Thursday, August 31, 2006

Actually doing a balance transfer

So things are set for me to do this 0% balance transfer thing - I just Really, Really Hate writing a check for SEVEN THOUSAND DOLLARS. See, it feels to me like I'm not actually getting anywhere with this debt, but I know that I am. This is partially because I paid off one of my school loans with a 3.9% check - and that was about $2200, on top of the $5100 or so I had on there already. This was only in May so I have only paid down about $500 since then. But I do seem to be making headway in interest charges - the student loan charged about $40 monthly in interest which is more than I pay in interest all month for the $7k credit card debt.

I am however cringing a little at the thought of paying $75 (the balance transfer fee) to put this debt on the 0% deal - which will only last till July 2007. But I'm doing it because at $25 a month in interest, that means that it'll be financially equivalent to leaving it on there and paying interest for three more months, and then for the next eight months or so I won't be paying any interest, saving about $200. Which is $200 more that is applied to principal, since I won't change the payment amount (actually I will be paying more on it.)

This is another one of those instances where people tend to get a little bit flippant about amounts of money that they would pull over to scoop up off the interstate. $200 is a LOT of money when it's in my checking account, but somehow it doesn't seem like very much money spread out over eleven months, and even less so when it's just money I'm NOT being charged, instead of money I'm being given. But it works out the same to be given money as to not have money taken away, I guess. It just feels better to get stuff.

So I bit the bullet and am doing the necessary shuffling (making sure the card is completely paid off before doing the transfer, raising my limit, etc) in order to do this balance transfer, and when July approaches next year, I will do the necessary steps to transfer it back to the other card (hopefully also with a 0% deal.) Or, if necessary, even to open a new card that will give me a 0% deal. Although I have three cards, so eventually somebody's got to send me another deal - they do about every two months.

My actual net worth won't be changing as a result of this (other than the $75 fee) but hopefully the debt will be paid down $200 faster over the course of this year. If I stay on track with the $250 per month payment, I should be transferring back about half of what I transferred in. Maybe less if I throw more money at it. We'll see how things go - I think this is good progress.


Anonymous said...

why pay the $75 bt fee? if you pick up a new credit card they should give you the balance transfer with no fee.
current offers
one inquiry and one new account won't seriously affect your credit score, especially since doing the transfer on the new card means you won't be eating up your used credit/available credit ratio.

Kira said...

I'm pretty nervous about getting new credit cards, and I'd rather just pay the fee than have more cards. The major negative on my credit report is that my cards aren't old enough (mostly cause I'M not old enough) so I'm trying not to lower the average age anymore. I'm still ahead a bunch of money anyway. But if I can't get another 0% offer from my other cards next year, I might open a new one.

Ken said...

You may not need a new card. Call the card's customer service and say you want to do a balance transfer but the fee is too high or something. They may waive the fee for you.

As far as getting new cards. Me being 34, I've realized that the one credit parameter that you have no control over is the credit history time.

I only had 1 card when I was 18, I still have the card and this card alone is giving me an 16 year old credit line which is great for your credit score.

If I had known better, I would have gotten more cards AND kept them was I was younger so I would have a longer average credit history.

D said...

I just began this way as well Kira. I understand your not wanting to open a new card.

The card I just got to transfer the business credit to lowered my score 3 points. I'm not really sure if this is normal or low/high. I just hate going in that direction.

It all works out though!