Discover Card Balance Transfers
Guest: chrys
Post subject: Discover Card Balance Transfers
Posted: Sat Aug 13, 2005 2:14 pm
I got a mail offer with the above offer from Discover and from reading the fine print I find that:
- 0% on purchases until May 2006 and then 9.49%
- 0% on BT until May 2006 but may be extended indefinitely as long as you make 3 purchases per month starting May 2006.
- no min dollar amount on purchases specified in offer
- no min financial service charge specified in offer but there probably is one
Granted, starting May 2006 you have to start making purchases and since payments are credited to lower interest category first (ie, BT) the purchases are going to accrue at 9.49% monthly plus min financial charge.
This seem too good to be true. I would make small purchases totaling no more than $5-$10 per month and probably still come out way ahead in total interest changes if I moved my Capital One 5.9% Fixed for life to Discover.
Can anyone see any pitfalls in this offer?
Thanks
Chrys
CardRatings.com is the most comprehensive source for comparing credit card offers. Please visit CardRatings.com to view the best rated credit cards!
Guest: nativechild48
Credit Expert (100+ Posts)
Post subject: Discover Card Balance Transfers
Posted: Sat Aug 13, 2005 3:24 pm
Not good to make purchases on accts. that you BT on, as your purchases get paid for last. Discover uses a two cycle method for apr., and the variable can be changed anytime. If you do not make purchases then the int. rate will not stay zero. All creditors can invoke the universal default clause at will, and part of what they want is you to commit to using the acct. for purchases and BT's.
Guest: maddybeagle
Post subject: Discover Card Balance Transfers
Posted: Sat Aug 13, 2005 4:39 pm
Agreed that this isnt a good offer. I ran a spreadsheet on this doesnt take very long to turn into a bad deal. I think the offer that I saw, you had to put a min. 50 bucks a month on and the money you pay on the bill gets to pay down the lower rate balance, so bad idea. They used to allow it to have just one purchase a month and folks were just getting a pack of gum at the gas station. I guess discover caught on. You are better off, just transferring to another card.
Guest: Daniel
Post subject: Discover Card Balance Transfers
Posted: Sat Aug 13, 2005 5:24 pm
Done right this is a smoking deal.
Because the required purchases are finite the best returns would be achieved with the maximum credit line; they will go a little above $20K without financials.
Assuming you make 3 $1 purchases per month and there is a 50 cent per month minimum finance charge, it would be years before your interest charges were significant at all.
Making a 2% minimum payment +$1 one could extend the offer for over 15 years while at the same time your paying interest on a total of $540 @ 9.49% you will have paid $654 in interest - more if the APR increases.
This type of deal requires discipline to make the required purchases and is best achieved by some type of automatic billing unless you can remember to make 3 $1 gas purchases per month.
The other caveats are making your required purchases at the beginning of the new billing cycle to avoid any slow charge postings costing you the deal and making sure your payments are all made on time.
So potentially it could cost you only $654 in interest because you got value out of the $540 in purchases, if you even did $10,000 over 15 years that’s less than 1 % in interest when you allow for the time horizon
All of this being said , I doubt that Discover would not change the terms somewhere up the road, before they allowed it to go to that length of time and you should always be prepared for this but other than that it is still a hot cheap money deal.
IMHO Go for it.
Guest: maddybeagle
Post subject: Discover Card Balance Transfers
Posted: Sun Aug 14, 2005 8:57 am
- no min dollar amount on purchases specified in offer
I didnt see that. What I was offered was the min. 50 dollar put on it every month. 3 purchases wouldnt be too bad, it you stop at the gas station every day for a coffee....Also, if you buy mp3's for 88 cents or something else cheap off of the web....
Guest: mouse
SENIOR MEMBER (Member for 2 yrs.+)
Post subject: Discover Card Balance Transfers
Posted: Sun Aug 14, 2005 2:48 pm
I would rather have a "NO CATCH" 1.99% (NO FEE) BT
Guest: chrys
Post subject: Discover Card Balance Transfers
Posted: Mon Aug 15, 2005 6:38 pm
...further info on this offer, FWIW:
I checked with Discover tonight and there is no minimum dollar amount on the 3 purchases per month (after the intro period) on this offer. Apparently, on other offers there is.
BT's have to be declared at the time of application in order to cap the BT transaction fee at $50; otherwise 3% of transfer fee.
I'd like to load up on the BT but I don't know if my FICO score is high enough to get a large line. I'm in Experian's Good category.
A few questions:
1. Would my score increase if I closed an CC account I'm not using?
2. At which score does the Excellent category begin?
3. At what percentage of credit limit utilized raises a red flag ie, 80%, 90%?
Guest: Alexis Rios
Credit Expert (100+ Posts)
Post subject: Discover Card Balance TransfersPosted: Mon Aug 15, 2005 10:50 pm
chrys wrote:
A few questions:
1. Would my score increase if I closed an CC account I'm not using?
2. At which score does the Excellent category begin?
3. At what percentage of credit limit utilized raises a red flag ie, 80%, 90%?
1. No , your score may decrease , because you're increasing your debt utilization (debt divided by total credit limit)
2. In general Excellent credit begins with a score of 730 aprox.
3. Just having an utilization of 50% or more may affect your score .
Guest: Polonius
Credit Expert (100+ Posts)
Post subject: Discover Card Balance Transfers
Posted: Tue Aug 16, 2005 8:50 am
Remember, there are many different scoring models and many ways used to interpret those scores. In some models, scores start decreasing with 30% utiliation of an individual card. Overall utilization is looked at as well. What is regarded as "excellent" is irrelevant--too high a score might actually get you declined for some credit products.
Post subject: Discover Card Balance Transfers
Posted: Sat Aug 13, 2005 2:14 pm
I got a mail offer with the above offer from Discover and from reading the fine print I find that:
- 0% on purchases until May 2006 and then 9.49%
- 0% on BT until May 2006 but may be extended indefinitely as long as you make 3 purchases per month starting May 2006.
- no min dollar amount on purchases specified in offer
- no min financial service charge specified in offer but there probably is one
Granted, starting May 2006 you have to start making purchases and since payments are credited to lower interest category first (ie, BT) the purchases are going to accrue at 9.49% monthly plus min financial charge.
This seem too good to be true. I would make small purchases totaling no more than $5-$10 per month and probably still come out way ahead in total interest changes if I moved my Capital One 5.9% Fixed for life to Discover.
Can anyone see any pitfalls in this offer?
Thanks
Chrys
CardRatings.com is the most comprehensive source for comparing credit card offers. Please visit CardRatings.com to view the best rated credit cards!
Guest: nativechild48
Credit Expert (100+ Posts)
Post subject: Discover Card Balance Transfers
Posted: Sat Aug 13, 2005 3:24 pm
Not good to make purchases on accts. that you BT on, as your purchases get paid for last. Discover uses a two cycle method for apr., and the variable can be changed anytime. If you do not make purchases then the int. rate will not stay zero. All creditors can invoke the universal default clause at will, and part of what they want is you to commit to using the acct. for purchases and BT's.
Guest: maddybeagle
Post subject: Discover Card Balance Transfers
Posted: Sat Aug 13, 2005 4:39 pm
Agreed that this isnt a good offer. I ran a spreadsheet on this doesnt take very long to turn into a bad deal. I think the offer that I saw, you had to put a min. 50 bucks a month on and the money you pay on the bill gets to pay down the lower rate balance, so bad idea. They used to allow it to have just one purchase a month and folks were just getting a pack of gum at the gas station. I guess discover caught on. You are better off, just transferring to another card.
Guest: Daniel
Post subject: Discover Card Balance Transfers
Posted: Sat Aug 13, 2005 5:24 pm
Done right this is a smoking deal.
Because the required purchases are finite the best returns would be achieved with the maximum credit line; they will go a little above $20K without financials.
Assuming you make 3 $1 purchases per month and there is a 50 cent per month minimum finance charge, it would be years before your interest charges were significant at all.
Making a 2% minimum payment +$1 one could extend the offer for over 15 years while at the same time your paying interest on a total of $540 @ 9.49% you will have paid $654 in interest - more if the APR increases.
This type of deal requires discipline to make the required purchases and is best achieved by some type of automatic billing unless you can remember to make 3 $1 gas purchases per month.
The other caveats are making your required purchases at the beginning of the new billing cycle to avoid any slow charge postings costing you the deal and making sure your payments are all made on time.
So potentially it could cost you only $654 in interest because you got value out of the $540 in purchases, if you even did $10,000 over 15 years that’s less than 1 % in interest when you allow for the time horizon
All of this being said , I doubt that Discover would not change the terms somewhere up the road, before they allowed it to go to that length of time and you should always be prepared for this but other than that it is still a hot cheap money deal.
IMHO Go for it.
Guest: maddybeagle
Post subject: Discover Card Balance Transfers
Posted: Sun Aug 14, 2005 8:57 am
- no min dollar amount on purchases specified in offer
I didnt see that. What I was offered was the min. 50 dollar put on it every month. 3 purchases wouldnt be too bad, it you stop at the gas station every day for a coffee....Also, if you buy mp3's for 88 cents or something else cheap off of the web....
Guest: mouse
SENIOR MEMBER (Member for 2 yrs.+)
Post subject: Discover Card Balance Transfers
Posted: Sun Aug 14, 2005 2:48 pm
I would rather have a "NO CATCH" 1.99% (NO FEE) BT
Guest: chrys
Post subject: Discover Card Balance Transfers
Posted: Mon Aug 15, 2005 6:38 pm
...further info on this offer, FWIW:
I checked with Discover tonight and there is no minimum dollar amount on the 3 purchases per month (after the intro period) on this offer. Apparently, on other offers there is.
BT's have to be declared at the time of application in order to cap the BT transaction fee at $50; otherwise 3% of transfer fee.
I'd like to load up on the BT but I don't know if my FICO score is high enough to get a large line. I'm in Experian's Good category.
A few questions:
1. Would my score increase if I closed an CC account I'm not using?
2. At which score does the Excellent category begin?
3. At what percentage of credit limit utilized raises a red flag ie, 80%, 90%?
Guest: Alexis Rios
Credit Expert (100+ Posts)
Post subject: Discover Card Balance TransfersPosted: Mon Aug 15, 2005 10:50 pm
chrys wrote:
A few questions:
1. Would my score increase if I closed an CC account I'm not using?
2. At which score does the Excellent category begin?
3. At what percentage of credit limit utilized raises a red flag ie, 80%, 90%?
1. No , your score may decrease , because you're increasing your debt utilization (debt divided by total credit limit)
2. In general Excellent credit begins with a score of 730 aprox.
3. Just having an utilization of 50% or more may affect your score .
Guest: Polonius
Credit Expert (100+ Posts)
Post subject: Discover Card Balance Transfers
Posted: Tue Aug 16, 2005 8:50 am
Remember, there are many different scoring models and many ways used to interpret those scores. In some models, scores start decreasing with 30% utiliation of an individual card. Overall utilization is looked at as well. What is regarded as "excellent" is irrelevant--too high a score might actually get you declined for some credit products.
