Discover 0% APR for life - worth it?

bishop · 04-09-2008, 11:44 AM

Perhaps some of you have received a similar offer and can help me out.

I just received an offer from Discover for a lifetime 0% balance transfer APR. That hinges upon making at least two purchases a month with the card beginning in 2009.

Right now, I have a MasterCard through my brokerage that carries about $6500 of balance transfers. I did this to consolidate our CC debt and get a nice rate (2.9% until November, then to 9%). We're paying on it very slowly but more than the minimum payment.

The 0% thing sounds great, and I know I wouldn't be tempted to use that card for anything else because Discover isn't as widely accepted as Visa or MC. But is it worth the catch?

jdp · 04-09-2008, 11:58 AM

IF I held a cc it'd be Discover. If you use cc's 2x's / mo then why not? Did you read the rest of the fine print re fee's and ways to lose that rate?

bishop · 04-09-2008, 12:14 PM

I would lose the rate if I missed a payment or didn't make the required purchases.

The balance transfer fee is a maximum of $75. The minimum payment each month would be a maximum of 4% of the balance, so $265 per month. That would certainly get us disciplined in paying it down...right now, I'm only managing to put $100 per month towards it regularly. I do put more on it when the money is available. However, my credit union Visa is carrying about $500 right now that was an unexpected expense...so I would need to get that paid down quickly (what I'm doing now) and make the $265 minimum payment.

I don't think that will work. Maybe when my 2.9& offer expires in November, I'll have a better deal on hand. But for right now, I don't know that this is worth the commitment.

gtwise · 04-09-2008, 06:34 PM

We have done it on my wife's Discover card a long time ago. We have started at around $7k and made the minimum payments every month until the minimum dipped under $100, now we just pay $100 every month. Over the years we have charged a total of $141 in purchases on the card after the initial trasnfer. The trick is to buy gum, or other cheap items every month and only two but always two. My wife used to buy $.50 gum or candy but after we moved the new grocery store did not allow credit card purchases for less than $3 so she started to charge sonic tots twice a month for $2 or so. It is still a bargain!

Her regular rate is 14.99% so as soon as your 0% balance hits about 3 times the 15% interest bearing balance it's time to pay it off as at that point you're paying 4% average interest and it's worse or pretty close to what you can earn on the money in an interest bearing account. Note that I'm arguing this deal from a credit card arbitrage point, which is how we used it.

Another advice is that Discover will usually do an ACH into your checking account for the whole amount or cut you a check that you can deposit yourself in one lump sum, pay off multiple debts while only getting hit with the $75 once. Just tell them you're planning on paying off several smaller debts and you'd prefer one lump sum to be sent to you either via ACH or check. Discover business does not allow checks or ACH but Discover personal does (or at least it used to as late as last November)

It might seem like a hassle for some to deal with it, but when you can get $7k interest free and shove it in a savings account or CD at 4% you can make $210 a year in credit card arbitrage alone. If you're paying off a 12% credit card with the money instead it's over $600 savings in a year on interest alone!!!

However if you're already having trouble making $100 payments on your current debt plus you had to charge an emergency expense of mere $500 onto credit I'd say you might be stting yourself up for a disaster and you're the kind of person Discover is looking for. It's great that there are 10+ suckers for every one who actually abuses the system such as myself, hence CC companies keep offering me crazy deals.

On a side note, Discover did have several versions of this plan, one required $50 in minimum purchases per month. That deal is nowhere near as nice as the one with no lower limit on spending other than the 2 minimum purchases. With the $50 minimum per month you'd be hitting the 3:1 ration of 0% vs. 15% principals quicker.

If you have the diligence, planning and the funds to make this play I'd say go for it. It sure worked for us!

ThePennyMine · 04-11-2008, 05:35 AM

If you're not certain that you can make the minimum payments, I would definitely not do it. If you lose that rate, you're going to be paying much more than you otherwise would, and it's not worth the risk.

Linsey Knerl · 04-21-2008, 08:29 PM

Did you say that you get 2.9 until Nov? If so, I would wait until closer to then. You will surely get similar (same or better) offers before then, so why risk it if you don't have to. You could also call you current credit card company a month before the rate change and tell them that you would like to continue doing business with them, but won't be able to with the new 9% rate. They may be able to work out a rate discount with you to keep the low 2.9 for another 6 months or maybe something closer to 5. (This is what debt counseling companies do all the time.)

Only if you can't negotiate a better deal with your current card, would I switch. The balance transfer fees can cost a bit, and there may be a month where you don't make 2 purchases or forget to pay (heaven forbid-- it happens to the best of us.)

Just my opinion. Hope everything works out for you!

bishop · 04-22-2008, 02:29 PM

Quote:

Originally Posted by Linsey Knerl

Did you say that you get 2.9 until Nov? If so, I would wait until closer to then. You will surely get similar (same or better) offers before then, so why risk it if you don't have to. You could also call you current credit card company a month before the rate change and tell them that you would like to continue doing business with them, but won't be able to with the new 9% rate. They may be able to work out a rate discount with you to keep the low 2.9 for another 6 months or maybe something closer to 5. (This is what debt counseling companies do all the time.)

My thoughts exactly. After mulling over the advice in this thread and talking about it with my wife, I've decided to decline the Discover offer and see what comes up between now & November.

Thanks, everyone, for the advice!

04-09-2008, 11:44 AM	#1
bishop Member Join Date: Mar 2008 Location: Pendleton, SC Posts: 36 Reputation: (10)	Discover 0% APR for life - worth it? Perhaps some of you have received a similar offer and can help me out. I just received an offer from Discover for a lifetime 0% balance transfer APR. That hinges upon making at least two purchases a month with the card beginning in 2009. Right now, I have a MasterCard through my brokerage that carries about $6500 of balance transfers. I did this to consolidate our CC debt and get a nice rate (2.9% until November, then to 9%). We're paying on it very slowly but more than the minimum payment. The 0% thing sounds great, and I know I wouldn't be tempted to use that card for anything else because Discover isn't as widely accepted as Visa or MC. But is it worth the catch?

04-09-2008, 12:14 PM	#3
bishop Member Join Date: Mar 2008 Location: Pendleton, SC Posts: 36 Reputation: (10)	I would lose the rate if I missed a payment or didn't make the required purchases. The balance transfer fee is a maximum of $75. The minimum payment each month would be a maximum of 4% of the balance, so $265 per month. That would certainly get us disciplined in paying it down...right now, I'm only managing to put $100 per month towards it regularly. I do put more on it when the money is available. However, my credit union Visa is carrying about $500 right now that was an unexpected expense...so I would need to get that paid down quickly (what I'm doing now) and make the $265 minimum payment. I don't think that will work. Maybe when my 2.9& offer expires in November, I'll have a better deal on hand. But for right now, I don't know that this is worth the commitment. Last edited by bishop : 04-09-2008 at 12:53 PM.

04-11-2008, 05:35 AM	#5
ThePennyMine Member Join Date: Mar 2008 Location: Canada Posts: 46 Reputation: (10)	If you're not certain that you can make the minimum payments, I would definitely not do it. If you lose that rate, you're going to be paying much more than you otherwise would, and it's not worth the risk. __________________ The Penny Mine - Personal Finance Tips and Tricks

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04-09-2008, 11:58 AM	#2
jdp Senior Member Join Date: Jan 2008 Posts: 152 Reputation: (24)	IF I held a cc it'd be Discover. If you use cc's 2x's / mo then why not? Did you read the rest of the fine print re fee's and ways to lose that rate?

04-09-2008, 06:34 PM	#4
gtwise Member Join Date: Jan 2008 Posts: 44 Reputation: (14)	We have done it on my wife's Discover card a long time ago. We have started at around $7k and made the minimum payments every month until the minimum dipped under $100, now we just pay $100 every month. Over the years we have charged a total of $141 in purchases on the card after the initial trasnfer. The trick is to buy gum, or other cheap items every month and only two but always two. My wife used to buy $.50 gum or candy but after we moved the new grocery store did not allow credit card purchases for less than $3 so she started to charge sonic tots twice a month for $2 or so. It is still a bargain! Her regular rate is 14.99% so as soon as your 0% balance hits about 3 times the 15% interest bearing balance it's time to pay it off as at that point you're paying 4% average interest and it's worse or pretty close to what you can earn on the money in an interest bearing account. Note that I'm arguing this deal from a credit card arbitrage point, which is how we used it. Another advice is that Discover will usually do an ACH into your checking account for the whole amount or cut you a check that you can deposit yourself in one lump sum, pay off multiple debts while only getting hit with the $75 once. Just tell them you're planning on paying off several smaller debts and you'd prefer one lump sum to be sent to you either via ACH or check. Discover business does not allow checks or ACH but Discover personal does (or at least it used to as late as last November) It might seem like a hassle for some to deal with it, but when you can get $7k interest free and shove it in a savings account or CD at 4% you can make $210 a year in credit card arbitrage alone. If you're paying off a 12% credit card with the money instead it's over $600 savings in a year on interest alone!!! However if you're already having trouble making $100 payments on your current debt plus you had to charge an emergency expense of mere $500 onto credit I'd say you might be stting yourself up for a disaster and you're the kind of person Discover is looking for. It's great that there are 10+ suckers for every one who actually abuses the system such as myself, hence CC companies keep offering me crazy deals. On a side note, Discover did have several versions of this plan, one required $50 in minimum purchases per month. That deal is nowhere near as nice as the one with no lower limit on spending other than the 2 minimum purchases. With the $50 minimum per month you'd be hitting the 3:1 ration of 0% vs. 15% principals quicker. If you have the diligence, planning and the funds to make this play I'd say go for it. It sure worked for us!

04-21-2008, 08:29 PM	#6
Linsey Knerl Wise Bread Blogger Join Date: Jun 2007 Posts: 61 Reputation: (21)	Did you say that you get 2.9 until Nov? If so, I would wait until closer to then. You will surely get similar (same or better) offers before then, so why risk it if you don't have to. You could also call you current credit card company a month before the rate change and tell them that you would like to continue doing business with them, but won't be able to with the new 9% rate. They may be able to work out a rate discount with you to keep the low 2.9 for another 6 months or maybe something closer to 5. (This is what debt counseling companies do all the time.) Only if you can't negotiate a better deal with your current card, would I switch. The balance transfer fees can cost a bit, and there may be a month where you don't make 2 purchases or forget to pay (heaven forbid-- it happens to the best of us.) Just my opinion. Hope everything works out for you!