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I recently paid off a balance transfer and then this thought occurred to me. Let's say you have $3000 of debt outstanding on a credit card. The goal is not to pay interest while you work to save the $3000 to pay the debt off.

Is it possible to continue to transfer that debt around to different credit cards in order to avoid being charged any fees whatsoever?

I'm sure some people out there have some creative ideas on this.

Chris W. Rea
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Kirk Ouimet
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4 Answers4

10

In theory, yes. In practice:

  1. Most cards charge a 3% or so fee on balance transfer.
  2. If you slip and let you balance go past "free balance transfer" time limits, you'll quickly pay more in interest than you gained from keeping free credit around.
  3. You'll need an endless supply of free transfer cards to keep shuffling it around - what if one day it so happens that none is offering it right now and your current free transfer is about to expire? Again, you'll pay a lot.
  4. Doing this (opening new accounts frequently) may hurt your credit rating, which may hurt your chance of getting new deals, which would lead to problems described above.

So it can be gamed, but the odds are not on your side :)

StasM
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I have done this for years and have been quite successful at it. Two reason I even need to do this - desire to pay for engagement ring and pay for 150 person wedding without using my nest-egg/savings.

You need to keep a document that details when the free APRs run out, and you need to setup automatic payments of the minimum balance from your checking account so you ensure you do not miss a payment.

You need to understand when you are going to need to make big purchases of homes/apartments/cars so that you can ensure you aren't doing this right before your credit score is being checked (Need to leave 12 months without opening new accounts before doing this).

I have been able to finance about $60,000 worth of unsecured debt paying between 3-5% interest per year. We have an unsecured credit line with Citibank that charges 14% and is capped at $10,000, and Discover Personal Loans charge around 14% as well (in pre-paid interest!).

I would say, all things considering, that this is a great deal if you don't have a secured line of credit with a low interest rate.

It is something, however, that if you aren't diligent can get away from you. From my experience I would rather pay a small amount of interest while allowing my savings and retirement to grow interest (hopefully greater than 3-5%) than pay the huge expense and start from zero. But if you miss a single payment on a 0 APR balance transfer they charge you all back interest concessions plus charge you a penalty rate.

Like many of the other posts, you need discipline to make this work.

0

IMO, it's a good deal. Pre-paying 3% interest is better than accruing it at 1-2% per month. The other nice thing about it is that all of your payments hit the principal.

duffbeer703
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Sure of course you can do balance transfers like this but you are way late to the party and it has gotten to be pretty challenging finding new cards to transfer balances to.

Before the current financial crisis in the US you could get enormous amounts of credit (2-5 times a person's annual income) and transfer balances to your bank account to collect interest . There were a bunch of ways to the transfer everything from direct deposit to your bank account to a balance transfer check payable to yourself to overpaying another credit card and requesting a refund. Over paying another account sets off a lot of red flags now days but other methods still work.

The financial atmosphere has changed a lot and there are very few available cards with no balance transfer fees or capped fees and the interest rates are a lot lower now so it really isn't worth doing.

stoj
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