Using convenience checks to pay down student loan

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Using convenience checks to pay down student loan

Postby strbrd » Thu Jul 25, 2013 10:10 pm

I have two student loans totaling approximately $15K that I'm considering paying down with a convenience check from my credit card company using a 1-year promotional APR. (I also have about $25K at slightly lower interest rates, and one ~$5K loan at the same rate that I intend to pay off in the next two months using a portion of my suddenly too-large emergency fund [SO got a job].) Details:

The "target" student loans are at ~6.5%. The convenience check APR is 2.9% for a year (the time period in which I intend to pay down the loans regardless), with a maximum $75 fee. I calculate the savings from using the convenience check at about $200 over the course of the year if I pay down the check transaction continuously over the course of the year. (Correct?)

Questions:
* Is this a good idea or not? Assume that I am very responsible with payments and have stable employment. Also note that this scheme will take up 3/4 of my available credit (although I have already requested a credit increase in order to assist with the utilization impact), but that I don't necessarily anticipate any kind of transaction requiring a credit check during this period. Too much work for too little gain?

* Can you help me with a slightly more complicated calculation? What would be the impact if I paid the minimum on the convenience check (I would be guessing what that amount would be) for the first 10 months and concentrated on paying down the second-highest interest loans, then made a balloon payment to take care of the convenience check debt before the promotional APR ran out? I can't figure out if this would even matter, given the fact that I would have to have enough cash on hand to wipe out the "target" loans before the time ran out anyway.


Thanks!
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Re: Using convenience checks to pay down student loan

Postby RobInCT » Thu Jul 25, 2013 10:25 pm

Find better convenience checks. Plenty of 0% for 12-16 months balance transfer offers out there with 3% origination fee. Will save you $525 over the course of the year.

I have done this, and it was great IF you have stable employment and are SURE you can pay it off in the recommended time frame. I did it back in the days when it was easier to get 0% balance transfer with no fee. Those days are gone, though if you hunt you can still sometimes get 0% for a year with a 1% origination fee.
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Re: Using convenience checks to pay down student loan

Postby strbrd » Fri Jul 26, 2013 8:28 am

OK, thanks! So all "balance transfer" offers work the same as a convenience check from your existing credit card? For some reason I was assuming you had to be transferring a credit card balance rather than another kind of debt. But I see some 0% fee, 0% for 15 months on balance transfer offers--if I apply for that card, can I assume I will just receive a convenience check from them and can send it to my student loan servicer?
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Re: Using convenience checks to pay down student loan

Postby jsl11 » Fri Jul 26, 2013 10:41 am

strbrd wrote:-if I apply for that card, can I assume I will just receive a convenience check from them and can send it to my student loan servicer?

Don't assume anything. Contact them and ask.
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Re: Using convenience checks to pay down student loan

Postby niceguy7376 » Fri Jul 26, 2013 10:57 am

Most of the times, I use this 0% bal trsfr to get lump sum amounts that I might need for immediate activities and then pay minimum each month till the last month and then pay off the total balance in the last month of the offer. I use them only when I know for sure that I would be able to pay them off at end. I never paid any interest, just the transfer fee. Most of the cards do send me checks (balance transfer checks is what they call) and I just deposit them into my account. Some credit card companies only provide online option wherein I need to pay to another credit card (that does not belong to the one that is offering, say from chase to another chase card is not allowed).
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Re: Using convenience checks to pay down student loan

Postby technovelist » Fri Jul 26, 2013 12:14 pm

I would do it, since student loan debt is just about the most dangerous kind to have.
In theory, theory and practice are identical. In practice, they often differ.
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Re: Using convenience checks to pay down student loan

Postby strbrd » Fri Jul 26, 2013 1:21 pm

OK, so the only card I can find with a 0% transaction fee and 0% balance transfer for a period of a year or more is the Chase Slate Visa, and when I called they told me that they can't give me a balance transfer check, just a cash advance check with the normal astronomical APR. (Maybe I shouldn't have told them I wanted to use it to pay down student loans? :happy) Anyone have leads on this kind of offer from a company that does do balance transfer checks? Otherwise I'm back to my 2.9% cash advance idea. Or perhaps I should offer my parents a one-year, non-FDIC-guaranteed 2.5% "certificate of deposit."

And yes, let me reassure you guys, I will easily pay down this amount in year. I have been extremely aggressive in paying down student loans in the past, and in the upcoming year and a half I won't have access to a 401k so I have even more incentive to "invest" in my student loan balance. I'd like to pay the entire balance off within two years.
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Re: Using convenience checks to pay down student loan

Postby SenatorSquires » Fri Jul 26, 2013 1:47 pm

I posted a similar question a couple of weeks ago. I haven't progressed much since the post but i'm still planning on doing the same thing

http://www.bogleheads.org/forum/viewtopic.php?f=2&t=118359&p=1728023
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Re: Using convenience checks to pay down student loan

Postby strbrd » Fri Jul 26, 2013 2:14 pm

Awesome, thanks for the link. Do you think I should just sign up for a Barclay card and wait? Which one do you have? I definitely have never received anything better than a 2.9% offer from my current CC (USAA).
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Re: Using convenience checks to pay down student loan

Postby SenatorSquires » Fri Jul 26, 2013 3:53 pm

strbrd wrote:Awesome, thanks for the link. Do you think I should just sign up for a Barclay card and wait? Which one do you have? I definitely have never received anything better than a 2.9% offer from my current CC (USAA).

I think you should hunt for a better deal as other posters have mentioned. One of the reasons for my delay is I have been meaning to shop for offers to see what the best deal is. I have only started looking for them in the last few weeks as my focus has always been rewards with credit cards.. but 12-18+ months at 0% with a 1% (i think 0% is still possible) fee seems like the offer to look for.

I have the barclay NFL card because of a slickdeal.net post that offered a $400 cash bonus after I think 1,000 spend in 3 months. I paid it off and never used it again but they seem to have decent convenience check offers. As I said though, I haven't done much shopping around.
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Re: Using convenience checks to pay down student loan

Postby strbrd » Fri Jul 26, 2013 4:20 pm

OK, thanks. I am shopping around but can't seem to get much info on convenience checks as opposed to balance transfer checks. (The woman I spoke to at Chase had no idea what I was talking about, e.g.)
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Re: Using convenience checks to pay down student loan

Postby Easy Rhino » Fri Jul 26, 2013 5:45 pm

Um, if you make a big payment on those student loans, it doesn't change your monthly required payment does it?

So, if you do the credit card checks, then you'll have to pay the student loan payments PLUS the credit card payments?

Make sure you have enough cash flow to pay that.
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Re: Using convenience checks to pay down student loan

Postby strbrd » Fri Jul 26, 2013 6:45 pm

Yes, all my loans are calculated (and one is held) separately, so if I pay any down (or shift the balance to another account, as I am attempting to do for these two), my minimum payment for the remaining balance decreases. I have already lowered my minimum payment from over $2K per month to about $700 and am using that extra to pay the remaining loans down faster.
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Re: Using convenience checks to pay down student loan

Postby strbrd » Sat Jul 27, 2013 9:57 am

OK, so just to consolidate everything I've learned for people considering this course of action:

  • the easiest way to do this is to passively receive a "balance transfer check" offer from an existing credit card; these are quasi-mythical beasts and may not be offered by every card with promotional BT rates so you can't necessarily "shop around."

  • other, more complicated-complicated methods are explained here: http://www.moneycrashers.com/ways-get-cash-0-apr-balance-transfer-offer/.

  • credit cards that have been known to make such BT check/direct deposit offers include Barclay and Citi (but not Chase).
The final idea I had is the cash-advance + BT-to-another-card method. (Not positive you can BT cash advance balances. Anyone?) This is slightly risky in that the BT might not go through in time and you would have to pay the first card's cash advance APR for the first billing cycle.

If you can BT cash advance balances, this Barclay card (https://www.barclaycardus.com/apply/Landing.action?campaignId=1665&cellNumber=1&prodidreq=CCMPS45299) looks intriguing for the first card, with just $1 fee per cash advance and base 8% APR if the balance transfer to the next card accidentally doesn't go through in time. And Chase Slate's promo BT APR is obviously best for the receiving BT, with 0% transfer fee and 0% for a year.

Still not sure what to do, but I'm pretty sure avoiding these ridiculous student loan rates is worth it. (I definitely would have tried it when I had some 8+% loans.)
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Re: Using convenience checks to pay down student loan

Postby jimbojones » Sat Jul 27, 2013 10:39 am

I would find the 0% card for new purchases that has the longest term. I've seen a 21-mth card from Citi. Use that card to make all your regular purchases. In the meantime, plow every last cent into the student loan.

It's not as immediate as doing a BT, but it avoids the BT fee and has 0% interest.
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Re: Using convenience checks to pay down student loan

Postby RobInCT » Sun Jul 28, 2013 12:46 pm

strbrd wrote:OK, so the only card I can find with a 0% transaction fee and 0% balance transfer for a period of a year or more is the Chase Slate Visa, and when I called they told me that they can't give me a balance transfer check, just a cash advance check with the normal astronomical APR.

If you ask them for a check, they treat it as a cash advance. I can't speak to Chase specifically, but when I did balance transfers to pay off student loans, when asked for an account number for the transfer, I put in the account number on my debit card. Payment came to my checking account, and I wrote a check to the student loan company.

I'll add a disclaimer that this was several years ago, and like I said, no experience with Chase, but I did it with a few others and never had any problems. Apply online. The worst that happens is that they reject your BT request and you have a new credit card which you can cancel immediately.
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Re: Using convenience checks to pay down student loan

Postby strbrd » Sun Jul 28, 2013 1:15 pm

Oh, thanks for clarifying. I never thought of "transferring" a balance from a 0-balance debit card. Has anyone tried this technique recently?
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