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We have 3 credit cards which, up until this past summer, were always paid off in full. This past summer there was a perfect storm of events (car trouble + family emergency) and we are slowly paying off our cards. Each card has a balance around 30-50% of its credit limit

Today in the mail we got an offer from one of our cards: balance transfer with 0% promotional APR through 2/21/15, 2% transfer fee, and "We will begin charging interest on these transactions on the transaction date."

For simplicity sake, let's say each card has a limit of 6K and a balance of 2.5K. If I were to transfer the full balance of my highest interest card using this promo, the cards would have balances of 5K, 2.5K, 0. I would then not use the card I transfered to at all, and would pay $450 per month for 12 months to pay off the 5K balance before the promotional APR expires. If I do this, will I avoid paying interest on the balance transfer? I am confused about the phrase "We will begin charging interest on these transactions on the transaction date." as it relates to the promotional APR. With the 2% transfer fee, I would pay about $50 which would be the equivalent of 1.5 months interest if I keep the balance on the current card.

  • After the promotion ends, my APR is 1% lower than the card I would be transferring from. – awestover89 Dec 11 '13 at 22:26
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Generally, in the US, you have 25 days after the date of the monthly statement to make a payment. If each month you pay the amount stated as the Balance Due within this 25-day window, then the purchases that you make after the monthly statement date are not charged interest. As soon as you pay less that the full amount due, this interest-free period disappears and new purchases are charged interest from the date of posting of the charge to your account. What the balance transfer offer is saying is that while the amount transferred over will not be charged any interest for a year, any new purchases that you make using your new card will be charged interest from the day they post to your account -- no free ride till the due date of the next monthly statement -- just as if you were paying less than the full amount due of each monthly statement.

  • Ok, so in this example, the $2500 existing balance would accrue interest, while the $2500 transfer would not (for a year) and if the card is paid off in full before the end of that year, then no interest on the second $2500 will ever get charged? – awestover89 Dec 12 '13 at 5:05
  • Yes, that is my understanding of typical contracts, but what your offer says might be different. You are also forgetting the 2% transfer fee on the $2500 transferred over which is, in effect, prepaid interest of $50 on the amount transferred over, and which will also accrue further interest until the card is fully paid off. – Dilip Sarwate Dec 12 '13 at 14:22
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I have a few 0% APR Balance Transfer cards. Here is what happens on mine--does not imply the same for you. But hopefully it will help you understand your contract.

My interpretation of the phrase is that they are going to calculate the interest you owe and place it in a hidden 'bucket' if you will. This 'bucket' of interest charges is only applied if your 'Balance' does not equal zero at the end of the promotional period (i.e. 2/21/15).

So, if your 'bucket' of interest charges has accrued $300 and you have a balance of $500 at the end of your promotion period, then your next balance will be $800 (500+300). And technically, there would probably be some more interest charges based on this new balance.

Said another way: Think of the interest charges you have been charged each month you have a balance. Under this promotion, the charges would be hidden from your monthly statement, but would still be calculated and accruing with each month. These charges would then be applied to your balance ONLY IF YOU DON'T PAY OFF YOUR CARD WHEN THE PROMOTION ENDS.

Hope that helps. But read your contract closely, and just ask them.

  • I do hope that your balance transfer offer works the way you claim it does. It differs from all the offers that I have ever been made. – Dilip Sarwate Dec 13 '13 at 3:27
  • Yes, it's more popular with retail cards and cards offered by stores. But based on the phrase in the original question I stand by my answer. That is how I interpreted the person's problem. If there was more information given, then we could provide a better answer. – Stuart Dec 13 '13 at 3:57
  • That is how I was assuming it worked, but wasn't sure. – awestover89 Dec 16 '13 at 16:10

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