Your mix of rates is unique, as most people aren’t fortunate enough to have fixed until paid off rates. For most people, the new laws will be positive, because their payments will reduce their highest interest balances first. Unfortunately, you seem to have been caught in the crosshairs, as your payments would reduce the long term balance transfer instead of the short term balance until the rate skyrockets.

Fortunately, you’re in solid financial shape and I hope you got fair terms from your credit union.

“Fairer payment allocation
A close look at your card agreement will likely reveal a clause that explains that payments will be applied to lower-rate balances first. Not so anymore. The Credit CARD Act requires above-the-minimum payments to be applied first to the credit card balance with the highest interest rate.”

I have the $10,000 balance at 5.9% until its paid off.
I have a new $7,000 credit union loan. I don’t have any other debt. (All of this was pre divorce house debt)

I think many people carry a balance and also have a balance transfer which will expire at some point. If anyone has the idea to pay off the balance transfer before the rate expires, it will be impossible.

I just got another offer in the mail to do a balance transfer at 2.9% until November 2011. There is a 3% fee and any payments above the minimum won’t touch it with the new law. Although my extra payments will go to it at 21%- that doesn’t help pay it off at 2.9%. The offer did NOT disclose the new law going into effect in February.

I’m in a good position right now. I just hate to see people fooled into thinking a balance transfer will be paid off before the time runs out. It won’t. You can only start working on paying it off when it’s at a high interest rate.

I’ll have to look further into this issue, as I am unclear about the payment allocation, though if you are correct, your particular situation is clearly problematic.

Let’s say I have balance transfer of $10,000 at a 5.9% for the life of my transfer. I also have $7000 balance transfer which is a 1.9% until October 2010. (After that it raises to 21%)

As of today, if I pay an additional 300.00 a month then it will go to my 1.9% interest. I have a chance of paying much of the $7000 balance before the rate goes up to 21%.

On February 22, 2010 any additional money paid will go to the highest amount owed. This will be the 5.9%.

I will NEVER be able to pay off the 1.9% transfer before it raises to 21%. I can never allocate any payments toward that transfer. That 1.9% doesn’t benefit me at all.

If you have any balance transfer added to a charge already on there, that balance transfer can never be paid by the time the rate increases. Your extra payment will go to the highest owed.

When my rate jumps to 21% the extra payment will go to that.

With this new law, I don’t see a low balance transfer as a benefit in any way.

I understand your skepticism, but the numbers really work out. I did a month by month breakdown to illustrate how much a person with $5,000 in debt would save with a 0% balance transfer compared with a person who doesn’t do a balance transfer in an article about using balance transfers to get out debt, which you view here. Once the 0% rate goes back up, the example I used of a person with 5k in debt with a 14% rate would have saved $588 on interest and reduced their debt 16% more than a person who didn’t do a balance transfer. After balance transfer fees, the savings were $438. So for a person with 10k on a card with 15%, the interest savings before fees would be in excess of $1200, and the total savings, once fees are accounted for, would be right around 1k.

I hope this clears things up for you and appreciate that you took the time to comment.

now, I am not an expert, but I do not think that a 0% for 12 months intro period would save you 1000 bucks, since the % rate post intro period would go back up to something more normal. I think this based on the diff between the full amount at 15% compared to 0%….???