratagey was started. Which is great b/c it puts you in better position to do it again in the near future, and hopefully with even larger credit lines.

  3. I often close the credit cards right away so no one will ask me to close one when I need another credit. It?s about the impression you create.

  4. what TW is concern with is true though. yes, your scores DO improve, BUT, it may affect your mortgage application negatively.

    having large amount of unused credit, in the eyes of mortgage lenders may be viewed as possible risk. it’s been suggested that you should consider closing one or two short history cards to reduce the amount of revolving credit lines you have open.

    example: rejected for credit because you have “too many accounts open for revolving type of account”

  5. From what I have read, the thing about too much available credit looking bad to mortgage loan officers is true. This is due to each bank’s specific lending requirements. But. there is no need to do it ahead of time as they should work with you. They’ll just say “If you close XX card or get an XX larger downpayment or jump through these hoops, we can get you XX lower rate.”

    Then, if they say jump, I’ll jump 🙂

  6. I would also like to add that you can ask for the credit card company to wire the money directly to your checking account. I have done this many times and it only takes 2-6 days rather than wait for a check in the mail.

    And last, I just paid off my car loan with a BT offer 🙂 So I am paying off the minimum each month back to the CC company and taking the difference of what my pament would have been and putting it back into savings to stooze the money some more. IN a year, I will re-evaluate my BT offers and retransfer the money to a new card(or two or three!)

  7. Has anyone had the experience of the 0% being yanked from them in the middle of the offer? My understanding is that card companies can do that at any time (fine print) but generally only do so if you default on a credit agreement you have. Have you heard of anyone who’s had the terms change even though they paid their bills on time?

  8. I’ve been doing the 0% thing for a few years now on several cards and have never had a problem with them yanking the offer. My buddy messed up once and they pulled the offer nad started charging the normal interest rate.

  9. When will second half be posted?

  10. Tiffany Beaumont says

    Dear Money blogger,
    I need help. I have been using my credit cards over the last 2-3 years to get my business going. I carry high balances (I have 4 cards in all) but always pay on time and well over the minimum payment. I have 2 cards with Citibank, one personal @ 7.99% APR (no limit), the other business @ 14.99% APR $25,000 limit). The other 2 are from Chase: 1 British Airways Visa signature which I just found out has been raised to a 24% APR from a 13% (11,000 limit) and a Chase Mastercard which has been raised to a 22% from a 12% APR (10,000). I called them and all they had to say is that they raised my APR because I was carrying high balances. I am absolutely horrified that they can get away with that especially when my credit history is flawless. My Fico score in the past 3 years has waivered between a 750 and a 660 depending on high the balances were overall. Today it is 673 and I do have all my credit cards close to the limits. I need probably another year for my business to get to the point where I can pay everything completely off. In the meantime I would like to transfer the balances of the Chase cards to a 0% card. Can I get accepted with a FICO score of 670 and high balances? Is there any advice you can give me? Thanks so much in advance.

  11. Some quotes:
    “once you pay off the debt, your score will bounce back to what it was before. Companies report to the bureaus monthly, so it may not bounce back until after your next statement closes after paying it all off.”

    “I have no plans to have any debt by the time I plan to apply for a mortgage (which is still at least several months away). I will pay everything off two months beforehand, and put this game on pause until the house is bought and the mortgage is closed upon. I fully plan on peaking my credit score to get the best rate possible.”

    Two months may not be enough. I use high reward credit cards for all purchases (though not the money shuffle). Six months before I was going to purchase a house, I stopped using all credit cards. When I got my mortgage, my credit report still reported my high balance from six months prior (~5K on some) in the debt/credit ratio sections.

    The credit reports the banks requested came with: “amount owed on revolving accouts is too high” as one of the “dings”, even though I hadn’t owed anything on any revolving accounts for the previous 6 months. My score was still over 800, so I did not try to “fight it out” with the agencies.

    Just my experience, and something to be aware of.

  12. What is the max credit card limit on a credit card ? Is it $50000 ?
    Secondly, can one have both the ATT Universal Platinum, and ATT Universal Rewards card, or 2 cards from Discover ?

  13. Jonathon,

    I am starting up my 2nd round of 0% offers but was rejected by Discover for a 2nd card because “Time most recent account was opened”. Have you or anyone else ran into this or know a way around it? I am about 10 months into my first card and would like to transfer the credit limit to a new Discover.

  14. I’m currently seeking to transfer about $5000 from one of my cards but the maximum credit limit offers I’m receiving on card offers range from $500-$1000. I really would like to transfer the entire amount to just one card. Any suggestions?

    Also, can you do a transfer from one card to the next if they are issued by the same bank?

  15. I’ve received my first two 0% APR cards a little less than a year ago and was stoked for the free loans. Now I’m already planning a balance transfer to continue a 0% APR, but this site is cool and overwhelmed me as you are taking it to the next level … So my big concern from reading everything here is: Balance Transfering more than your older card has a balance for — do ALL banks not mind this overpayment and gladly send you a refund check when you ask? Because it seems to me that they could almost charge you for a ‘cash advance’, which I learned the hard way is not very pleasant.
    Essentially: do any CC suppliers object to overpayments and do not issue you a fee-free check?
    Also, is this over-payment BT is the best (recommended) way to get the money from your new card into cash (interest)?

  16. I am having a bad time with this arbitrage.

    I just transferred $25k to a Bank of America credit card – leaving a -$21000 balance. I then transferred $18800 (the max ‘cash advance’ amount) this to a BofA checking account. Bank of America put a hold on that card and their rep Shelley Taylor (866-297-9257) left me a message. When I called them up they proceeded to ask a bunch of questions – including why I transferred the money (I just said “arbitrage” – a word she did not understand).

    She said if ever “overpaid” again my account would be closed. Nice.

    My account still seems to be frozen. Hopefully I can get this resolved quickly.

  17. One way to do it without making a large overpayment to an existing card is basically to charge everything where you might normally use cash or checks. I buy groceries on my Discover card and get $50 cash back each time. There seems to be no additional cash advance fee for the $50. Over a month, you can rack up a sizable balance, which you could transfer to a new 0% card. It likely won’t be the $10,000 you might want to do, but it could be $2,000. Some of the balance transfer offers let you make multiple transfers over a period of time, so you could make new transfers each month until you max out the 0% card. This may be more trouble than it’s worth, but it does avoid the over-payment-and-request-refund-check approach.

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