I currently have an Auto loan that I owe 15k on. I have a credit card offer to transfer balances to it for 3.99% for the life of the balance. Right now my insurance is hurting me big time. Since I have to have full coverage on it. If I pay off the loan I could drop down to liability only and save $2000/year that I could use to help pay off the car. Assuming I don't get in an accident and I don't miss a payment on the credit card (which I never have and don't see why I ever would) is there anything I should be aware of? Do I risk getting burned by the CC company? Or is my biggest worry just making sure I make my payments? I would make the same payment on the CC as I do for the loan, I'm just looking to save on insurance.
Your risks, as I see them, are as follows: 1) Approval; the key item is being approved with a credit limit over $15K. (I just got the same offer yesterday!). Have you gotten the exact "payoff" amount for your auto loan yet? Make sure you know the number you need before applying for the CC. 2) CC company allowing "balance transfer" of auto loan, generally these transfer are from a CC account. Read the fine print, and call to verify this would be an allowable "transfer". 3) Default Rate: if something unforseen happens, you risk going up to the 31% default rate, which would be very expensive. But, if you have been responsible with your credit, and your job is steady, then this may be a minimal risk item. 4) Credit Score Impact: If (can) you transfer the $15K balance, and lets' say you get a $20K limit, your overall utilization (debt/available credit) will increase, and negatively impact your credit score. You will need to analyze this effect, based upon your entire credit picture and current scores. 5) "Murphy's Law & The Accident": need I say more..that's why they call it insurance. It does seem to make sense of saving $2K/year, and applying to car loan to repay quicker, but can you handle paying for damages to your car due to an accident or vandalism? 6) $2K/year for comprehensive insurance seems VERY high! Have you shopped around? I recommend looking at Safeco insurance; they are the largest, and have the lowest rates. Yes, you probably have never heard of them, because they do not advertise, they pass that savings on to customers. Shop around though, I saved 42% on my auto insurance by shopping (and got better coverage!).
Watch your Utilization percentages. Don't go over 30%. Reason: If your card has a Universal Default clause (or even if it doesn't they can still change their terms and interest rate at will) then appearing to have "too much debt" could trigger the Default Rate to pop in and you will be paying a HIGHER rate than you presently are on the car. It is my position that a Balance Transfer offer from a Credit card that gives a very low rate is a warning sign - they lure you in with a low rate for the life of the balance then rate-jack you anyway because your balance exceeded some percentage of your credit limit and they feel you are not as creditworthy as they thought you were. This happens all the time.
