0% Balance Transfers Questions & Answers: 2nd Half

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Here is the 2nd half of questions submitted to me. 1st half is here. All are part of my series on How To Make Money From 0% APR Balance Transfers (index of all posts). And off we go:

First let me say thanks for taking some newbie questions. I am currently looking into doing some of these transfers but my question lies in what is the best approach. I have right now about 140K in CL on cards. Credit score in the 735 area. (Took some hits from opening those 100 dollar sony cards this month.) I would like to take out but I am wondering on the utilization. What is an effective percent to utilize in order to continue to grow my credit line without killing my credit score.

From what I’ve read, the utilization of each individual credit line matters, as well as the utilization of the all your lines. For example, if you have two card at $20,000 credit line each – having a $10,000 balance on both card is better than none on one card and maxing out the $20,000 on each other. Not sure why this is, but that’s what they say.

As for the exact effect, it just depends on various factors including how long your credit history is and your current card inventory. Most people just do one credit card to start with, and see how they like it and how it affect their credit score.

Might be a little off topic. I’m just wondering what you would do in my situation:

I currently have 4 AMEX cards
1)Starwood Amex (1st year free $30/year) Credit Limit: $10k
2)HHonors AMex (Free) Credit Limit: $10,000
3)Costco True Earning (free with Costco Membership) Credit Limit: $10,000
4)Amex Cash Rebate Card (free) $6000

Should i ask a credit increase for Amex Cash and maybe consolidate the credit limit to my Starwood card and close out the Amex Cash? Or should i just leave as they are for now?

Depends on what you want to do and if you still use the cards. I still say not to close any cards unless you have to in order to get a new card that you like or a loan officer asks you to. If you get a nice 0% offer on one of them you could move over most of the lines to that one. If you’re just using all of the cards for buying stuff here and there I wouldn’t do anything.

I’m 20 years old and thinking about doing these. Does doing this hurt your credit score? I am planning on buying a house in the next few years.

Yes, it will temporarily due to credit line utilization. You’ll want to pay off all these offers at least 60 days before applying for mortgage loans, as I’m doing. Your score will bounce back up once these are paid off.

I’ve just received my 0% BT Citi Amex, and I plan to do my first BT next month after I’ve earned the promo reward for the first month. I’m debating in my mind whether to go for the entire $8500 limit or instead to follow the advice of one of your posters to only BT less than half of the limit to reduce the amount of degradation of credit score.

I want to take advantage of this great spread, as you mentioned, but I also want to buy my first home in the upcoming years – more than likely about 2 years from now.

Since a lot of what determines FICO scores is secret, I don’t know if you can answer these or not, but:

1. Can you provide any gauge as to how much a credit score would be impacted (I know this would vary greatly with other factors, but maybe a general idea?)

2. D’ya have any idea how long a period after paying off all balance transfers it takes to erase the damage done (assuming a perfect record of timely payments on everything)

If you want to minimize the credit score hit, doing a balance transfer of less than 50% of the credit line will definitely do that. It will also minimize the profit, obviously ๐Ÿ™‚ As I said above, using 50% of two lines is better than using 100% of one line, if you have two cards available. (Using 100% of both lines will give you more profit but a bigger credit score hit) I think I’ve answered both #1 and #2 previously.

hi. i have a couple of questions:

is the purpose of doing an app-o-rama, besides playing the transfer game, to minimize the hit on their credit scores when you apply for multiple cc’s?

i know that there are some cards that offer gift cards after an initial purchase, but how does this come into play when you make an initial purchase to get the gift card while having a huge bt balance?

Another method to this game is known as the app-o-rama, which involves getting a bunch of cards together that you want to apply for, and then applying for them all on the same day.

The idea has a couple advantages:

1) You possibly can minimize the credit score hit due to hard credit pulls, as either the bureau or the card issuer may classify multiple pulls on the same day as just one pull.

2) You are tricking the issuer a bit, because this way they may not know that you are applying for credit elsewhere. For example, if you just applied for the same cards on consecutive days, on the third day that issuer would see that you already applied for two credit cards the past two days. But if they don’t know, the thinking is that you can get a higher credit line as you are considered less risky.

The disadvantages are:

1) To really get this to work, you want a pristine score to start with. That means you have to pay off all your cards and not apply for anything for 6 months to peak your score. Then you abuse it!:

2) Since you are applying for a bunch of cards (some people do 10-20 cards at a go), you are going to suffer one nasty hit which will last 6 months. This can have some varying effects. For one, you won’t be able to get another card for a while, even if one comes up with a nice signup bonus, as your credit is now totally shot.

2) Some card issuers may freak out and close all your current cards. MBNA is one of the less-forgiving companies.

I think the method works well for some people. I personally like just applying for offers that I like and having my credit score stay around 700 and then be able to pop it back up to 750 whenever I need to by paying off all the balances.

Okay, I think i overdid this arbitrage. At one point, I have $125k cc balance outstanding (now down to $70k). Some for arbitrage (0% balance), some to replace my car loan (I have 1.99% & 2.99% offer on life of balance).
At this balance my FICO drops to low 700s, but these days I never get those 0% offer any longer in the mail. I guess I’m a high credit risk at this level.

Maybe ๐Ÿ˜‰ 0% offers seem to come and go with me as well, often for no reason as my situation stays the same. As the offers expire and your balances get paid off, your score should bounce back and they may come back. Or you can go out and apply for 0% offers online.

FYI – MBNA in the past has never offered me 0%. 3-4 weeks ago, they started offering me 0% on both cards I have with them. I think this has something to do with BofA buying them out. Anyway, I stoozed both cards ($21600 & $15500) and put the money in my ING account. I used $17200 to pay off my car loan and I am collecitng interest from the rest of it. They also wired the money directly to my bank account. Although I had to pay a $75 charge for each card to get the balance transfer(they charge $5 to a max of $75 balance transfer fee). Even though I had to pay $150 in fees, I will still make over $600 in interest ๐Ÿ™‚

MBNA offers me 0% now and then – it seems to bounce back and forth for now reason. Thanks for the data point that they send the money directly to your checking account.

I was applying for the Discover Miles Card, and noticed that there is a 3% Transaction Fee on all Balance Transfers and Cash Advances. Is this waived during the introductory 0% APR period? Just wondering, coz a 3% transaction fee would negate a huge chunk of earnings from interest. Thanks for your help.

It does say that there is a 3% balance transfer fee. But if you scroll down further underneath the box, you will find a longer paragraph that starts with “INTRODUCTORY/SPECIAL APR OFFERS:” and ends with If you make a balance transfer with this application, there is no balance transfer transaction fee. Gotta read through the whole thing to find both the bad things and the good things! ๐Ÿ™‚

I want to go the Discover way. I’ve 2 Citibank cards already. I never carry any balance so assume $0 with those Citicards. Can I balance transfer say 15k from Discover to Citicard without having a balance there? How long before they send me a check for that credit? I know you’ve posted this but I want to be 100% sure. Can I do the same with AmEx instead of Citicards?

Also since it is 0% for purchases also, can I keep piling purchases on top of the balance transfer and just make the minimum payment?

Third question. How long before I can cash in the miles?

1) Yes, that sounds fine. See Part 3: Application Tips and Getting Cash From 0% Balance Transfers.
2) Yep ๐Ÿ™‚
3) You can cash them in as soon as you get them, which seems to be 1,000 per month. When I got mine it was 5,000 miles upfront, which I just transferred into another free $25.

I only tried it once. I signed up for the card (chase) b/c it was giving 0% balance transfer. My problem was that once I got the card, I couldn’t figure out how to get them to just transfer my money into my bank account. I called their number, tried giving them my account numbers, but the person I talked to said that they couldn’t do a BT into a bank account.

Please see the indirect method of Part 3: Application Tips and Getting Cash From 0% Balance Transfers.

I’m not sure if this is a question or just me complaining about a recent experience. I received a Citi Platinum Dividend American Express 0% offer in the mail and figured I’d apply for a balance transfer. While on the phone, I was told I would receive $8,000. Come to find out three weeks later, they didn’t give me jack for a balance transfer and just sent me the card. Now I realize this is a nice card giving 5% on gas and groceries and 1% on everything else, but I probably would not have bothered if I knew they wouldn’t give me the balance transfer.

My credit score is through the roof and I pay off my bills every month. Is there something I’m missing here or are they smartening up since they knew I was just going to “borrow” their money anyway and collect the interest? Is there any way to tell or some question to ask in order to make sure you’re not going to get stiffed like this?

I’m sorry to hear that, I haven’t heard of that happening with Citi before. Does that mean you got a small credit line? I would have called them up and complained to them with your story. If you get to a supervisor they could probably check your credit history and boost your line. I don’t think they care what you do with the money, to be honest.

I would like more info on the process for non-Citi cards. Like Chase cards, for instance. Also, since I have a low income, CC companies don’t like to start me off with a large limit. I get around this by getting a second card from the same company of one I’m already using and transferring over some excess credit limit from the old to the new card and then doing the BT. Do you know if asking for a credit line increase results in a hard credit check. Next time I do a BT I may first ask for an increase on the card I have before applying for another from the same company. Anyway, thanks for all your help!

I hope I’ve covered enough of non-Citi cards for you, and also ways to max out the credit limit they give you. Smart move on transferring the credit limits! As for credit line increases, I would just ask the company. They should know what you mean. If not, hang up and call back for another person. Many let you ask for an increase without a hard pull every 6 months or so, like Citibank.

Maybe a stupid question…but I owe nothing and have no “balance” to transfer. So how do I get the cash from the credit card company. Do I use the cash advance checks they send…or is there some other way to get access to “their” money?

Not stupid, check out all the other people who asked the same thing! – Covered in Part 3: Application Tips and Getting Cash From 0% Balance Transfers.

Should we have a person on stand by who can yank us out of 50,000 dollars of debt in case i miss a payment?

No, you should have the cash easily available in a bank account. This way, the worst case scenario is that you pay maybe a week’s worth of interest at the default. Even if this is a $100-$200, you may have already made that amount in interest already. And if you were careful, you can deduct those fees as an investment expense.

Taxes? – Reported income on tax forms? Legal – SemiLegal – Not Explicitly Defined – Illegal?

Income is usually bank interest, which is reported on a 1099-INT. If you’re putting it in a municipal fund or something, you may not have to worry about interest. I can’t see how any of this is illegal – Borrow low, lend high? Banks have been doing this since the dawn of money!

Okay, I think I’m going to have to make a third half. ๐Ÿ˜ณ But it’ll be tomorrow, I promise!

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  1. To get the most out of your FICO score don’t use more than 30% of the credit limit on credit cards. As you go over that 30% threshold, your FICO score starts to decrease. For example, if you have a $10,000 credit limit, don’t spend more than $3,000, or in this scenario, only do a balance transfer up to $3,000 to protect your score.

    It’s not necessary to pay off the entire bill each month. Just remain within the 30% and you’ll be ok.

  2. Hey guys, thank for an interesting reader. I have a question though. I just spoke to a credit card representative and he told me if I have a $0 balance on my citi card and I transfer money as a BT from another card on city I will end up with a credit on my account. However if this credit is more than a certain amount of money than they can hold it till they investigate where the money came from. He mentioned The Patriot Act and money laundrying techniques. Can you comment on this ?

  3. They usually investigate on any big transfer, it’s not a big deal. People transfer balances all the time.

    For example, if you make a balance transfer from Discover Card to Citi, then Citi will call Discover, verify that they indeed made the payment, and then you’ll get your check.

  4. Hi Jonathan,
    What % of the CL per card would you recommend for BT?
    Particulary to Citi and Chase.

    I recently did a mini-AOR and got approved instantly
    for 4 cards (3 Citi and 1 Chase). The CLs are:
    9K for each of the 3 Citicards and 18K for Chase,
    all 0% APR for BT.

    I know below 50% is pretty safe.
    Is 60% safe enough to not trigger any review?
    Or can I be a bit greedier and go higher? ๐Ÿ™‚


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