0% APR games

[hownowbrowncow]

So I got a sweet offer from Citibank and signed up for a 21 month, 0% APR on purchases in July 2013.  0% rate will last through April 2015.  So I’ve been putting ALL my purchases on in order to accelerate paying off my student loan.  Literally everything besides rent and my student loan payments (if only I could use a cc for those!) goes on plastic.

Anyway the current balance is $4855 on a $10000 credit limit. 

I have another Citibank card with a $8000 limit (current balance $0), two Chase cards combined limit $34,250 (current combined balance $0), a BoA card I haven’t used in years but it’s still open because it’s my oldest card $3000 limit (current balance $0) and a Gap credit card $1000 limit (current balance $0).

So my total credit usage is a moderate 9% but I’m wondering if my credit rating will get dinged since that one card is approaching a 50% utilization and I was planning on pushing it higher.

Side question – can I ask Citibank move some of the unused $8k to the 0% credit card?  Maybe change the split from $8k and $10k to $2.5k and $15.5k.  Or would that mean a hard credit pull?

Thanks in advance.

[seattlecyclone]

I really don't think having a high utilization on this one credit card will hurt your score any more than it would hurt your score to spread that same amount of debt around to all of your other cards. Any effect will be minor.

You might as well ask for them to give you more 0% borrowing authority. The worst they can do is say no.

But please, please make sure you can pay off this credit card balance before the insane interest rates start to apply in 2015.

[Louisville]

Maybe I'm no too quick this morning. What are you gaining by putting all of your purchases on the CC, even at 0%?

[secondcor521]

Yes, your credit will most probably be dinged.  How much depends on the FICO algorithm and your particular fact set, and is impossible to guess specifically.  It's hard to reverse engineer the algorithm since everyone's data is different, but when I was playing these games my impression was that 50% and 90% utilization on a single card were the trigger points for credit score reduction.

It would not be a credit pull to move existing CL from one card to another.  You could even ask them to move the whole $8k over and close the other card if you wanted to.  Back in the go-go days Citi used to do this all the time but lately not so much.  Certainly worth a phone call if you want to play this game.

@Louisville, the OP is playing a shell game where s/he is putting current expenses on 0% and taking the money that would have gone towards current expenses towards the student loan, which is presumably accruing interest every day that it is not paid down.  Paying down the student loan earlier rather than later saves on interest.  Say s/he saves one year of interest on $5k at 6%, that's $300 in his/her pocket.  When the offer expires, if OP has done the job right, s/he will have the money available to pay the CC off.

I doubt Citi will give you more of a 0% line in your situation, but you can always ask.  Any CL increase would include a hard pull.

[mustachianteacher]

Maybe I'm no too quick this morning. What are you gaining by putting all of your purchases on the CC, even at 0%?

I'm curious what your plan is, too. We actually took advantage of the exact same deal, but we used it to transfer the remainder of a loan we took to replace our furnace and A/C (bad, I know, but we didn't have the savings to pay cash because we were throwing everything at paying down student loans), so now we have an end in sight to the furnace and A/C loan.

[chicagomeg]

I don't think this will continue to affect your credit after you pay it off, unless some one does a manual review and sees your highest lifetime balance on the card. Even then, the effect is likely to be minimal. I have an old credit card that I carried a balance on in college (it was regularly maxed out) and a credit score of 745 or so. Keep doing what you're doing, its worth it!

[gimp]

Maybe I'm no too quick this morning. What are you gaining by putting all of your purchases on the CC, even at 0%?

I'd guess other debt already owned, and emergency expenses.

Though from a purely monetary point of view, I could totally see putting all purchases on a 0% CC, paying minimum payments, and investing the difference, and then paying it all of right before it starts accruing interest. In theory, that'd work well (assuming investments haven't lost money), though in practice that'd require the self-control of a monk not to spend more than one would otherwise spend with cash.

[daverobev]

Here's what I know:

MBNA in Canada will move credit from one line to another you have quite happily, so I would guess you have a good chance others will do the same; I don't think it will require a hard hit, or any hit, as it is credit you've already got.

I don't believe having moderate usage will harm; having ~100% utilisation on one line will do *something* negative but hey. If you wanted to get a mortgage and stuff it might be wise to not have it that high when you apply (70% would probably be ok if other lines were only at a few percent).

To the people questioning what the OP is up to - *I* would be getting 3% tax free in Canada, or using the money to temporarily reduce a line of credit to save on interest... Obviously don't rack up debt and not be able to pay it off, 20% APR kills any savings pretty quickly..

Also make sure to check the exact date the offer runs out; with one in Canada it is x months from the date of approval, NOT the statement date that month...

[Hotstreak]

Side question – can I ask Citibank move some of the unused $8k to the 0% credit card?  Maybe change the split from $8k and $10k to $2.5k and $15.5k.  Or would that mean a hard credit pull?

Thanks in advance.

Yes, and they may even do it.  It's pretty common to be able to combine balances.. you might have to ask a few times but they are usually amiable to that (if you're a good customer).  When one is a zero percent, it may throw a hitch in it.. but then again it may not.  They WANT you to use the limit.  They expect you to end up paying interest for years.. so it's in their "favor" in that sense. 

[hownowbrowncow]

In response to peeps asking what I'm doing here's my current situation:

 $(9,951.81)   6.55% Student Loan 1
 $(8,009.45)   6.55% Student Loan 2
$(4,896.76)   0% APR credit card
 $(22,858.02)   

 $4,259.95    401 (a)
 $9,306.79    403(b)
 $33,051.21    rollover 401k
 $11,119.92    emergency fund ~4-5 months of living expenses
 $4,788.88    liquid fund
 $62,526.75    
   
   
I've been paying off my student loan like my hair is on fire.  My balance on 3/13/13 was $65, 017.97.  Today it's $17,961.26.  My hope is to have it paid off by the end of March 2014. I'm expecting some bonuses in January plus I figured I'd dip into my emergency fund once the balance was around $5k just to have it done.

I took the 0% APR offer because it was the longest term of all the offers I get.   21 months - almost two years of free credit!  I'm too lazy to run the numbers right now but in the end this will get me out of  (interest-charged) debt faster and save me a  few hundred in interest on the student loan (the only debt I've ever had)  I have to admit it does feel really weird not paying off my cc in full every month.

So if I'm done by April 2014 I'll still have about a year to payoff the 0% credit card which would only be $10k - $15k (if Citibank were to up  limit).  With no other debt, I'm confident I could do that.

I'm def going to call CB tomorrow and see what they say about shifting one credit line to the other.  I want the increase more to improve my ratio rather than to spend more. 

 Last time I got my credit checked (June 2012 when I moved to my current apt) it was just over 800.  I'm going to go with general theme of reponse that this one credit card's high usage isn't going to knock it dangerously low.

[Jamesqf]

Though from a purely monetary point of view, I could totally see putting all purchases on a 0% CC, paying minimum payments, and investing the difference, and then paying it all of right before it starts accruing interest. In theory, that'd work well (assuming investments haven't lost money), though in practice that'd require the self-control of a monk not to spend more than one would otherwise spend with cash.

Yes.  Been doing it for over a year now.  Investments are up over 20%, plus collected a couple hundred bucks signup bonuses for cards.

For the OP, you might look at the Chase Slate card.  When I signed up a couple of months ago, they were offering no-fee balance transfers, and %0 interest to IIRC the end of 2014.  So I moved the approx. $3500 that had accumulated on a year of using the 0% BofA card (see, I don't spend more :-)) the month before the 0% rate expired.