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I have a Visa loan with company A that has an interest rate of 10%.

Company B is offering to let me transfer my balance with A to them for a 12-month 0% interest rate.

I know that company A also offers visa balance transfers, at a rate lower than my current (say, 3%).

Are there any issues I should expect if I were to move my balance from A to B, wait 11 months (paying all the time interest free) and then transferring what's left from B to A at my new, lower rate?

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  • Do you mean a loan from a bank that uses the Visa network? Visa isn't involved with the loan, other than processing the transfer of money.
    – Acccumulation
    Commented Mar 28, 2019 at 22:13
  • @BenVoigt If the loan balance is from purchases, then Visa was probably involved in the original transfer of money from the lending bank to the acquirers. And Visa is involved in some push transactions.
    – Acccumulation
    Commented Mar 29, 2019 at 2:53
  • @Acccumulation: Oh right, you're talking about accruing debt in the first place, not the transfer. Sorry for misreading that.
    – Ben Voigt
    Commented Mar 29, 2019 at 3:27

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The kicker is the balance transfer fees (not to be confused with the interest rate). My guess is that B charges a flat 2-3% fee upfront just for doing the transfer. The "0% interest" might also be deferred, meaning if you miss a payment (intentionally or from some mistake) or don't pay off the balance in 12 months, they'll retroactively charge you all of the interest that had been accruing but you hadn't been charged. All that should be outlined in the terms of the transfer agreement. Read it very carefully.

So, can you do this? Sure - it will cost you 9% over 2 years (3% for each transfer plus 3% for the second year after you transfer back), and after two years you'll still be in debt. You haven't really accomplished anything, just moved your debt around for a slightly lower interest rate. Plus if something happens and you can't pay the monthly payment, you might end up MUCH worse off than when you started.

Depending on how long you plan to take to pay this off, you might be better off, but if it only takes you 6 months to get it paid off, you might be better off paying the higher interest instead of the 3% upfront fee and the risk of extra fees if something goes wrong.

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    Another thing to consider is that often payments are applied towards the transferred balance. So if you transfer $1000, then buy $100 worth of stuff, and make a $200 payment, there's $800 left on the transferred balance and nothing gets applied towards the $100, which accrues interest at the regular rate. So if one is doing this, one shouldn't put anything else on the card.
    – Acccumulation
    Commented Mar 28, 2019 at 22:18
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    "Sure - it will cost you 9% over 2 years" Slightly more, with compounding. "You haven't really accomplished anything, just moved your debt around for a slightly lower interest rate." But moving debt around for a slightly lower interest rate is doing something. This could save the OP thousands of dollars in interest.
    – Acccumulation
    Commented Mar 28, 2019 at 22:18
  • Deferred interest isn't applicable for balance transfers, or even regular credit cards. Only some store branch credit cards use deferred interest, and it would be on newly purchased items from that store.
    – TTT
    Commented Mar 28, 2019 at 22:42
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    @Acccumulation - I think the law was changed in 2009 which says, after the minimum payment is made, all excess beyond that must be applied to the highest interest rate first. AFAIK this only applies to consumer credit cards though. I think business cards can still do what you suggested.
    – TTT
    Commented Mar 28, 2019 at 22:45
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You can definitely do what you propose. Note there are usually upfront balance transfer fees (typically 1-5%), so you have to factor that into the total cost. But even with a one time 5% hit you're still better off than the 10% APR you have now, at least for the first 12 months.

Two things to keep in mind with your plan:

  1. You must consider the possibility that the low interest balance transfer offers will dry up in the future. The offers are dependent on many factors, including your credit score and profile, the bank's marketing initiatives, and even the overall economy. In the worse case scenario, if bank B has an interest rate that goes to 20% after the 12 months is up, and at that time bank A no longer offers you a balance transfer, you would then be stuck with your debt at 20% instead of the current 10%.
  2. You are going to be increasing your credit line (possibly close to doubling it). Depending on your personality, this could be an enabler that allows you to go into ever more debt.

In general though, if you have good spending habits and are actively climbing out of debt, low APR balance transfers are a great way to save on interest.

I know you said you plan to shift the balance back to the original card after 1 year, but the best advice I can give you is to take the offer, divide the balance by 12, and work hard to pay that amount every month. Then you won't have to transfer the balance again and pay any more fees or interest.

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  • Whether a 5% transfer fee is better than 10% APR depends on how quickly the debt is being paid down. If 12 or more months away from payoff, then the average daily balance over the next year will be over half the starting amount, and the BT fee is better. If paying on a schedule to clear the debt in less than a year (which OP doesn't seem to be doing), then the 5% fee would be worse. To be totally accurate, the 5% fee needs to be compared to the present value of a future series of interest charges.
    – Ben Voigt
    Commented Mar 29, 2019 at 3:31
  • @BenVoigt - agreed. 10% interest paid off on an 11 month equal payment schedule is roughly equivalent to an upfront 5% fee.
    – TTT
    Commented Mar 29, 2019 at 3:50

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