0% APR with Balance Transfer Checks Question

[Sarah'sMomfrom PA]

We recently received a 0% promotional APR with Balance Transfer Checks (transaction fee is the greater of $5.00 or 1% whichever is greater)--we have a small home equity line of credit (our home is paid off) but the interest on the loan is 2.99%. (this is due to college expenses for my daughter in Pharmacy school in Boston)--I was thinking of writing one of these balance checks for $8,000.00 to pay off the home equity line of credit (saving approximately $20.00 a month in interest) and then diligently paying back the credit card at 0% interest but the terms are confusing to read. If I pay back the credit card at least $450.00 a month (the promotional rate lasts until June 2014) would I be charged any interest? According to the literature attached to the checks, it says that "We will be charging interest on balance transfers on the transaction date"--but I thought that the promotional APR was 0% or does this just mean on future purchases. So if I borrow $8,000.00 and pay it off completely by June 2014 (and it will likely be paid alot sooner since this is our only bill), do I have to pay the balance in full by the next payment due date (in which case, I would just forget it). I am just confused and need some guidance from the smarter Budget Board People. Thanks!

 

[timmac]

Generally, something to look out for is that in some cases, any part of the balance not paid off at the expiration of the 0% APR, may be subject to interest from the time the purchase was made. I am not sure if this is the case for you or not, but if it is, ask yourself if you're certain you can pay off the 8k in the timeframe... otherwise, it's not worth it.

 

[mikehn]

The way I interpret this is that interest starts accruing immediately, but the interest is deferred. If you pay the entire balance of your loan by the end of the promotion, all the interest that accrued from day one is waived, (as if it is zero interest). If you do not pay your balance off by the end of the promo, then the interest accrued from day one is added to your remaining balance, and so on. However, Im sure that there is a minimum monthly amount you are required to pay. In other words, you cannot skip any monthly payments, even if you pay the entire balance by the end of the promo.

 

[rockawaybeachgirl]

The way I interpret this is that interest starts accruing immediately, but the interest is deferred. If you pay the entire balance of your loan by the end of the promotion, all the interest that accrued from day one is waived, (as if it is zero interest). If you do not pay your balance off by the end of the promo, then the interest accrued from day one is added to your remaining balance, and so on. However, Im sure that there is a minimum monthly amount you are required to pay. In other words, you cannot skip any monthly payments, even if you pay the entire balance by the end of the promo.

yes - I do these all the time, and this is how it works. The 'clock starts' on interest accrual on transaction date, but the accrued interest is waived if pay it all off by the expiration date - assuming you abide by the other terms like paying on time, always paying the minimum balance etc.

As someone pointed out, the key is knowing that you can pay it off on time - otherwise the interest can be crushing. So, while I know you think you can defintely pay it off on time, I'd weigh the benefit of $20 bucks a month saved interest vs. the risk that something will come up and you'll be stuck with a big balance at the end of the day.

 

[Sarah'sMomfrom PA]

Thanks everyone....I'm very disciplined about paying my bills (pay all my credit cards in full every month) but this is money that had to be spent on 1st and Last months rent; security deposit and realtor's fees for my daughter's apartment in Boston. I know that I have nothing to lose since I do this same type of account with Best Buy and we actually pay them more than is necessary.