handy911

I owed $26K back in December 2007 when I bought the car . Now, the balance is 16K, with 5.9%.

I got this credit card offer for 1.99% for one year. I am planing to pay the car off, since the savings will probably be around $400.

A. Is this a wise thing to do?

B. Considering that I only have the account open for 5-6 months, If I pay it off, will it improve my credit score or hurt it? There is no penalty to pay it off soon.

Thanks guys.

Bearcat94

Payoff won't hurt enough to matter. Credit issuers like "slow payers" - those who pay, but make minimum payments. That way they make the most money possible.

There is a difference in credit reporting/scoring based on "installment debt" (Cars, houses, etc) and "revolving debt" (credit cards). Not sure how those types of debt effect credit scores. But again, probably not enough to matter.

Only do the CC thing IF:

1. You DO pay the car off at an interest rate less than 5.9% (i.e. the first year is fixed and the interest rate after 1 year is less than 5.9%).

2. You make NO late payments (not even 1 day) on the CC (cause that'll jack your "promotional" interest rate).

1995hoo

One difference between installment and revolving debt is that revolving debt is subject to a credit limit that you can use or not use as you see fit, whereas installment debt is not. In calculating your credit score and your creditworthiness, one thing that is considered is the ratio of debt carried to available credit. That is to say—suppose you have four revolving-credit cards (meaning you don't have to pay them off in full every month, as opposed to a "charge card" like a traditional American Express) with a credit limit of $20,000 on each card and you have $17,500 of debt on each. That's going to hurt your score because you're using most of your available credit.

Installment debt, on the other hand, is factored in terms of whether you pay reliably as you promised to do. If you pay your car payment every month, that helps. Paying it off early won't directly improve your score, but it won't hurt it either. I say it won't "directly" improve your score because if you take the money you save on car payments and apply that to paying down the credit card debt, your score would then slowly improve as your debt to credit ratio improves.

I wouldn't recommend paying off the car loan on a credit card for two reasons. First, it increases your credit card debt and your available credit. Second, it's been reported that lenders become suspicious when you open a new card and promptly put a single big charge on it like that, because they think that you bought something you couldn't pay for with your available credit.

A-TLvic882

I did pay off my car with credit card offer for 0.00% for one year, By two cc. My score is 800. So if you wona save some $$ it 's way to go.

acuraowner4life

If you don't pay payments for at least 1 year, your credit score will not go up! Even if you pay for 11 months, your score will not go up. I have a friend who is a finance officer at a Subaru dealership and hes always warning me about trading in or selling before the 1 year mark. It wont hurt your credit any but it wont help either. I would wait for a least one year before you pay it off. That way your credit score goes up and you'll have less of an interest rate when you go to purchase your next vehicle Also, anytime your credit card balance gets over 50% of your limit, your credit score goes down. Creditors want to see that your not relying on a credit card to pay for everyday things and when your balance gets over 50% of your limit your score is negatively affected. Try to keep it below 50%

REY

I have enough offers from current cards that I have to pay the loan off at about 3% and all of these is for the life of loan. However, I tend not to trust credit card companies and am hesitant to do so unless I had the ability to just pay the entire thing off in full if I had to. The savings would be huge and it would lower the loan terms even if I only pay min payments, plus it would lower the monthly as well. I have decided against it at least for the moment because since I have only had this loan for 6 months I would like to keep it there for a while because of my current credit file lacking big trade installment loans. Creditors and scoring bureaus like to see a mix of different types of products over long periods. Normally the best thing to do is to use cash to pay down as much as you can and this will in effect lower your interest paid out over the life of the loan and of course the length of the loan. Also your interest rate is not bad so its something to think about.


Note also that balance transfer checks sometimes carry fees based on percentage and sometimes they have no cap. This would be in the super fine print.

Best of luck

handy911

I considered the fees as well, $400 is net savings for the one year period...I know it's not much, but I can also save on insurance by increasing my deductibles or lowering my liability coverage.....

but, I have decided to just pay $15.5 out of the $16K..I will have the loan open for another 6 months at least before I pay the remaining $500...

to keep this on topic of Acura 3G, I want to do this credit card thing so badly becasue I purchased my car at the peak in 2007 with high interest rate....this time of year, with all the "recession" that's happening, I can get the same car for about $2.5K less and much lower interest rates....but who knew recession was coming...damn gas prices

REY

I know its crazy what they have been offering almost makes me upgrade right now. The thing is I hold back because of the pending 2009 tl release. Hoping they don't add everything I have been missing and then fail it in the looks department. The look of this generation TL is one that is just hard to improve on, and I hope they don't try too hard.

1995hoo

The picture Road & Track ran recently of the new 4G TL made me glad I have the 3G. That MDX-style grille is hideous.

NE14RoxCJ

Seeing the looks of the new TSX, I have to think the TL will have some similar body features, like the grill and lights. I keep a pic of it (the TSX) saved and look at it occasionally trying to decide if I like it. Where's the new TL?? They're killin' me. Sorry for the OT post.

handy911

no problem...many people actually wish that the 4G will be great looking and have better performance...

for me, since I just bought the car 6 months ago, I wish our 3G will be at least better looking....am I the only one here?

REY

Good point down with the 4G!

For looks theres not much better on the road I'd say theres not much to worry about it will remain a good looking car through it all.

ndabunka

NO FREAKING WAY!
The ONLY consideration you should have is if you would take it against a Home Equity loan (for the tax AND lower interest rate breaks). Additionally, Credit card's often charge "transfer fees" of as much as 3% of the amount so your interest rate wouldn't be anywhere near that promotional "fishing line". Please don't BITE on these false advertsiements.

ndabunka

The interest rates haven't changed much for those of us with good credit. I bought a $40K vehicle a year and a half ago and got a 3.99% interest rate. This particular post appears to indicate that you are trying to find ways to save money. I applaud the exercise but just make certain you REALLY understand how things work. An excellent example of your current mis-understanding is the statement about leaving $500 on the existing auto note and then paying it off in 6 months. Some auto loans don't work that way. You may still owe a "regular" payment next month and thereby would be paying it off in a month (and have BOTH $500 bills due at that same time). Paying off a note (and getting the title "IN HAND") does help your credit score (as it shows you were able to pay it off early) however, the detriment of the (NEW) large Credit Card debit will be more detrimental than any benefit you may have gotten from paying it off.

REY

This is true no matter what the balance you will always have the same payment (unless the balance is less than your payment of course.)

gcason

I'd be REALLY careful. There is a very good chance that there are fees in the fine print that are more than $400. Also, there are definitely provisions in the fine print that allow them to raise the interest rate pretty much at will.

So, is this a wise thing to do? No. You'll probably lose money on the deal.

REY

They are able to raise rates at will however, they are required to send a letter allowing you to close the account and pay off the balance at the current rate. Although I have heard some stories where they conveniently make sure you get the letter so late it forces you to take the new rate. They can be a bit ruthless

handy911

Thanks. I considered all my options and had decided to leave $500 balance or so on the loan. I had always paid my monthly payment ahead, and when I was still ahead, the next statment would not have any balance due. I also called Honda Financial Services, with $500 left on the loan, I won't have to make a payment until 2012, with $0.08 interest accrued everyday. I can deal with $30 interest per year.

The fee for the balance transfer was $150 maximum, and according to my amortization schedule, I will have net $400 savings. Additionally, I estimated that I will have about $200 savings over 6 month of insurance for higher deductible and lower liability coverage.

The only thing I am still skeptical is that it won't do any good to my credit score. It's actually true, carrying a large balance on the credit card will hurt my score, more than the gain I got from paying off the car loan.

REY

A lot of people fail to realize that credit is meant to be used (responsibly of course) but whats the point of having perfect credit and never using it. The fact of the matter is that your drop in score will depend on many factors but will mainly be based on the amount of credit utilization. The worst thing for your score is to have a credit card maxed out so trying to stay below 30-50 percent utilization will help. Another fact is that if you do not intend to apply for any credit before the balances are nearly paid off, then you really have nothing to worry about because it will have had little to no effect on you and will have rebounded by that time.

Just be weary of thieving credit card companies.