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To save some money on interest, last week I transferred a balance of $17,500 from my student loan account to my credit card for 0% APR for 18 months and a 2% transfer fee.

The transfer fee ($350) just posted to my account.

I'm wondering, do credit card companies charge interest on this fee? If they do, how can I avoid paying it? Should I make a payment right now for $350 and then just pay the minimum when the next statement comes around? Or should I wait for the next statement and then pay the minimum plus $350?

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Typically your statement will break down each of the balances that carry a different rate, so you'll see them lumped into the 0% line, or two separates lines with different rates for each. If you don't see it on the statement, a quick call to your bank should clarify it for you.

If I had to guess, I would lean towards the fee likely being at 0% also, but if it isn't, typically you would pay the minimum + $350 on your next statement. (Because only amounts over the minimum go towards principal of the highest rates first, at least this is true in the US for personal accounts.) Of course this is something your bank should be able to clarify as well.

Balance Transfer Tip: I always recommend setting up automatic payments when you take advantage of a balance transfer offer. The reason is, oftentimes buried deeply in the terms and conditions, is an evil phrase which says that if you miss a payment, they have the right to revoke the promotional rate and start charging you a higher rate. That would be bad enough if it happened, but to make things worse I believe the fee you paid for the transfer is not returned to you. So, set up an auto payment each month for at least the minimum payment. And if you can afford it, divide the total transferred by the number of months and pay that amount each month. (Assuming you don't pay interest on the fee: $17,500 * 1.02 / 18 = $991.67/per month.) That way you'll have it paid off just in time to not have any higher interest when the promotional rate expires. If you don't know if you can afford the higher amount each month, set it to the max you know for sure you can afford, and make additional payments whenever you can.

  • Well, the idea is to pay just the minimum and use the rest to pay down what's left of the student loan. When I'm done with the student loan in 3 or 4 months, continue paying the minimum on the card and put the rest on a bonds ETF. By the time the promotional period ends, I'll have plenty of money saved to pay the entire balance in one blow. – AxiomaticNexus Jun 16 '16 at 19:14
  • Sounds good. As long as the investment has an annual yield better than 1.33% and you pay the balance off in time, then you should come out ahead. – TTT Jun 16 '16 at 19:35
  • Well, I'm already saving 7.65% of interest from the student loan, so I'm already ahead. Whatever the ETF yields (which has historically been between 4% and 5% annually) would just be a bonus. – AxiomaticNexus Jun 16 '16 at 19:54

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