Avoiding AA - Minimum payments during 0% APR promotions

[policebox]

My primary concern here is reducing the risk of AA and maximizing how each individual creditor reviews the accounts, so to allow for CLI, product changes, etc.

 

The DW and I have three accounts with 0% APR promotions. So the issue is we have (over the time frame) the money to pay these 0% APR promo offers off in full before their expiration date. However, never wishing to leave money on the table, I'd like to pay the least amount each month towards the accounts and put the remaining cash in a savings account or CD that will earn some interest. Then, before the promotional expiration, we pull the money from the savings/CD to pay them off.

 

So, keeping in mind that I'm trying to look my best in the eyes of each creditor and reduce the risk of AA, does anyone have any specific rules of thumb for how much to pay towards each card (above the minimum payment), to try to achieve the goal of paying as little as possible up front, saving the remainder, and then paying in full when the promotional offer expires?

 

For the specifics, DW has two 0% APR promos going:

• Chase Slate. Current balance: $10,875. Promotion expires 10.22.2018. Minimum payment is 1% of balance. Credit limit: $19,700 (utilization as of 02.01.2018 = 55.2%)
• Barclaycard Ring. Current balance: $10,400. Promotion expires 10.10.2018. Minimum payment is 1% of balance. Credit limit: $18,000 (utilization as of 02.01.2018 = 57.8%)

DW's overall aggregate utilization is ($10,875 + $10,400) / $102,300 = 20.8%.

 

Once the cards are paid-in-full, the goal would then be to product change to some type of rewards card.

 

For myself, I have one 0% APR promo going:

• NFCU. Current balance: $5,626. Promotion expires 02.22.2019. Minimum payment is 2% of balance. Credit limit: $19,400 (utilization as of 02.01.2018 = 29.0%)

My overall aggregate utilization is $5,626 / $134,450 = 4.2%.

 

My original plan was to pay 3X the minimum payment then save the remainder. That'd translate to 3% of the balance for Chase and Barclaycard, then 6% with NFCU. But, the 3X figure has basically been pulled from thin air, and I know each lender has their own quirks over what spooks them. No planned new apps or changes in overall debt load expected through the remainder of 2018.

 

Any insight on this is appreciated. Thank you for your input!

 

tl;dr

• 0% APRs on cards
• Want to pay as little as possible towards payments then save remainder of cash until APR promo expires, then pay-in-full
• What's the "ideal" minimum payment for Chase Slate, Barclaycard Ring, NFCU Visa

Edited February 1, 2018 by policebox

[Kat58]

2x the minimum.

[JeffeVerde]

Be aware that utilization - both individual and overall - is a big part of your FICO score. I suspect that those two accounts with >50% utilization are probably costing your DW in the neighborhood of 20-40 FICO points. Not a big deal, as long as she has no near-term plans to app anything.

 

Also be aware that the FICO algorithm responds to decreases in util more slowly than it does to increases. So an increase in util will affect your FICO's the day the high balance is reported. But once the util drops, it can take several months for your scores to recover. So don't expect your FICO's to instantly recover if you pay off a large balance at the end of the promo period.

Edited February 1, 2018 by JeffeVerde

[Kat58]

Be aware that utilization - both individual and overall - is a big part of your FICO score. I suspect that those two accounts with >50% utilization are probably costing your DW in the neighborhood of 20-40 FICO points. Not a big deal, as long as she has no near-term plans to app anything.

 

Also be aware that the FICO algorithm responds to decreases in util more slowly than it does to increases. So an increase in util will affect your FICO's the day the high balance is reported. But once the util drops, it can take several months for your scores to recover. So don't expect your FICO's to instantly recover if you pay off a large balance at the end of the promo period.

 

You forgot to answer the question

[Konrad2012]

Be aware that utilization - both individual and overall - is a big part of your FICO score. I suspect that those two accounts with >50% utilization are probably costing your DW in the neighborhood of 20-40 FICO points. Not a big deal, as long as she has no near-term plans to app anything.

 

Also be aware that the FICO algorithm responds to decreases in util more slowly than it does to increases. So an increase in util will affect your FICO's the day the high balance is reported. But once the util drops, it can take several months for your scores to recover. So don't expect your FICO's to instantly recover if you pay off a large balance at the end of the promo period.

 

That is highly dependent upon the percentage of the balances and what segmentation tree your file gets moved into.

 

Based on the OP's data, if Policebox paid off that ~$5K, I would expect him to gain back all of his FICO points as soon as it reports.

 

The wife with 2 products at 50% each and 20% global utilization might have been placed in a different segment, but even that isn't a real red flag.

[cashnocredit]

Fair Isaac published research a few years ago showing a significantly lower risk for people that paid over 2x the minimums on account balances. This was separate and apart from FICO scores which do not factor this in.

 

However, the study was payments v minimums. Special 0% offers were not separated out. Another factor is that a relatively small number pay over 2x yet don't pay in full so statistically, FICO score validity isn't affected because of the small numbers. But, given that Fair Isaac did publish this, I suspect it is something commonly known to underwriters.

Edited February 1, 2018 by cashnocredit

[Kat58]

Correction.

 

2x the minimum... plus $1

[shifter]

Don't over think it.

 

But paying more than the min is a good idea especially since you're going to have to pay off the balance at the end of the promo period anyway.

[moneypyts]

I always pay about 3%.

 

I pay the minimum payment, rounded up to the nearest $100, within a day or two of the statement closing.

Then, a few days before the next statement closing I pay another installment of $100(s) to get to above 3%.

This pays off about 50% of the balance by the time a 12 month 0% promo transfer expires, putting the actual annual interest charge at about 5% for a 3% BT fee.

I've been doing this for a couple years. Barclays CLD'd me once and only once, but they're known for being erratic. No problems with Chase, Citi, Discover, Bank of America, FNBO. I've had all of these at 40% utilization at one time or another.

MP

Edited February 1, 2018 by moneypyts

[CTSoxFan]

I generally will pay whatever the minimum is round up to the next $100 level. Have done this with almost all the major issuers with no AA, and always PIF the card before the promo ends. Although to be fair, between the DW and I we have over $1M of unsecured lines and we never come close to maxing anything out.

[cashnocredit]

I generally will pay whatever the minimum is round up to the next $100 level. Have done this with almost all the major issuers with no AA, and always PIF the card before the promo ends. Although to be fair, between the DW and I we have over $1M of unsecured lines and we never come close to maxing anything out.

Back before I dropped my CCs in the 90's, I did the same thing. Writing round numbers on a check took less time and it was easier to keep track of.

[Konrad2012]

 

I generally will pay whatever the minimum is round up to the next $100 level. Have done this with almost all the major issuers with no AA, and always PIF the card before the promo ends. Although to be fair, between the DW and I we have over $1M of unsecured lines and we never come close to maxing anything out.

 

Back before I dropped my CCs in the 90's, I did the same thing. Writing round numbers on a check took less time and it was easier to keep track of.

I still do it to SCE, The Gas Company, water bills etc.

[credit_help]

 

 

I generally will pay whatever the minimum is round up to the next $100 level. Have done this with almost all the major issuers with no AA, and always PIF the card before the promo ends. Although to be fair, between the DW and I we have over $1M of unsecured lines and we never come close to maxing anything out.

 

Back before I dropped my CCs in the 90's, I did the same thing. Writing round numbers on a check took less time and it was easier to keep track of.

I still do it to SCE, The Gas Company, water bills etc.

I rarely pay anything using checks. I have my non credit accounts and credit card accounts that don’t have any 0% APR offer (for BT or intro purchase) set to pay statement balance. For accounts with no interest, I have them set to pay minimum payment due.

 

Of course, some CUs still don’t have auto payment system figured out and cannot pay anything other than a fixed amount if using external bank accounts. I set them to pay a fixed amount which is rounded to the minimum plus a few dollars.

 

I have not had any AA with any creditor for carrying a balance and I have carried at least 12K balances on 0% APR accounts in the last 18 months.

Edited February 2, 2018 by credit_help

[haydeno]

i have carried 90%+ util on 0% cards several times on severalcards ( ~200k peak borrowing) and only lost one card despite peak score drop of ~150 points(~800 to ~650) while paying ~2x minimum

[nooneimportant]

I might be inclined to get your wife's utilization below 20% since you are so close, but otherwise would not be that worried about it. I think Navy is probably the least likely to care and if I did make extra payments it would be to Chase and Barclay. And I've recently carried balances with both Navy and Barclay and neither seems to care. Barclay even gave me a CLI when I got close to the limit. Chase doesn't give me any good offers so I have no recent experience carrying a big balance with them. I think they know I will use it if they do offer.

[shifter]

I still do it to SCE, The Gas Company, water bills etc.

who writes checks for bills anymore???

[cashnocredit]

 

I still do it to SCE, The Gas Company, water bills etc.

who writes checks for bills anymore???

 

Pretty rare these days. I deposit more checks than I write but there are still a few. Contractors generally want checks. HOA, though we are getting a new management company that takes CCs (with a surcharge) or debit/ACH.

[shifter]

well, yes, you need to pay lots of people with checks.

 

but that's what bill pay is for.

[cashnocredit]

well, yes, you need to pay lots of people with checks.

 

but that's what bill pay is for.

Most of the contractors we employ are not regular or for predictable amounts. But I can live with the infrequent checks. Haven't had to order any in over 5 years and they are starting to yellow with age.

[credit_help]

 

 

I still do it to SCE, The Gas Company, water bills etc.

who writes checks for bills anymore???

Pretty rare these days. I deposit more checks than I write but there are still a few. Contractors generally want checks. HOA, though we are getting a new management company that takes CCs (with a surcharge) or debit/ACH.

Contractors and their bills probably vary. So, it’s convenient writing out checks. But, HOA should be the same payee, amount, and address. Do they (HOA) not take checks mailed/issued by your bank’s bill pay?

[credit_help]

 

I still do it to SCE, The Gas Company, water bills etc.

who writes checks for bills anymore???

People who have varying bills, those who are set in ways. :-)

[steelers1]

 

 

I still do it to SCE, The Gas Company, water bills etc.

who writes checks for bills anymore???

People who have varying bills, those who are set in ways. :-)

 

 

My mother-in-law still writes out checks and mails them to the credit card company.

 

Can't teach an old dog lady new tricks I guess

Edited February 2, 2018 by steelers1

[credit_help]

My mother-in-law still writes out checks and mails them to the credit card company.

 

Can't teach an old dog new tricks I guess

It works for her probably sufficient for her needs. Edited February 2, 2018 by credit_help

[policebox]

I might be inclined to get your wife's utilization below 20% since you are so close, but otherwise would not be that worried about it. I think Navy is probably the least likely to care and if I did make extra payments it would be to Chase and Barclay. And I've recently carried balances with both Navy and Barclay and neither seems to care. Barclay even gave me a CLI when I got close to the limit. Chase doesn't give me any good offers so I have no recent experience carrying a big balance with them. I think they know I will use it if they do offer.

 

Just got DW a CLI of $2,000 on her Discover Card and I got a $2,800 increase on mine (she's an AU), so her new utilization will be ($10,875 + $10,400) / $107,100 = 19.9%. I love cheating the system.

[shifter]

Not sure that 20% is a magic number?