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A while back, I mentioned that I applied for and received a new credit card with a 0% balance transfer offer for 12 months with no balance transfer fee. In the world of credit cards these days, that is a pretty darn good deal. I was hesitant, though, to put all of our credit card debt on that single card.
I ended up having the credit card company send me a balance transfer check for $20,000. I deposited it into my personal account and I distributed it to the three companies that make up our credit card debt (one credit card, my Prosper loan and our IRS debt).
At first glance, it seems like an easy enough decision. Putting all of our credit card debt at 0% interest makes sense mathematically. But personal finance decisions aren’t cookie-cutter. There are other things to consider besides the math behind it. Here’s a few examples of what went through my mind:
- Does this card have a universal default clause? (No.)
- Does this card have an existing balance? (No, it’s a brand new card.)
- Can we handle a huge payment due at one time since it will be on one card? (Our debts now are all due around the same time of the month so we can handle it. We could also choose to send payment twice a month or even weekly even though it is due monthly.)
- If something happened to me with all of the credit card debt in my name, would that impact my husband negatively? (Well, as far as I can tell, in Michigan it will affect my husband regardless.)
- How much of the balance could we pay off before the balance transfer period is over? (I’d love to say all of it, but I’m really not sure how much we’ll be able to pay.)
- If we can’t pay the entire balance before the period is over, how bad will the interest rate be? (The rate on the balance after the balance transfer period will be around 15%.)
- Will there be options after the balance transfer period to transfer the balance again for a lower rate? (I hope there will be since we will have a few cards with zero balances. But you never know.)
After thinking about all of these things, I decided to go ahead and transfer all of our credit card debt. According to this nifty calculator, I see that I will easily save over $1,000 in a year by doing this move.
Things could go sour and after a year we could have our entire credit card balance at 15%. Or, things could go well and all of our credit card debt could be paid off (which could happen if my husband got that job we are still waiting to hear about). With life, you never know what is going to happen. So in the end, I decided to go for it and save over $1,000 and go from there.
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Credit Card Debt
- Starting = $37,614
- Paid Off = $29,141
- Current = $8,473
- $25 ING Savings Bonus
Savings Account
- Current = $3,750
Posted: October 7th, 2007 at 4:03 pm
That is awesome! I would love to BT all my credit cards down to 0% again. I’m really glad to hear that you are paying off the Prosper loan.(see the next post) That is way cool. I’m still dipping only my toes into the water right now, and I think I’m lucky to have no defaulted loans. I wish I had bid on your loan when it was available, but I still still skeptical of it.
Posted: October 7th, 2007 at 7:59 pm
Sounds like it was a good deal for you at a time when you could use it and that’s what matters. I think sometimes these decisions seem so hard to make even when the numbers all say go for it, part emotion, part logic. Congrats on going for it!
Posted: October 7th, 2007 at 9:09 pm
Congratulations! It is a good feeling to have it all at 0% isn’t it!
Here’s to both of us never having to pay any more interest
Posted: October 8th, 2007 at 6:53 am
Yes, It’s nice that all credits cards give us minimum percentage balance transfer fees. We have another sites to all about cards, credit card debt management program, managing credit card debts is possible. This program is comprised with various methods
Posted: October 8th, 2007 at 11:26 am
Not me! I am stuck with my 13% at CITI! and my balance is 12,650… yep they make 150 dollars off me every month… Its my fault! I figured this way I will never do this again!! I want it to hurt me know… so I learn my lesson.
Moving the balance around is just putting off the payoff!!
Posted: October 8th, 2007 at 11:34 am
[...] announced that all her credit card debt is at 0%. - That’s awesome! Now each dollar she sends in goes directly towards reducing her debt. My [...]
Posted: October 8th, 2007 at 1:40 pm
Cool! Zero percent for a whole year! That should definitely help you knock more off your debt
Posted: October 8th, 2007 at 1:41 pm
Congrats! That should speed things up!
Posted: October 8th, 2007 at 3:02 pm
Congrats! Dollar for dollar to reduce the debt!
Sounds like you took the time to evaluate all the important questions. Great way to keep from getting hit with sucky rates/penalties/etc. I’m going to be posting tomorrow about some occasions when getting lower rates doesn’t actually mean getting lower rates (i.e. CC companies trying to trap you).
Posted: October 9th, 2007 at 8:47 am
I’d rather owe a credit card than the IRS any day!
Posted: October 9th, 2007 at 11:58 pm
Did you have to pay a 3% fee for the 0% balance transfer?
Posted: October 10th, 2007 at 12:00 am
Oh wait, you just answered that question…good for you!
Posted: October 14th, 2007 at 12:43 am
You should share with us the name of the card that offered you the 0% for 12 months BT. I could use that right now, because I started my own business 20 months ago. At the same time I established my first credit card, and now my credit score is way low because I kept it maxed out with business purchases. Never delinquent or defaulted, just maintained above 75% of my credit line for 20 months and I’m labeled “High Risk” on Prosper.
Posted: October 14th, 2007 at 9:34 am
Hi Eric - I try not to explicitly say what cards I have. However, when I was shopping for a card, I used this bloggers handy list:
http://www.bargaineering.com/articles/list-of-cards-with-0-balance-transfer-offers-for-12-months.html
He keeps it updated regularly. Just as a sidenote, he does get a commission from those links.
Posted: October 20th, 2007 at 11:26 pm
I had 20,000 in credit card debt - have got it down to 7,000 now. have closed the accounts. once paid off i don’t plan an ever using one again.
Posted: October 21st, 2007 at 10:13 pm
[...] Barry Broome: I had 20,000 in credit card debt - have got it down to 7,000… [...]