I got this offer via direct mail from Discover today. 0% for life as long as you make two purchases a month (no minimum amount on the purchases). I was thinking of transferring the remaining balance of my car loan, $14k, and taking advantage of this. Is this too risky? What are the odds that Discover might amend the terms down the road and end the 0% for life program? Paying no interest on the remaining loan balance would be nice.
Calling Credit Card Gurus
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dullard
Elite Member
- May 21, 2001
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A few things to think about.
1) What is the interest rate on those required purchases?
2) Do you realize that those purchases will never be paid off as long as you still have that balance transfer to pay, so the interest will accumulate (and you'll pay interest on the interest).
3) What is the cost to transfer the balance?
4) Is there any chance that you'll ever be late paying any bill to any company? If so, that 0% suddenly becomes 19% (or more).
1) What is the interest rate on those required purchases?
2) Do you realize that those purchases will never be paid off as long as you still have that balance transfer to pay, so the interest will accumulate (and you'll pay interest on the interest).
3) What is the cost to transfer the balance?
4) Is there any chance that you'll ever be late paying any bill to any company? If so, that 0% suddenly becomes 19% (or more).
i just got a similar offer from them not too long ago. i called them to cancel my account about a month ago and they gave me 0% BT until my sept 06 billing statement. IF i make $25 per month in purchases starting then, the 0% offer will extend from month to month.
edit: no transfer fees either
edit: no transfer fees either
before this i had 2.9% from citibank for the life of the balance. my coworker also received an offer from discover for 0% a little while ago. i just received this offer when i made an attempt to close the account. it's still open, and now with a balance.
kranky
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- Oct 9, 1999
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It's a battle of wills. Discover is betting one of three things will happen.
1. You forget to make the two purchases a month at some point, giving them the right to cancel your 0% BT.
2. You pay late, same outcome.
3. You start liking Discover so much, you make bunches of purchases so they start collecting interest from you.
On the other hand, you are betting you will make exactly two very, very small purchases each and every month until the 0% BT is paid off.
Remember that your payment is first applied to the lowest-rate balance, so all your two-a-month purchases will be racking up interest until your 0% BT is fully paid.
You want to read the fine print to see under what conditions you forfeit your 0% BT. If it says that they can change your promotional rate at their discretion if they see anything on your credit report they don't like, then there is risk. But that risk isn't all that great, because if for some reason they try to yank it out from under you, you can always refi into a used car or personal loan using the car as collateral.
There is some risk, no absolute guarantee.
1. You forget to make the two purchases a month at some point, giving them the right to cancel your 0% BT.
2. You pay late, same outcome.
3. You start liking Discover so much, you make bunches of purchases so they start collecting interest from you.
On the other hand, you are betting you will make exactly two very, very small purchases each and every month until the 0% BT is paid off.
Remember that your payment is first applied to the lowest-rate balance, so all your two-a-month purchases will be racking up interest until your 0% BT is fully paid.
You want to read the fine print to see under what conditions you forfeit your 0% BT. If it says that they can change your promotional rate at their discretion if they see anything on your credit report they don't like, then there is risk. But that risk isn't all that great, because if for some reason they try to yank it out from under you, you can always refi into a used car or personal loan using the car as collateral.
There is some risk, no absolute guarantee.
That's not necessarily true. it depends on the lender. I don't remember which lender i was delaing with at the time, but in the past, i was told that half of my payment would go towards the BT and the other half towards the purchases.
it is definitely something that you'd want to find out though.
Dullard has a point:
For example, the OP does this and has a 14k balance on his CC. He goes and makes a couple purchases each month for a total of, let's say $2 per month. THat $2 will get interest tacked on BECAUSE when he makes a payment Discover is going to apply it to his Balance Transfer, NOT, his purchases.
Is this what you're getting @?
CPA
Elite Member
- Nov 19, 2001
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The problem here folks is that any payments he makes will go towards the 0% balance before it is applied to the n% balance. So, if he transfers the 14K balance and then makes 2 purchases a month, he POTENTIALLY could end up accruing more in interest than with his old car loan. Now, if you could keep the purchases to $1 each and pay off the car soon, you may slide by.
edit: oops, dullard and others already nailed it. You should clarify this with Discover first.
edit: oops, dullard and others already nailed it. You should clarify this with Discover first.
dullard
Elite Member
- May 21, 2001
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Yes, that is what I'm getting at. If you can (a) make both purchases on the right dates every month, (b) keep the purchases small, and (c) never have any late bills or anything else bad on your credit report, then yes it can be a good deal. Discover is gambling that you'll one day slip. One day you'll might be in a bind and charge $100+ on the Discover (at 19+% interest rates and you can't stop this until you pay off the balance transfer). One day you might forget to charge twice that month (you get ill and stay at home for example or you charge on the last weekend of the month, thinking it'll post in that month but it posts next month). One day you might pay your electric bill late by one day. Etc. Discover will make a killing on you if anything like that happens. If not, you win.
Its a gamble and they make the rules. Its like a casino. Yes you can win, yes some people WILL win. But the rules are stacked in their favor and they know that most people will lose.
In other words, its a trap for most people that would try this "deal". (just like anything else with very fine print)
It's a trap. 0% on the terms you have to make two purchases is bad news. Even if you buy 2 packs of gum, you will be still hit with a min finance charge. 60 cents of gum = maybe $1.50 of interest a month.
Remember on this promos, most go towards the balance with the lowest APR. Which means your payment will never pay off the new purchases until you pay off the 0% balance.
Remember on this promos, most go towards the balance with the lowest APR. Which means your payment will never pay off the new purchases until you pay off the 0% balance.
my old roommate managed to convince discover to allow a minimium purchase of a QUARTER/mo (yes, twenty-five cents) in order to maintain the 0% BT. He was on the phone for hours... I still have no idea how he managed it. I guess when you blow your money (credit) away on strip clubs heh.
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