Personal Finance

How does the balance transfer offer work? Or its a trap?

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  • Mar 26th, 2012 4:55 pm
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Newbie
Dec 24, 2011
17 posts
TORONTO

How does the balance transfer offer work? Or its a trap?

I have a scotia visa that offers me very low interest for about 10 months...I think about 1% of interest on balance transfer.

I am thinking of paying off my other credit card with TD using this very low interest card and finish the scotiavisa off every month by making bulk payments.

Now, I am confused about something, mainly because a friend of mine told me so.

Lets say I use this Scotiavisa low interest balance transfer promotional offer today, and pay off about 7000 dollars on my TD visa, which is about 19% interest. Now my TD is zero and Scotiavisa carries about 7K.

I have about 10 months of very low interest period to pay it off, and then they'd charge me 11% anual interest.

My question is, Do I have to finish off this 7K to zero within the promotional offer expires? In case if I was not able to pay off this 7K within the promotional offer will they start the 11% annual interest from the expired month? OR they would start the interest calculations FROM THE DATE I made the balance transfer?

The agent doesn't give me a clear answer, someone from here could please help out?

Thanks.
5 replies
Deal Addict
User avatar
Feb 6, 2012
4947 posts
425 upvotes
Gloucester, Canada
Usually, when you make the balance transfer, there is a 1% fee on it. eg: transfering 7000 would incur a $70 fee. the deal is for 10 months at 1% so you paying about 1% each month for the next 10 months. Let just say after 10 months, you still have $1000 left, you'll paying 11% for subsequence months until the balance = $0. Oh another thing to becareful for as well is when you transfered your balance to the scotia visa card, try not to use that card for purchase.
Deal Addict
Feb 25, 2007
1569 posts
1129 upvotes
Ottawa
Lostwords wrote: Usually, when you make the balance transfer, there is a 1% fee on it. eg: transfering 7000 would incur a $70 fee. the deal is for 10 months at 1% so you paying about 1% each month for the next 10 months. Let just say after 10 months, you still have $1000 left, you'll paying 11% for subsequence months until the balance = $0. Oh another thing to becareful for as well is when you transfered your balance to the scotia visa card, try not to use that card for purchase.

I'm not familiar with the Scotia offering, but when I did similar with the MBNA offer a while back, it was actually important to make really really sure not to use the card for purchases (not just "try not to"). The thing was, the way MBNA did it, they would apply any payments first to the lowest interest-rate outstanding balance, so if you put anything at a higher rate (e.g. a purchase) on your card, you would be stuck paying on it until you had paid off your full outstanding balance, including the total of the low interest balance transfers. There was no way to say "here's the $200 for the purchase I accidentally made, plus $200 for the balance transfer". So I made a point of taping up my MBNA card and not putting it in my wallet to avoid errors.
Deal Addict
Feb 5, 2009
2429 posts
403 upvotes
angrymeathead wrote: My question is, Do I have to finish off this 7K to zero within the promotional offer expires? In case if I was not able to pay off this 7K within the promotional offer will they start the 11% annual interest from the expired month? OR they would start the interest calculations FROM THE DATE I made the balance transfer?

You'll pay 1% for the promo period, and then 11% on whatever is leftover when the promo period ends. There's no recalculation to go back and hose you for 11% for the whole promo period just because you didn't pay it all off.

And I think MBNA changed their policy so payments go to the higher interest rate first. Although there have been several policy changes that I never fully read, so I'm not 100% on this.

Looks like that's the case. From http://www.mbna.ca/help/credited_manage.html
MBNA allocates payments to statement balances at the highest AIR first in descending order to statement balances at the lowest AIR first. This method applies for both minimum payments and any amount received over the total minimum payment due. Most other issuers are applying payments in a less favorable way such as allocating payments across all balance categories in equal proportion to the balance size allocating only payments over the minimum to the highest interest rates first and applying the minimum payment to lower rates.

Be smart-monitor your balances and make sure that you pay off your higher balances first. You can do this by transferring your collective balances to a lower rate credit card. Learn how at Balance Transfers & Cash Access.
Member
Dec 1, 2010
239 posts
22 upvotes
That "highest interest rate first" policy must be new because the last time I looked for my card the policy was "we will apply your payment proportionally to your outstanding balances".
Newbie
Dec 24, 2011
17 posts
TORONTO
GSRee wrote: You'll pay 1% for the promo period, and then 11% on whatever is leftover when the promo period ends. There's no recalculation to go back and hose you for 11% for the whole promo period just because you didn't pay it all off.

And I think MBNA changed their policy so payments go to the higher interest rate first. Although there have been several policy changes that I never fully read, so I'm not 100% on this.

Looks like that's the case. From http://www.mbna.ca/help/credited_manage.html


But this is VISA. MBNA is Mastercard?

And that means that if I only paid lets say about 6 K in total, out of 7 K...and I still have 1000 dollars left off, and my promotional period expired. They would start the 11% FROM THAT MONTH to this 1000 dollars right? Not for the entire period from the beginning of the promotional period? If this is true, im a happy man.

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