credit card interest rates
January 4, 2005 9:24 PM   Subscribe

I've got two credit cards with interest rates of 21.24% and 23% - both with balances over $5K. Both banks have sent me convenience checks - one with 3.99% fixed APR for life of balance - the other with 0% through August (then 17% after). Can I 'swap' the debt from one card to the other by using a convenience checks to pay the balance and getting lower interest rates? I'm paying my debt off every month - but if I can get it to grow slower, I thought this would be a way to do that.
posted by anonymous to Work & Money (16 answers total)
If you've enough credit on the one with the 3.99% over the life of the balance, I'd write the check for as much as possible, deposit it into your bank, then write checks to the card companies. I don't know if this would actually work, but it's certainly worth a shot.
posted by FlamingBore at 9:36 PM on January 4, 2005

Yes, you can do that. I managed to get my debt under control by consolidating all the debt to one card, then doing the 0% swap as I got offers from the cards I had cleared. The thing you want to look at closely are the transaction fees - usually 3% of the debt, with a minimum/maximum range. If you have an offer with no fees, that's obviously better, but just be sure you compare the fee to what you would have paid in interest and make sure it's still a good deal. With really high rates like yours, though, you should come out way ahead.

If you can't get it all on one card, I'd go for the 0% on one and the fixed balance on the other, then work to pay off the 0% balance before time runs out. If you can do that, and not accumulate new CC debt, you'll be in great shape by the end of the year.

(If you're worried about your credit rating, I bought a house after doing the consolidate/swap routine, and it didn't affect my score. Overall, having a low current debt and having a "paid off" history were by far more beneficial.)
posted by donnagirl at 9:42 PM on January 4, 2005

Be careful about writing a check to yourself and depositing it into your account. Usually the fine print of the offer will say doing that will be treated as a cash advance, and you will be charged the normal cash advance APR. I guess they look at the name of the payee of the check.
posted by reverendX at 9:49 PM on January 4, 2005

Just call up the card providers and tell them you have an offer from another bank for 11 percent and if they don't match it, you're going to take your business elsewhere. They'll lower your rate. No complex check scheme required.
posted by willnot at 10:17 PM on January 4, 2005

What willnot said, twice.
posted by dirtynumbangelboy at 10:35 PM on January 4, 2005

Actually, just call up the credit card company A and tell them you want to transfer the balance from card B. Once that goes through call credit card company B and tell them you want to transfer the balance from card A.

It's been a while, but usually when they send you those checks the same interest rate is applied for balance transfers over the phone.

Worth looking into anyway.
posted by alan at 11:35 PM on January 4, 2005

Just call up the card providers and tell them you have an offer from another bank for 11 percent and if they don't match it, you're going to take your business elsewhere.
That works much better when you have a zero balance or when you have the means to pay off the existing balance in one payment. However, when you have a significant balance they will more than likely pull your credit report to see if your story jibes. (They can do this without the request being visible on your credit report.)

Something to be concerned about is Check 21. If you don't have the available credit to cover the checks, you could be in a bit more trouble than you imagined. It's possible you might be stuck with overlimit fees and bounced check fees from both banks, along with other hidden penalties, like a change in your interest rate to a higher rate. Even if Check 21 doesn't apply, these are still possible outcomes.

Call up each company, explain the situation and see if they can help you. Don't write the checks until you understand up front how much it will cost you and what possible negative outcomes may arise.
posted by sequential at 2:50 AM on January 5, 2005

you're paying the debt off monthly? by which you mean you're making payments, i assume, and not paying it down to zero and then adding more.

fresh out of college, my wife and i went to a credit union (much better than a bank, if you can join one!) and got a debt consolidation loan. we didn't owe a huge amount but the monthly payments sucked. the interest rate from the credit union was way lower than any card company offered, and we had fixed monthly payments. we knew that in X months we would owe nothing. less revolving credit (meaning cards) is better on your credit score. having paid off card debt is better on your credit score (our union gave us the loan to pay off all balances, and had us cancel all current cards; we got a new one from them with a tiny interest rate for emergencies, it's still the only one we have).

it was the smartest move we've ever made, credit-wise. my brother didn't do this, and now his credit card debt is pretty unmanageable. ours is nothing. student loans, car payments, yeah, those are still there, but no credit card debt any more.
posted by caution live frogs at 5:57 AM on January 5, 2005

Worth examining the fine print on the "fixed APR for life of balance" offer to see if the rate jumps back to 21% or 23% if you're late on a payment.
posted by gimonca at 7:13 AM on January 5, 2005

I just purchased a house in September, but would love to consolidate my credit card debt into a single payment with a lower interest rate. Now, given the balances, this lowers my credit score, which might preclude me from getting the loan. Does a bank take into consideration that you are doing loan consolidation? Or does that even matter to them, and they just go by your current credit report? What's the best way to go about getting a credit consolidation loan. (for reference, I need about $4500 to consolidate).
posted by benjh at 7:56 AM on January 5, 2005

benjh -- they'll pretty much just go by the raw FICO score number to determine the interest rate on your loan. I don't think it would make the difference between getting a loan and not getting it, unless you already have very borderline credit.

$4500 in credit card debt is really not very much in comparison to a home mortgage; IMHO you might want to put off the consolidation until after you get your loan. But you'll have to crunch the numbers yourself to be sure.
posted by bcwinters at 8:14 AM on January 5, 2005

I have the home mortgage, which would not be part of the consolidation. I was thinking of consolidating my consumer debt only.
posted by benjh at 8:31 AM on January 5, 2005

I'm curious: if you already have a morgage, why not consolidate your consumer credit into it? Morgage rates are generally better than any unsecured loan. Alternatively, you can often get really good rates on lines-of-credit backed by your morgage property.
posted by bonehead at 9:13 AM on January 5, 2005

...because usually second mortgages are screwing you over. you end up spending the first 10 years paying off the interest, instead of actually building up any equity.

there's a reason they'll give you one over the phone without even evaluating your property.
posted by caution live frogs at 9:25 AM on January 5, 2005

...and had us cancel all current cards...

If you can control yourself, it's better to keep the cards. Having open credit card accounts, even if you don't use them, improves your credit score. If you have no credit cards then there is a big question mark for potential lenders ...
posted by knave at 10:35 AM on January 5, 2005

I tried to get a consolidation loan a few years ago and the deal I was offered sounded too good to be true so I read the fine print and found out I'd be paying MORE with my new loan. My $4500 loan almost turned into $10,000.

Anyway, the fine print is what I'd be concerned about. I have one friend who just kept transferring his balances and another who didn't read the fine print correctly and got burned. I opted for a credit union loan to clean up my mess.

Now I've got my Amex, Visa check card, a few department store cards I rarely use, and I maintain a great credit score by setting up automatic payments for my mortgage, student loan and car payment.
posted by whtsherbkt at 11:42 AM on January 5, 2005

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