Applying for a credit union visa for balance transfer--yea or nay?
March 9, 2010 12:54 PM Subscribe
Credit unions for balance transfer on Visa. Pros/cons?
Before the new credit act laws caused many card companies to screw over their customers with APR hikes, I need to figure out how to get out of $15k on my Visa. I jumped from a 7.9 fixed to a 12.99% variable and my min. payments are $350 and it's killing me.
I viewed cardwatch.com and saw that competitive rates from other card banks aren't much lower. Then I thought credit union and saw they can be as low as 8-9%.
I never joined a credit union. We have one at work but the annual fee is $50 (seems high). From what I've been looking at others are $15-25 a year.
So, is this a good or bad idea? I saw the fine print on these card terms and it seems pretty standard/competitive with traditional card terms.
I need to get out of this $15k and getting a lower APR is the only thing I can think of to help out.
Before the new credit act laws caused many card companies to screw over their customers with APR hikes, I need to figure out how to get out of $15k on my Visa. I jumped from a 7.9 fixed to a 12.99% variable and my min. payments are $350 and it's killing me.
I viewed cardwatch.com and saw that competitive rates from other card banks aren't much lower. Then I thought credit union and saw they can be as low as 8-9%.
I never joined a credit union. We have one at work but the annual fee is $50 (seems high). From what I've been looking at others are $15-25 a year.
So, is this a good or bad idea? I saw the fine print on these card terms and it seems pretty standard/competitive with traditional card terms.
I need to get out of this $15k and getting a lower APR is the only thing I can think of to help out.
Do credit unions normally charge an annual fee? Mine doesn't. That somewhat surprises me.
Seconding to watch out for balance transfer fees. They are often hidden, but might be 3%+.
Here's an idea though - why not get a loan through a local credit union instead of a credit card? I got a signature loan through my credit union to pay off my credit cards once, it was pretty easy. It might be easier to get a loan for $15,000 than it might be to get a second card with that kind of credit limit. The APRs look to be comparable (around 8%).
posted by Vorteks at 1:24 PM on March 9, 2010
Seconding to watch out for balance transfer fees. They are often hidden, but might be 3%+.
Here's an idea though - why not get a loan through a local credit union instead of a credit card? I got a signature loan through my credit union to pay off my credit cards once, it was pretty easy. It might be easier to get a loan for $15,000 than it might be to get a second card with that kind of credit limit. The APRs look to be comparable (around 8%).
posted by Vorteks at 1:24 PM on March 9, 2010
I have belonged to several CUs over my lifetime and none of them have ever charged a fee, might want to shop around. The other big deal about balance transfers is that they can take some nebulous amount of time to go through so in addition to fees that might occur, you might have to double pay one month [by paying the old and new bills which will both show balances] which will all get sorted out but can be taxing if you're living close to the bone. y credit union is otherwise exactly like a bank except that they make decisions by what the membership wants and not what the muckity muck board wants. I find it very civilized. I'm sure there are exceptions but I've been very happy as a credit union member for several decades.
posted by jessamyn at 1:33 PM on March 9, 2010
posted by jessamyn at 1:33 PM on March 9, 2010
I've transferred quite a bit of credit-card debt to our credit union's visa & it's been fantastic. Interest rate is under 7%, no fees, good service, etc. It's saved us hundreds of dollars.
YMMV, of course. Not all credit unions are the same.
posted by iwhitney at 1:34 PM on March 9, 2010
YMMV, of course. Not all credit unions are the same.
posted by iwhitney at 1:34 PM on March 9, 2010
I've been involved with two, maybe three (it was a while ago) credit unions, and I don't remember anything about an annual fee. A minimum balance in a share/savings account seems normal (I think it might be $5 for the credit union I'm using now, it's been $50 before). Never heard of an annual fee to join a credit union.
posted by amtho at 1:37 PM on March 9, 2010
posted by amtho at 1:37 PM on March 9, 2010
Also, be aware that if you apply for a card and request a balance transfer, it is entirely possible that they will give you a card with a lower limit than you were hoping for, and transfer only as much of the balance as will fit. Of course, this might still be preferable to having the whole balance on the high-interest card.
A signature loan or debt consolidation loan may still be a better choice though.
posted by Vorteks at 1:38 PM on March 9, 2010
A signature loan or debt consolidation loan may still be a better choice though.
posted by Vorteks at 1:38 PM on March 9, 2010
Some balance transfer fees are as high as 5%. Seconding the idea to get a personal or signature loan.
Even if you get your interest rate back down, though, you really need to be making a larger payment than you are if you ever expect to pay it off. You can look at cutting expenses to free up money, but that usually nets you only tens of dollars before you start feeling deprived. Usually you can make a bigger impact by increasing your income. If you could take an additional part-time job for a couple of years, and earn even an extra $500 a month, and put that all toward the debt (in addition to what you are comfortably able to pay now), you could pay it off completely in that time frame.
posted by kindall at 1:39 PM on March 9, 2010
Even if you get your interest rate back down, though, you really need to be making a larger payment than you are if you ever expect to pay it off. You can look at cutting expenses to free up money, but that usually nets you only tens of dollars before you start feeling deprived. Usually you can make a bigger impact by increasing your income. If you could take an additional part-time job for a couple of years, and earn even an extra $500 a month, and put that all toward the debt (in addition to what you are comfortably able to pay now), you could pay it off completely in that time frame.
posted by kindall at 1:39 PM on March 9, 2010
Also, if all else fails, you could talk to a credit counseling service. They will get your rate reduced. However, you will not be able to get new credit while on a credit counseling program, or for a while after completing one.
posted by kindall at 1:41 PM on March 9, 2010
posted by kindall at 1:41 PM on March 9, 2010
Response by poster: Kindall, tried credit counseling. They said I make too much on paper yet my debt is too high (mortgage, utilities, etc). I'm living paycheck to paycheck.
posted by stormpooper at 1:59 PM on March 9, 2010
posted by stormpooper at 1:59 PM on March 9, 2010
Perhaps try a different one? The one I dealt with never even asked about my income (granted, this was ten or so years ago). People whose debt is too high for their incomes are exactly who that kind of program is intended to help, because they are at high risk for defaulting.
posted by kindall at 3:40 PM on March 9, 2010
posted by kindall at 3:40 PM on March 9, 2010
I say NAY to the idea of transferring this balance somewhere else. The $350 minimum payment is mostly based on the size of the balance, not the interest rate. Minimum monthly payments between 2-3% of the balance are much more common these days.
Of that $350, at around 8% you are paying around $100 of that monthly payment to interest and the rest (around $250) to the balance. At around 13%, you are paying around $165 to interest and the rest to the balance. This is a difference of around $780 in interest a year (not really that much because your balance will continue to go down). While this is a difference, it's not a huge difference, and much of the benefit will be eaten up if your balance goes up by $600 when you transfer the balance to another card and pay a balance transfer fee.
I think that trying to transfer this balance somewhere else is a mistake. First, you're going to pay 3-5% of the balance to buy yourself an additional window at a lower interest rate for a limited period. Right now you are at 12.99%. You may get it down to 2-4% for a year or so, but you'll go back to a higher rate, probably around 20%.
My honest advice is you should alter your lifestyle and concentrate on paying down the debt where it is. At 12.99%, you won't see huge benefits from moving it somewhere else, will pay a big fee to do so and are basically just further putting off what you know that you need to do.
posted by iknowizbirfmark at 12:16 PM on March 10, 2010
Of that $350, at around 8% you are paying around $100 of that monthly payment to interest and the rest (around $250) to the balance. At around 13%, you are paying around $165 to interest and the rest to the balance. This is a difference of around $780 in interest a year (not really that much because your balance will continue to go down). While this is a difference, it's not a huge difference, and much of the benefit will be eaten up if your balance goes up by $600 when you transfer the balance to another card and pay a balance transfer fee.
I think that trying to transfer this balance somewhere else is a mistake. First, you're going to pay 3-5% of the balance to buy yourself an additional window at a lower interest rate for a limited period. Right now you are at 12.99%. You may get it down to 2-4% for a year or so, but you'll go back to a higher rate, probably around 20%.
My honest advice is you should alter your lifestyle and concentrate on paying down the debt where it is. At 12.99%, you won't see huge benefits from moving it somewhere else, will pay a big fee to do so and are basically just further putting off what you know that you need to do.
posted by iknowizbirfmark at 12:16 PM on March 10, 2010
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Just FYI though: balance transfers ain't free. In addition to paying interest from day one--no grace period like normal purchases--many cards impose a transfer fee of up to 3%. Considering your current card is at 13%, this could decrease the incentive to move. Read the contract thoroughly before you move forward.
posted by valkyryn at 12:58 PM on March 9, 2010