rymetymeuk

hey all

just curious. I have a 0% balance of a couple thousand on my Citi Exec card. My annual fee will hit this month and I don't want to keep using the card, so my question is:

if I cancel the card with a balance, I know that the balance is still due (which I'll pay in a couple of months) but does that avoid the annual fee?

thanks all!

Redhead

If you cancel the card 100% of the balance will become due immediately

rymetymeuk

Really? Is that because it's 0%? I always thought you could close an account but you'd still be liable for making the monthly payments. Maybe I got my wires crossed.

jmfflyer

You actually ran up a couple thousand dollar balance on a high APR rewards card with a $450 annual fee? Why? Maybe you should not be churning.

Anyway...I would use MS techniques to transfer the money to another card and close it.

Edit: I am confused you say citi executive but the only card I know about is the AAdvatage one and that doesn't have a 0% offer. What card do you have?

sexykitten7

I'm pretty sure this is untrue. People revolve on closed accounts (without defaulting) all the time. You just can't make any new charges. And it looks really bad on your credit report.

rymetymeuk

Well firstly as I said it is at 0%, as I did a couple thousand dollar balance transfer, so it would be correct to say the balance is at 3%. Thanks for your concern but I don't need to rethink anything. As I said I'll clear it very soon, I just don't want to pay $450 to renew the card if I can avoid it.

And who said anything about churning? I got this card when I flew AA a great deal and it made sense for me. I have no plans on getting new cards for some time, so I am not worried about my credit taking a very temporary dip until I pay it in full.

And thanks for the MS idea, that does make sense so I will look to do that.

traveler9020

If you cancel the card with a balance, you will avoid the annual fee. You will still have to pay off the balance under the terms of the original agreement. With that said, you should contact Citi to confirm this before taking any action.

sdsearch

And the original agreement might have said that the balance transfer rate wouldn't last past a cancellation, but not in so many words. It might have spelled out various cases where a balance transfer rate would end (an obvious example case would be missing a payment), and in that list might have buried something which, if examined carefully, includes the situation of cancelling the card.

So I would suggest the OP both look over the original terms of the balance transfer very carefully, and also ask Citi about it and get it in writing (or else hang up, call again, and ask several different Citi customer service people and see if they all say the same thing).

Meanwhile, if the card isn't cancelled, and the annual fee is billed, is there any chance that interest (at a much higher rate than 0%!) will be charge on the annual fee if the statement with the annual fee is not paid off in full? There's nothing the say that a bank has to apply payment on the card in the order that you prefer; they can apply part of the payment that you think is the annual fee to the 0% balance, and now some of the annual fee carries over to the next cycle, and then gets hit with the "full" interest rate, right?

(I haven't dared try doing a balance transfer on an annual fee card. But I do have two separate 0% balance transfers on the same card, one ending months before the other, but if I try to pay off the one that ends first by itself, I can't, because any extra amount I pay in a given month, the bank applies that to the transfer that ends last, not the transfer that ends first! So I'll have to pay both of them off by the time the first one expires, it seems. So it's clear to me that a bank may not apply payments in the order you wish it would.)

rymetymeuk

Very interesting post, thank you for taking the time to write that. I hadn't considered that the interest on the $450 would be charged at the 15% rate. I got this debt for my buddy who needed the cash the next day (which Citi transfers are awesome for) and I don't really want to cash in stocks to pay the balance before he can repay me (couple months max). But I may just go that route.
I bank with a small TX credit union and they were closed when he needed the funds, and Citi are great and even though I initiated the transfer after 6pm CST the funds were there the very next day.

Appreciate the information all, thank you much.

sexykitten7

As the other poster noted, banks have some latitude when applying payment.

But any payment in excess of the minimum MUST be applied to the balance with the highest APR, per the CARD Act. That's why they could choose which BT balance to pay down; they had the same APR.

sdsearch

But that's only "balance", ie, when it shows up on a statement. I don't the CARD Act says that if you know of something that's about to get hit with a higher APR in the next statement, that you can pre-pay and the bank has to apply it to whatever will have the higher APR on the next statement.

So the only way to just pay one item that is about to have a higher interest rate by itself is to wait for the statement to close, which shows it as already having been hit with a higher interest rate, and then pay more than the minimum. But you still lose some money in this approach, since high interest even for a short amount of time still can be significant.

So while I can "forecast the future" and know that my two 0% balanace transfers will no longer be both 0% (in Feb, if I haven't paid the first one off, the first one will jump to normal interest rate on the card), I have to wait until I see my Feb statement (with interest already charged for one month) before I can pay use the CARD Act rule to my advantage. (But I consider that too late!)

sameoldme

Have you tried asking them to waive the annual fee?

rymetymeuk

my buddy paid in full before the fee hit so i cancelled the card today, thanks for the replies all.