0% Balance Transfers Questions & Answers: 1st Half

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.