Should we put all our debt on a 0% visa

bouncingpigSeptember 26, 2002

We keep getting offers for Platinum Visas with no interest until Dec. 2003. We have excellent credit and can get up to $35,000 on the card. We currently have a truck payment at 9% (we owe $17,000) and a credit card bill of $4,800 at 12%. Can we roll both the auto loan and the credit card over to a new interest free visa? And, if so, is it hard to switch again when this one's free interest period runs out? It just seems like we are spinning are wheels with so much of our payments going to the interest and at least for the next year it would go straight to the principal balances. Your thoughts on this are appreciated.


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As long as your credit history is good enough for you to get those offers, you could keep transfering those balances forever.
The ones I see, though, don't give the 0% rate on transfered debts, only new purchases. Are you sure about that offer?

    Bookmark   September 26, 2002 at 10:30PM
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Not sure what your situation is, but sometimes the credit cards have a fee for balance transfers or maybe a fee for transfers after the first one. If you put the truck payment on the card, then put the other credit balance on the card they might apply a fee to the second transfer. Of course it's all there in the microscopic print! I'm leery of hidden fees, sometimes they promise people one thing and then the terms & conditions are different and when you ask them about it they say 'you should have read the fine print'. :( I have a card where they raise the interest rate if you make a payment higher than the minimum balance. They seem to get people coming and going.

    Bookmark   September 26, 2002 at 10:36PM
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I would roll the credit card to the zero percent card but not the truck payment. Strive to get the $4,800 paid off by the time the interest free period ends. Doing the truck would be dangerous because if there aren't anymore free deals when this one comes to an end, you're going to be stuck paying 18 percent (or whatever) on a big balance.

Credit issuers indirectly know how much you owe when they extend these offers because they get from credit bureaus a list of people who meet such and such criteria. When this free offer ends, you may no longer be attractive to these people for one reason or another.

AND here is the most important point: Anyone who rolls a balance onto a low interest credit card MUST NEVER use that credit card to make any other purchase or cash advance after they do the initial balance transfer. NEVER. Here's why: They will apply all payments to the low interest balance first. So what happens to many people is you roll the $4,800 on to the promotional zero rate card, and then go out and charge $500 of stuff in a month. You mail off a payment of $1,000 figuring you paid off the $500 plus $500 of the $4,800 existing balance. Nope, that's not what you did. They will apply the $1,000 payment to the $4,800, reducing the zero rate balance to $3,800, and now you have $500 sitting there at whatever their prevailing high rate is, and you can't even begin to pay it down until you've retired all of the zero rate balance.

You can see that if you go out and charge more stuff on that card, in just a few short months, they will get your whole $4,800 "moved" to where you're paying the prevailing interest rate on it.

And another problem is when they're giving you that zero percent, they will say very clearly in the terms that your account must be in good standing, otherwise they'll ratchet your rate up to the prevailing rate -- or maybe even a higher than normal "penalty" rate. So maybe they define "not in good standing" as a single late payment, which could occur from something as simple as a delay in the mail, and then your rate goes from zero percent to 18 percent or whatever, and you're stuck. You can see why if you had that truck on there too, you could be in a real mess very quickly.

You could refinance the truck at less than 9 percent if you want to save money there. An additional problem of rolling the truck into your card is, if you trade it in, presto, you have all kinds of equity because it's "paid off" from the standpoint that there's no lien on it, but you still owe the money on a credit card. So if you do that you'll owe money on a new one (which you may spend just by buying a much more expensive one) and then you have a new vehicle while you are still paying for the old one.


    Bookmark   September 27, 2002 at 1:45AM
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Ken says it very well and there isn't much that I can add with the exception that I doubt that they would offer you a credit limit that would cover both your truck and credit card payments. I would suggest you call the financier of your truck and see if the would lower the rate. Tell them straight up that you can pay a lower interest rate by transferring a balance to a credit card.

    Bookmark   September 27, 2002 at 8:16AM
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I just want to go on record to say;
You impress the heck outa me sometimes!

I *DO* expect to share a beer sometime...

    Bookmark   September 27, 2002 at 3:13PM
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Well, it appears I need to read all the fine print on these offers and be sure of what I am getting into. I would certainly not want to be penalized for paying more than the minimum, as our goal is to lose this debt ASAP. We can get credit for the full amount, as our credit rating is almost 796, but I need to know for sure what is what first. Plus, as I am a powerseller on ebay, Ebay requires I let them bill a credit card for my ebay fees. Since it sounds like they could "screw me" if we added to it, perhaps I would need to have a separate visa for my ebay. We are spending about $250.00 in just paying interest each month! I'd sure love to see that all go straight to the principal. My husband and I will spend some time looking into it this week. Thanks for all the input and advice!


    Bookmark   September 27, 2002 at 5:07PM
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Thanks, Dave, for the kind words.

Brenda, definitely keep the eBay charge card separate from the low rate one where you plan to transfer the $4,800. Not only for the reasons I explained above, but also because, if you start charging more to the card where you already have a big balance, it's very easy to just let it pile up. Of course, that is the theory behind credit issuers making offers to begin with: Everyone starts out with good intentions, and then things go haywire and they wind up owing more rather than less, which is exactly what the credit card companies are banking on.

Since the offers keep filling everyone's mailbox, apparently offers such as these are profitable, and zero percent interest can't be profitable. The whole premise is that people are going to wind up paying much more than that in the end, and apparently a large number of people do.


    Bookmark   September 27, 2002 at 11:53PM
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I agree that the want to catch you and hopefully reel you in and have you pay more in the long run. I did some research on the internet tonight and found one that is 0% for 6 months and then goes to a 5.5% fixed after that. It is a platinum visa. I think we will probably go that route as 5.5% is still very good. I want to make sure about things such as penalties for paying early, etc. before we sign up for anything though. Thanks for your help.


    Bookmark   September 28, 2002 at 1:51AM
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In the past, we have transferred credit card balances that we had to 0 interest loans and used this strategy: 1) do the transfer, 2) cut up the credit card (seriously), 3) divide the balance by 12 months (or whatever works for you) and pay that amount each month by 4) setting up an automatic payment to be deducted from our checking account each month, so there are never any late fees.
Some of Ken's points are valid if you are undisciplined. However, if you are smart about it, it can work--it certainly did for us. It seems unlikely that there won't be any other low interest credit card offers after 12/03 but if you did transfer your truck balance to that 0% credit card for 14 months, your principal would be significantly lower than it will be leaving it where it is now. If the low interest credit cards solicitations do dry up, you could transfer the remaining balance to a HELOC or second mortgage.

    Bookmark   September 29, 2002 at 2:27PM
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Some of my points are valid if you are undisciplined? Most of what's in that post doesn't have a thing to do with being undisciplined. They have to do with the way the deal is structured, and that's where people get caught. Charging more to a credit card that you also used for a balance transfer is not a matter of being undisciplined -- if you didn't know the ins and outs of how they set you up on those, then you could make the mistake whether you were undisciplined or a model of financial responsibility.

    Bookmark   September 29, 2002 at 2:34PM
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Well we did a ton of research this weekend and I think we are going to get a visa that is 0% for one year and then locks in at 9.9%. We will switch over to another one before this one switches to the 9.9% (hopefully there will still be 0% offers at that time too!) At the same time, we will open one we found for 5.5% fixed for the ebay expenses I will incure from here on out each month. It should be one we will pay off at the end of each month anyway. Other than my monthly ebay charges I have to have as a powerseller, we won't be using credit. We have learned discipline and are hoping to pay both the truck and the visa off in two years once we knock off the interest. I hate debt with a passion! Thanks again.


    Bookmark   September 30, 2002 at 2:57AM
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I think you made a wise decision. I do this type of thing all the time ... and everything Ken and Sadiesmom said is true. Both of them gave very good advice.

I have been transferring my debt around for a number of years now ... and those low-interest offers always seem to be available when you need them, as long as your credit remains good. The 0% offers are something new we've been getting, and I did do it once ... works good as long as you make sure there isn't transfer fees and that it is for balance transfers and not purchases.

I have a American Express Optima card and I got a great offer of 5.5% until the balance is paid off, so I transferred everything to that and I think it will benefit us the best since I now don't have to worry about moving the debt around anymore. I actually transferred debt from this Amex card to another card and then back again to get the 5.5% deal. I was nervous, but it worked :)

    Bookmark   September 30, 2002 at 2:29PM
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I guess I'm either very disciplined or very lucky -- I've always paid my ccard balances in-full, never paid even a penny interest (except on a foreign purchase in which the currency conversion was considered a cash-advance), and never have had a need to transfer balances.

    Bookmark   September 30, 2002 at 4:37PM
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Most of our debt is the truck and since I sell on ebay, I have to use credit each month, or they won't let me list more than $25.00 worth of stuff. We don't use it for just anything and have extremely good credit. We are also disciplined.


    Bookmark   October 4, 2002 at 11:54PM
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It's been a long time, so perhaps the issue isn't current any more.

But I think that, if I were you, I'd check out some other credit card offers, then call your company to negotiate that business of the penalty if you try to pay part of the principal off regularly.

Tell them that you're unhappy with that policy, and are considering transferring your account to another carrier. Be conversant with the rules and policies, so that they know that you mean business.

You'll very likely find that the rules are bendable.

Be courteous. Be knowledgeable. Know what you want, and spell it out for them.

Don't take their first, or even second or third "No" as final.

Don't challenge their denial directly, however - it may get their back up, in which case they'll likely get stubborn.

It may be a good idea at that point to start dealing with another subject - for example, if they say that you can't pay off part of principal on occasion, ask if they offer that 0% interet rate on transferred balances, etc.

When they turn you down - change the subject. But get back to the original issue before long. Doing that several times drives them crazy.

Be persistent. Wear 'em down, if necessary.

If not - you can find a carrier that makes a better offer.

Ya don't ask - ya don't get.

Good wishes for finding a deal that meets your needs.

joyful guy

    Bookmark   November 19, 2003 at 5:04AM
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Having many credit cards may seriously undermine your good credit rating...

    Bookmark   November 21, 2003 at 11:38AM
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