Transferring consumer loans to my credit card: Feedback needed!

[neatdesign]

I just received a BT offer and I'm trying to figure out whether I should take advantage of it. Your feedback would be appreciated. Here are the details:

OFFER:
4.9% fixed for the life of the BT balance, no BT fee

TRANSFER TO THIS ACCOUNT:
USAA MasterCard -- $2100 current balance at 6% fixed, $18,400 available credit. Because I already have a balance on there, my payments would be allocated to pay off the 4.9% balances first, then the 6% balance. However, the overall rate would still be low that I'm not too worried about that.

POSSIBLE TRANSFERS (one or more of the following):
Bank of America -- $1450 current balance at 10.99% fixed
Consumer Loan #1 -- $1800 current balance at 11.15% ($68/mo pymt)
Consumer Loan #2 -- $2800 current balance at 11.25% ($99/mo pymt)


I'm definitely going to transfer my BofA balance using this offer, because paying 10.99% when I could be paying 4.9% is just ridiculous. What I'm not so sure about is whether I should also transfer my consumer loans to my credit card.

The upside of doing it is that I'll be reducing the interest rates on those balances from over 11% down to only 4.9%. I would continue to pay the same monthly payments as before, only have them directed towards my USAA credit card instead of the loan accounts. That would shave several months off my payoff timeline (even with the additional balances added to the total on the credit card) and save me hundreds of dollars on car insurance... no, wait, in interest.

The downside is that I feel having all of that money due on a credit card instead of in the form of loans makes me a bit more vulnerable if something were to go wrong. I don't necessarily have anything specific in mind that makes me feel that way, I just do.

So, your thoughts?

~ Jenney

[deca]

It sounds like you don't have any savings for dealing with unexpected events? Is that why you don't want to tie up the credit on your credit card by transferring your consumer loans?

If my math is right, even if you transfer all those balances over you will still have about $10K in available credit. It would take a pretty extreme emergency for that to not be enough.

I would suggest however that once you get all those balances transferred over to the 4.9% rate, you then concentrate on building up an emergency fund. You can get a savings account at Emigrant Direct that pays 5.05%. Set a goal of building that savings balance up to $1000 while paying minimums on the cards (they're at a lower interest rate after all), then maybe split whatever you can spare each month between savings and debt reduction until your emergency fund balance equals at least 3 months' living expenses. Then concentrate on paying down the debt until it's gone. It's 4.9% today, but you never know. The banks can and do change interest rates for just about any reason or no reason. One payment lost in the mail could get you back into 10.99% territory or worse.

That's what I would do in your shoes anyway.

[JoyJoy]

Right now you're showing 11% utilization on your card with the balance at $2,100 and that is a good place to be! If you consolidate all of your accounts to this one card then you will be at 80% utilization which is not good. I wouldn't consolidate all the cards at 4.9%, only the 10.99% Bank of America since you definitely want that one on this card (I might add that is better to add any new cards or loans to a card that has a zero balance because now you will be charged at 6% and 4.9% with interest going to the 4.9% first. However, you state that this isn't a big factor to you!)

Regarding the two loans, I would look apply for a 0% balance transfer card with a credit limit that would accomodate both loans with utilization at 35% or below.

I just don't like putting all my eggs in one basket because like deca said, rates can go up or your payment could get delayed and your interest rate on that one card can skyrocket.

Good Luck!

[neatdesign]

Thanks for your replies. We do have some savings and are working at adding to it. I didn't mention our savings because I didn't think it relevant to this issue.

As for utilization, $8150 is about 39% of my $20500 credit limit, not 80%. I'm not sure how you got 80%, actually. A 39% utilization is not too bad, in my opinion.

In addition to my USAA MasterCard, I also have two checking accounts, two auto insurance policies, a Roth IRA and both aforementioned consumer loans through USAA. In short, I've been a USAA member for many years and trust them as a very reputable company. All of my bills are paid through USAA's online banking system, so I'm not worried about any missed payments.

I'd rather not open another credit card account for a 0% APR that will only be available for a few months. I feel it would be better to either move the loans to the 4.9% fixed rate, or leave them where they are and just keep plugging away at paying them off.

~ Jenney

[deca]

Thanks for adding more details. What makes you nervous about tying up available credit by moving the consumer loans to the cc?

I agree with you that I would feel more secure with a USAA card than a commercial bank.

[zetta]

Just wondering -- what is a consumer loan?

[JoyJoy]

Neatdesign, I was going by the figures that you first quoted....$2100 was your balance and $18,400 was available. If you added the total of all debt it would come to $8,150.00. If the $2100 is already included in your $18,400 CL then the other three bills would total $1450, $1800 and $2800 or $6050.

$18,400 - $6050= $12,350 and $12,350 of $ 6050 would be 48.99%(I had included the 2100 in with the 8150 previously making it 80% sorry) I had better stop while I think I'm ahead LOL. Anyway I'm moving on!!

Anyway with the additional information you presented , you have more money to work with and USAA would be a wise move to consolidate everything at 4.9%. It certainly is a much better APR than the rest of them.

Just my two cents worth. Good luck!




.

[deca]

Originally Posted by zetta

Just wondering -- what is a consumer loan?

I think that's like a fixed-term loan for a specific thing. Like if you go to Best Buy and buy a computer and finance it through them for a specific payment for 24 months. Rather than buying it with a personal credit card.

[neatdesign]

Originally Posted by deca

I think that's like a fixed-term loan for a specific thing. Like if you go to Best Buy and buy a computer and finance it through them for a specific payment for 24 months. Rather than buying it with a personal credit card.

Yes, that's more or less it -- although these loans weren't for any specific item. They were just... well, loans!

~ Jenney