0% on Balance Transfers - a free loan and a great opportunity? [merged]

[SIA1A]

I have had a Virgin Credit Card in the bottom drawer for several years. Virgin Money is folding its CC business and has sold it to Westpac. Westpac has just issued a replacement for the Virgin card, called the Ignite Card. This is a 'bare bones' credit card with no points scheme, no annual fee and up to 55 days interest-free (but read on).

Westpac Ignite's opening gambit is to offer balance transfers from existing credit card accounts (eg my Citi account). Balances transferrred up until 15 March will not begin accruing interest until 1 Sep 2009. Likewise, all spending on the Ignite card will have a 0% interest rate until 1 September 2009. So if the balance is paid off on the Ignite card by 31 August (ie balance on 1 Sept is $0), presumably there will be no interest charges for activity up until 31 August.

Now for the 'interesting' bit.

I currently have a balance of about $10K on my Citi Platinum (I just paid last month's bill in full). My credit limit is very large.

I find (to my surprise) that the Ignite card has a credit limit of $30K.

I could instruct Westpac to do a balance transfer from Citi of $10K and presumably there would be no hassles. I assume (correctly?) that this would not result in a loss of any Citi points that I have already accrued. Presumably all that happens is that Westpac credits my Citi Platinum with $10K and debits the Ignite card for the same amount - interest free until Sep 09. I assume that from Citi's viewpoint the effect is the same as simply paying off the card balance.

However, it occurs to me that I could instruct Westpac to do a balance transfer for up to 95% of my Ignite credit limit, ie 95% of $30K or $28.5K (instructions with the card say that a balance transfer of up to 95% of the card's credit limit can be done).

That way, my Citi Platinum would leap into a strongly positive credit position and I could continue spending with it, and accruing points, until I have drawn down the credit balance to zero, at which point I would go into debit and resume normal pay-in-full-every-month activity as usual. Meanwhile, the Ignite card could stay in my bottom drawer with a balance owing of $28.5K, which I would pay off in late August, interest free. Money for jam?

So the real question is: When I request the balance transfer, does Westpac ever find out my actual balance on the Citi Platinum anyway? From what I can see of the application process, I do not give Westpac permission to do anything except transfer an amount of money, which I specify, from my Citi card to the Westpac card. Westpac would not know my actual Citi balance unless there's some fine print in its privacy policy whereby I may have somehow granted Westpac the right to request my actual balance from Citi.

One little problem: I don't have much time to act (one business week, to be precise) so your prompt views would be very much appreciated.

 

[vilemerchant]

I'm not sure if Citi (or westpac) would want the balance transfer feature used like that, to go into a huge positive balance.

What you could do that would make it look a bit more legit is first to do a balance transfer with the Citi account, using the 'Send me a cheque' feature. You could get a BT cheque from citi for say 20K at 9.9% (not that this matters) and stick it in ING or wherever accruing interest. THEN do a BT over to the ignite card to get it to 0%. At least this way you are transferring actual debt as Westpac intended.

 

[cove]

Re: Westpac Ignite - Interest Free Offer

Your proposal to get cash out interest free requires you to be a great manager of money and not lose or spend it with frivolous abandon.
Today we are dealing with deflation where assets we buy today may be worth less in October and it seems to be getting worse.
Make sure your plan to access the free money will work for you as I am seeing high interest rates and fees on unpaid credit cards ruining lives.
If you look up GORDO filings you will see what free transfers did to one of our members in the last couple of years.

 

[pongie]

I don't think they like positive credit balance for extended period. I've heard instances where they actually close your account and sends you a cheque. You're better off transfering the balance into a homeloan where you can redraw it anytime. Ofcourse no points this way.

 

[SIA1A]

Re: Westpac Ignite - Interest Free Offer

Your proposal to get cash out interest free requires you to be a great manager of money and not lose or spend it with frivolous abandon.

Point taken - I should point out that I am, indeed, a great money manager! I have never done anything with my credit card balance except pay it off in its entirety every month.

(My CC balance is always a tiny proportion of my liquid assets and I am a high income earner - with very little prospect of taking a substantial haircut in these 'difficult' times.)

Now back to my queries - any views about the procedures involved in what I am thinking of doing?

 

[SIA1A]

I don't think they like positive credit balance for extended period.

Is that Citibank's policy? Of course, I would gradually draw it down over a period of 6 months.

I once had an Amex account with a positive balance of about $100K. Amex never objected to this - it's only comment was a note on my monthly statement pointing out the positive balance and an offer to send me a refund chheque if I requested it.

I've heard instances where they actually close your account and sends you a cheque.

Which card issuer(s)?

You're better off transfering the balance into a homeloan where you can redraw it anytime.

I don't have any home loans or other consumer credit facilities (except credit cards, which I normally pay out monthly).

Of course no points this way.

...and that reduces the attraction of the scheme.


Back to my query - will Westpac have access to any information that alerts them to the fact that I will be running a large positive balance with Citi Visa if I proceed in the fashion described above?

 

[NM]

I have merged the two threads created on this topic. Please do not create duplicate threads in multiple forums as it leads to split discussions and confusion.

 

[SIA1A]

Re: 0% on Balance Transfers - a free loan and a great opportunity?

I'm not sure if Citi (or westpac) would want the balance transfer feature used like that, to go into a huge positive balance.

But running a positive balance, per se, is not a problem, is it? I have occasionally paid large cheques into my Citi Visa account, creating a large positive balance, with no complaints from Citi. After all, they get the money interest-free.

I could then of course draw it down, though I think there's a charge for cash advances when the account remains positive, though it may be nominal.

Westpac would not like it, obviously. If it knew the situation. It's the loser here. But hey, it has made the offer and taken risk on the resulting exposure, up to the value of the credit card limit. However, would it ever know that I have run up a big positive balance at Citi unless I spill the beans to Westpac?

 

[NM]

I expect Westpac are going to want to see the actually balance outstanding on the card from which the balance is to be transferred (in the form of a statement) and will limit the transfer to the actual outstanding balance as per the provided statement.

 

[oz_mark]

Citi could suspend or close the account:

Account in Credit

If your Account has a credit balance, we may
choose to:
(a) suspend or close your Account by giving
you reasonable notice that we will do so
and, subject to clause 16(f); or
(b) send you a Cheque for the amount of
the credit balance (excluding unclear
funds) less any accrued interest, fees and
charges and Transaction amounts up to[/LEFT]
the closing date (Net Credit Amount).

​

That is not to say they would, just they could.​

 

[deepakabc]

I did the same stuff .. i asked a cheque of 5000 from citi bank and transfer money from virgin to citi bank....

 

[SIA1A]

I expect Westpac are going to want to see the actually balance outstanding on the card from which the balance is to be transferred (in the form of a statement) and will limit the transfer to the actual outstanding balance as per the provided statement.

This seems unlikely.

The balance transfer can be done manually, using a short application form. No documentation apart from the form is requested and there is a statement on the form saying that once it is received, the BT will occur within 10 days.

Similarly, the BT can also be done online, in which case it appears that it happens within the same time period as a BPay-type transaction. The online method appears to not involve human intervention.

 

[vilemerchant]

The cheque is definitely the way to go. No positive balance and you get to keep the money in ING and earn some interest. BTW citi is the last place I'd want a positive balance

 

[SIA1A]

citi is the last place I'd want a positive balance

Good point!

I note that Citi's share price dipped below US$1 last night - a far cry from it's price of around $50 little more than a year ago.

 

[docjames]

I think you'll find they wont allow you to draw down essentially what is 20k in cash - they'll only allow transfer of outstanding balance / closing balance.

 

[SIA1A]

I think you'll find they wont allow you to draw down essentially what is 20k in cash - they'll only allow transfer of outstanding balance / closing balance.

But Westpac does not request any info from me about my current outstanding balance - and it doesn't request my permission to get this info from Citi.

So what is the mechanism that will be used by Westpac to implement this policy if it doesn't have the info?

It seems to me that it doesn't care - and hopes that I will forget to pay out the Westpac card balance at the end of the interest-free period.

 

[Flashback]

Just to add to this, when I closed my ANZ Gold FF C/C and moved to the AMEX Platinum, all AMEX asked me for was a number....... for all they knew, I could have told them X and it still would have been paid.

Obviously you're dealing with Westpac here, so YMMV...... I don't forsee any issues though. My balance was only $8k on the BT though, so anything "large" e.g. 20k they *may* ask for proof ?

 

[markis10]

ANZ often have special balance transfer offers, basically they use the BPAY process to make the transfer so no need to show any statments at all.

As for postivie balances triggering a closed account, AMex did it to me on a credit card which has a low limit that I have put more money in to cover a large upcomming expense.

 

[medhead]

I have had a balance transfer fail between ANZ and AMEX because I didn't have an outstanding balance. Happened because the BT didn't credit by the due date, so I paid the full amount. Couple days BT rejected. So some banks do check and citi sending out cheques without checking would seem to be the exception to the rule

 

[Flashback]

You're up late !