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Is it acceptable to balance transfer credit card debt to the same card?

Often, balance transfer promotions come as checks in the mail, and I learned that you may write that check to yourself and deposit it into your checking account. Can you then take that money and pay off the card offering the balance transfer promotion to begin with?

I understand that the sum of the existing balance and the requested balance transfer (plus fees) must remain under the bounds of the credit line, but other than that, are there any technical or legal restrictions against doing such a thing?

  • In case it was not clear, the purpose of doing so would be to take advantage of the promotional rate (0 APR) instead of the standard purchase rate, if carrying a balance. – Andrew Cheong Apr 17 '14 at 7:36
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    "Is it acceptable to balance transfer credit card debt to the same card?" Almost certainly not. But read the fine print to be sure. – Joe Strazzere Apr 17 '14 at 11:11
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To expand on @JoeTaxpayer's answer, the devil is actually in the fine print. All the "credit-card checks" that I have ever received in the mail explicitly says that the checks cannot be used to pay off (or pay down) the balance on any other credit card issued by the same bank, whether the card is branded with the bank logo or is branded with a department-store or airline logo etc. The checks can be used to pay utilities, or even taxes, without paying the "service fee" that is charged for using a credit card for such payments. The payee is paid the face amount of the check, in contrast to charges on a credit card from a merchant who gets to collect only about 95%-98% of the amount on the "charge slip".

Generally speaking, balance transfer offers are a bad deal regardless of whether you pay only the minimum amount due each month or whether you pay each month's statement balance in full by the due date or anything in between.

The rest of this answer is an explanation in support of the above assertion. Feel free to TL;DR it if you like.

  • If you make only the minimum payment due each month and some parts of the balance that you are carrying has different interest rates applicable than other parts, then your payment can be applied to any part of the balance at the bank's discretion. It need hardly be said that the bank invariably chooses to apply it to pay off the lowest-rate portion. By law (CARD Act of 2009), anything above the minimum payment due must be applied to pay off the highest-rate part (and then the next highest rate part, etc), but minimum payment or less is at the bank's discretion.

    As an illustration, suppose that you are not using your credit cards any more and are conscientiously paying down the balances due by making the minimum payment due each month. Suppose also that you have a balance of $1000 carrying 12% APR on Card A, and pay off the entire balance of $500 on Card B, transferring the amount at 0% APR to Card A for which you are billed a 2% fee. Your next minimum payment will be likely be $35; computed as $10 (interest on $1000) + $10 transfer fee + $15 (1% of balance of $1500). If you make only the minimum payment due, that payment will go towards paying off the $500, and so for next month, your balance will be $1500 of which $1035 will be charged 1% interest, and $465 will be charged 0% interest. In the months that follow, the balance on which you owe 1% interest per month will grow and the 0% balance will shrink. You have to pay more than the minimum amount due to reduce the amount that you owe. In this example, in the absence of the balance transfer, the minimum payment would have been $20 = $10 (interest on $1000 at 1% per month) + $10 (1% of balance) and would have left you with $990 due for next month. To be at the same point with the balance transfer offer, you would need to pay $30 more than the minimum payment of $35 due. This extra $30 will pay off the interest and transfer fee ($20) and the rest will be applied to the $1000 balance to reduce it to $990. There would be no balance transfer fee in future months and so the extra that you need to pay will be a little bit smaller etc.

  • If you avoid paying interest charges on credit cards by never taking any cash advances and by paying off the monthly balance (consisting only of purchases made within the past month) in full by the due date, then the only way to avoid paying interest on the purchases made during the month of the balance transfer offer is to pay off that month's statement in full (including the balance just transferred over and the balance transfer fee) by the due date. So, depending on when in the billing cycle the transfer occurs, you are getting a loan of the balance transfer amount for 25 to 55 days and being charged 2% or 3% for the privilege.

    If you are getting offers of 2% balance transfer fees instead of 3%, you are probably among those who pay their balances in full each month, and the bank is trying to tempt you into doing a balance transfer by offering a lower fee. (It is unlikely that they will make a no-transfer-fee offer.) They would prefer laughing all the way to themselves by collecting a 2% transfer fee from you (and possibly interest too if you fail to read the fine print) than having you decline such offers at 3% as being too expensive.

    Can you make a balance transfer offer work in your favor? Sure. Don't make any purchases on the card in the month of the balance transfer or during the entire time that the 0% APR is being offered. In the month of the transfer, pay the minimum balance due plus the balance transfer fee. In succeeding months, pay the minimum balance due (typically 1% of the balance owed) each month. All of it will go to reducing the 0% APR balance because that is the only amount owing. Just before the 0% APR expires (anywhere from 6 to 24 months), pay off the remaining balance in full. But remember that you are losing the use of this card for this whole period of time. Put it away in a locked trunk in the attic because using the card to make a purchase will mean paying interest on charges from the day they post, something that might be totally alien to you.

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You owe $10k at 18% and borrow an additional $10k at 0. When you pay back $10k, they are likely to apply it to the zero rate money and you are out 2%.

Your question has merit, but as others say, the devil is I'm the details. You should read the fine print.

My credit card checks forbid drawing a check payable to myself. I need to pay another account, in my case easy to 'pay' my HELOC, then draw the funds.

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    Didn't legislation in 2009 mandate that only the minimum payment may go toward the lowest APR balance, and any additional payment must go toward the highest APR balance(s)? (At least, I know that's how my Citi, AMEX, and Barclays cards work, having done the BSTIR calculations by hand.) But okay, I didn't realize that the fine-print could forbid it—and if it does, I'm still not sure how they'd prove it, but maybe it's on your honor... – Andrew Cheong Apr 17 '14 at 14:50
  • Ooh, the CARD act. Yup, I wrote about that, but it slipped my mind. Nice catch. – JTP - Apologise to Monica Apr 17 '14 at 14:52

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