Visa balance transfer question

[PeeluckyDuckee]

Say if you have two visa cards with two different companies. Both carry a balance of lets say $1000 with a $1500 limit. One company sends you visa cheques for 4.9% and the other send you a 3.9% offer.

Both simultaneously I write a 3.9% cheque for $500 and deposit it into the other visa card. And from the other visa card, I write a 4.9% cheque and deposit it to the first visa card.

What's the net effect?

At the moment both are at a rate of 18.9% percent

By doing so, can I effectively change it so that for one card $500 is charged at the regular 18.9% rate, the other at 3.9% rate. And for the second card, 18.9% for the first $500 and 4.9% for the remainder?

Or is this a waste of effort?

 

[pyonir]

when you do transfers, you pay off the lower interest money first. You'd be paying off the 3.9% while still being charged the 18.9% for the other amount.

If i'm reading what you are saying correctly...

 

[PeeluckyDuckee]

But if you make the deposit both at the same time, then would it not go towards the balance with the higher interest rate first?

 

[pyonir]

Originally posted by: PeeluckyDuckee
But if you make the deposit both at the same time, then would it not go towards the balance with the higher interest rate first?

Yes...but you'd still be charged at the 18.9 rate for the second 500 while paying off the first 500...on both cards.

I think i'm confused.

 

[Kelemvor]

If both checks got to the palces and they initiated the transfers at the same time, then you'd swap balances and have the lower rate on both cards. But if the transfer went through on one before the other, then when the second one got the check they'd transfer back the money that you just transferred so they could keep charging you the higher rate.

It's best to get a 3rd card with 0% for balance transfers, transfer them both to that new card, and then go close the other 2.

 

[PeeluckyDuckee]

Thankyou FrankyJunior, that was what I meant. Since processing time varies between banks, the probability of both transactions occuring at the same time is not very likely then I would think.

The best rates I've seen up here in Canada is 2.9%. I work in a bank and I've never seen 0% balance transfers myself.

 

[dullard]

I'm trying to picture exactly what you are suggesting. I may be slightly wrong here.

Currently you owe $2000 at 18.9% interest. That comes to $378 a year in interest. And you want to do better than that. One obvious answer is to go to a bank and get a lower interest loan and pay off the CCs. But people don't like that option for some reason. Another option is to call up the CC companies and ask for a lower interest rate (often works and you won't know if you don't try). Another option is to get a 0% CC and just transfer both to that card.

Lets focus on what you suggest though. You left off the check writing fee, so I'm assuming it is 3% off the top (tell me if it is different). So you write a check for $500 from CC#1 to CC#2. Off the top they charge you $15. This CC#1 is now maxed out and you are paying 18.9% on $1000 and 3.9% on $500; net charge is $208.50 yearly if you did nothing else on CC#1. CC#2 is at $500 at 18.9% or $94.50 a year in interest. Net interest is $303 a year with a one time fee of $15. This is very slightly better in the short term than doing nothing. However as time goes on, you pay the low interest off first and the high interest stays there leaving you right back where you started from.

But you write a $500 check from CC#2 and deposit it into CC#1. This of course adds another one time fee of $15. CC#1 now has a balance of $1000 at 18.9% (remember they pay off the 3.9% first and only when that is gone they pay off the 18.9%). CC#2 has a balance of $1000 at 18.9% (the depositing check paid off your $500 check at 4.9%). Net effect: both cards have $1000 balance at 18.9% and you owe $378 a year in interest. However you are out that $15 + $15 = $30 convenience fee for writing checks. Don't do it.

 

[PeeluckyDuckee]

I'm not sure about the United States, but up here in Canada there is no service charge or cheque writing fee for using their enclosed promotional visa balance transfer cheques.

But you're right, a consolidation loan would be the best way to go. If that were an option.
Our bank uses a TDS ratio of 40% for loan applications.

Just a thought on the side as well....is it possible to use locked in group RSP to acquire a secured credit line account?

 

[PeeluckyDuckee]

I rerread your post again and I think I get what you're trying to say. Doing both simply neutralizes or cancels out the gains.

Student loan interest rates are tax deductible, and I currently have one with a balance of about $900 at variable rate, at the moment, prime of 4.25 plus 2.5%. Would it be wise to use the 3.9% visa cheque to pay it off? And then take my time to pay down the visa? Or is that a bad idea since the student loan is tax deductible anyways?

 

[dullard]

Originally posted by: PeeluckyDuckee
Or is that a bad idea since the student loan is tax deductible anyways?

You answered your own question. The interest rate is low now and with the tax deduction you are probably much better off than with a temporary 3.9% visa loan. Remember it is temporary as you buy things the new purchases will be 18.9% and the payments you make will quickly pay off the 3.9% loan. They do not apply your payments to both - the payments go in full to the lower interest rate loan. Your stuent loans may go up, but they certainly aren't going to go up to 18.9% like your Visa loans will.