6 ms·

What's HN's opinion on 0% balance transfers? Yes, there's usually a 3% fee but... I've been able to borrow about $5k-$12k for a one time 3% fee over 18 months m

What's HN's opinion on 0% balance transfers? Yes, there's usually a 3% fee but... I've been able to borrow about $5k-$12k for a one time 3% fee over 18 months multiple times in a row now. I make sure to always pay the balance back before it is due. Why don't more people who need a cash infusion do this?

S_A_P 7y ago
there is usually an asterisk next to those offers* *well qualified applicants only...
- MuffinFlavored 7y ago
  I had a feeling this was the case. I didn't realize it because I've been getting them in one degree to another since I was very young (~19-20 years old)
- deleted 7y ago
  [deleted]
maxerickson 7y ago
They simply don't qualify. Would you even consider a $3,000 loan at 25%? That's what's going on with these companies.
- ac29 7y ago
  25% would be a relative bargain - that's better than some people's credit card rates. The screenshot in the article shows a range of 60-225% APR.
  - chasd00 7y ago
    Well keep in mind, to a cash strapped individual that "minimum required payment" line is very attractive. a $3k loan can turn into a decade of "minimum required payments" that sum to well over $3k without even touching the principle owed.
mindslight 7y ago
If your intent is to pay off that balance, and more surprises don't keep you from doing so, then you'll have won out. But if you get complacent and think of it as the new normal that you can keep rolling, it will eventually catch up with you. Of course the way the feedback cycle of the economy is set up, if you don't get into trouble with debt, someone else will.
rootusrootus 7y ago
Be careful with balance transfers. At 18 months, a 3% fee is like a 3.75% APR. If the balance transfer is only 12 months, it's about 5.5%. Still a lot better than a subprime installment loan, but a 3% fee is not a 3% APR.
- basch 7y ago
  But minimum payments are super low, so you can store the cash somewhere high interest and pay most of it back in a lump sum. If cash is 2% right now, your minimums might be $90-100ish a month, and the rest can wait till month 12. Theres little to no incentive to pay it off early except to lower your utilization. A 10,000 3% loan over the course of one year equal payments has $147.00 interest. A 3% transfer has $300, but your balance in month 12 will be 8846, which is like $80 back in interest if you save those what would be monthly payments until the end. Under this math, a 3% balance transfer is equivalent to 4.5% APR one year loan.
  - p1mrx 7y ago
    I don't think there are any savings accounts with >= 3% APY right now. How could it ever be profitable to borrow money at a higher interest rate than you earn by holding it? Or, if "somewhere high interest" refers to the stock market, then you risk not being able to pay back the loan in a year.
    - basch 7y ago
      A balance transfer is a one time fee, not compounded monthly or daily. You pay 3% up front, and then theres no benefit to paying the loan off early, except for holding a lower credit card balance. What I am saying is, is that IF you are taking a balance transfer, to accurately compare it to a traditional, monthly compounded loan, you need to account for the minimum payment differences (the balance transfer will be 5x-10x lower) and then calculate the interest that extra cash not paid back to the loan can net you. I am making a counter argument to the claim that a 3% balance transfer is equal to a 5.5% apr loan, i think its closer to 4.5% if managed wisely. Its closer to 50% higher, not double.
wefarrell 7y ago
I try to keep myself in as much 0% APR debt as possible, almost at 100K. It’s all on business cards that don’t report to credit bureaus so it doesn’t impact my credit utilization. Instead of balance transfers (which have a 3% fee and a low limit) I put my quarterly taxes on my CC, which you can pay for 1.8%.
- MuffinFlavored 7y ago
  Could you elaborate on this? If I started a business (LLC), I could open an AmEx card card under the business and have access to a 0% line of credit? That doesn't sound quite right. I'm surely missing something.
  - xur17 7y ago
    You can open business credit cards directly under your name, no LLC required.
  - wefarrell 7y ago
    The card is still under your name, the application will pull your credit report, and you're personally liable for the debt. However most major banks (with some exceptions) do not report business cards to the credit bureaus unless you're in default, so it's possible to carry large balances without any impact to your credit.
    - MuffinFlavored 7y ago
      When is the statement balance due? Every 30 days? I don't see how this is 0% APR/any different than a consumer credit card?
      - wefarrell 7y ago
        The statement balance is never due but I always make sure to pay it off before the 0% APR ends. Each month a small minimum balance (around 1%) is due.
- 7y ago
tempsy 7y ago
I've strategically used 0% BT offers in the past. Agree if you need a loan it's the cheapest personal loan you can get by far. The obvious catch is that you need a plan to pay it off completely in 18 months (or subject yourself to nearly 30% interest, which is what the credit card company is hoping for). The biggest downside vs a traditional installment loan is that having high utilization on a revolving credit line like a credit card has a much bigger negative impact to your credit score than having an equivalent balance on installment.
chasd00 7y ago
because over 18 months there's 18 chances for something to go wrong, miss a payment, and then the trap snaps shut.
vxNsr 7y ago
I used those "loans" to avoid taking out college loans. I still have around 20k but between p2 and me I can move it every 15-18 months to a cc that doesn't even have the 3% fee without consequence. I know I'm not really their target market for this but I love it. I'm banking (no pun intended) on a strong economy which makes banks happy to lend out free money. as soon as the economy sours I'm gonna be hard pressed to find anyone offering this. Truthfully I could pay it off now, but why should I?

S_A_P 7y ago

there is usually an asterisk next to those offers* *well qualified applicants only...

MuffinFlavored 7y ago
I had a feeling this was the case. I didn't realize it because I've been getting them in one degree to another since I was very young (~19-20 years old)
deleted 7y ago
[deleted]

maxerickson 7y ago

They simply don't qualify. Would you even consider a $3,000 loan at 25%? That's what's going on with these companies.

ac29 7y ago
25% would be a relative bargain - that's better than some people's credit card rates. The screenshot in the article shows a range of 60-225% APR.
- chasd00 7y ago
  Well keep in mind, to a cash strapped individual that "minimum required payment" line is very attractive. a $3k loan can turn into a decade of "minimum required payments" that sum to well over $3k without even touching the principle owed.

mindslight 7y ago

If your intent is to pay off that balance, and more surprises don't keep you from doing so, then you'll have won out. But if you get complacent and think of it as the new normal that you can keep rolling, it will eventually catch up with you. Of course the way the feedback cycle of the economy is set up, if you don't get into trouble with debt, someone else will.

rootusrootus 7y ago

Be careful with balance transfers. At 18 months, a 3% fee is like a 3.75% APR. If the balance transfer is only 12 months, it's about 5.5%. Still a lot better than a subprime installment loan, but a 3% fee is not a 3% APR.

basch 7y ago
But minimum payments are super low, so you can store the cash somewhere high interest and pay most of it back in a lump sum. If cash is 2% right now, your minimums might be $90-100ish a month, and the rest can wait till month 12. Theres little to no incentive to pay it off early except to lower your utilization. A 10,000 3% loan over the course of one year equal payments has $147.00 interest. A 3% transfer has $300, but your balance in month 12 will be 8846, which is like $80 back in interest if you save those what would be monthly payments until the end. Under this math, a 3% balance transfer is equivalent to 4.5% APR one year loan.
- p1mrx 7y ago
  I don't think there are any savings accounts with >= 3% APY right now. How could it ever be profitable to borrow money at a higher interest rate than you earn by holding it? Or, if "somewhere high interest" refers to the stock market, then you risk not being able to pay back the loan in a year.
  - basch 7y ago
    A balance transfer is a one time fee, not compounded monthly or daily. You pay 3% up front, and then theres no benefit to paying the loan off early, except for holding a lower credit card balance. What I am saying is, is that IF you are taking a balance transfer, to accurately compare it to a traditional, monthly compounded loan, you need to account for the minimum payment differences (the balance transfer will be 5x-10x lower) and then calculate the interest that extra cash not paid back to the loan can net you. I am making a counter argument to the claim that a 3% balance transfer is equal to a 5.5% apr loan, i think its closer to 4.5% if managed wisely. Its closer to 50% higher, not double.

wefarrell 7y ago

I try to keep myself in as much 0% APR debt as possible, almost at 100K. It’s all on business cards that don’t report to credit bureaus so it doesn’t impact my credit utilization. Instead of balance transfers (which have a 3% fee and a low limit) I put my quarterly taxes on my CC, which you can pay for 1.8%.

MuffinFlavored 7y ago
Could you elaborate on this? If I started a business (LLC), I could open an AmEx card card under the business and have access to a 0% line of credit? That doesn't sound quite right. I'm surely missing something.
- xur17 7y ago
  You can open business credit cards directly under your name, no LLC required.
- wefarrell 7y ago
  The card is still under your name, the application will pull your credit report, and you're personally liable for the debt. However most major banks (with some exceptions) do not report business cards to the credit bureaus unless you're in default, so it's possible to carry large balances without any impact to your credit.
  - MuffinFlavored 7y ago
    When is the statement balance due? Every 30 days? I don't see how this is 0% APR/any different than a consumer credit card?
    - wefarrell 7y ago
      The statement balance is never due but I always make sure to pay it off before the 0% APR ends. Each month a small minimum balance (around 1%) is due.
7y ago

tempsy 7y ago

I've strategically used 0% BT offers in the past. Agree if you need a loan it's the cheapest personal loan you can get by far. The obvious catch is that you need a plan to pay it off completely in 18 months (or subject yourself to nearly 30% interest, which is what the credit card company is hoping for). The biggest downside vs a traditional installment loan is that having high utilization on a revolving credit line like a credit card has a much bigger negative impact to your credit score than having an equivalent balance on installment.

chasd00 7y ago

because over 18 months there's 18 chances for something to go wrong, miss a payment, and then the trap snaps shut.

vxNsr 7y ago

I used those "loans" to avoid taking out college loans. I still have around 20k but between p2 and me I can move it every 15-18 months to a cc that doesn't even have the 3% fee without consequence. I know I'm not really their target market for this but I love it. I'm banking (no pun intended) on a strong economy which makes banks happy to lend out free money. as soon as the economy sours I'm gonna be hard pressed to find anyone offering this. Truthfully I could pay it off now, but why should I?