Balance Transfer Y/N?

[amarowsky]

Hey I haven't posted in a while, but I have a situation I could use a few ideas on. I'm not hurting or anything right now, but I have been leaning on my credit card for the past three months to keep extra liquid cash in my main bank account for the duration of the buying/preparing of my first home I bought in December. I still haven't moved in yet, I'm waiting for the contractors to finish all the work so I can get my Cert. of occupancy (it was a forclosure). So here's my situation.

Current Net Income - Between $4714-6000 monthly*. (*net is roughly 60% of that after my 401k is taken out and 10% for my EF)
- $500 rent from my two friends (both rent 1 room)
Monthly bills- $660 mortgage and escrow (tax, pmi, insuance)
- $192 car loan. $3980owed/6000 burrowed total. @ 5.75%
- $150 for Cell phone and car insurance
- $350 pay to my mom I used to pay for rent, that i now just pay her to help her out because she is still out of work.
- $200-400 Utilities (cable, water, gas, electric) I'm guessing that is roughly what these will come out too, but I havent paid them yet because I haven't even moved in yet. My first bill should be coming shortly, but only for gas and electric seeing as water and cable havent been hooked up yet.

****- $40 minimum for my credit card. owe $3600 @ 10%. This is what I am asking about.

My plan is to pay it off aggressivly, but for the next month or two I wanted to make sure I have MORE than enough money sitting in my account to pay my first rounds of monthly bills. I do right now, I just want to be well over and then attack it immediately after. My first month of paying my mortgage is February. So 2nd half of feb I wanna start paying at least $500 per check (paid bi weekly) towards my credit card, after its gone, then I wanna hit my car loan. I think this is a solid plan, but my real question is.

Q. Do you think it would be worth it to do a balance transfer to another card to take advantage of the interest free 12 month deal? Or is it better/easier/simpler to just keep it at the 10% because its not too bad, plus opening another line of credit after all of these mortgages, 203k loans, credit checks, and what have you would damage my credit further.

I ask this because I just got an offer from AMEX in the mail, for 12 months no interest, the cost to do the balance transfer is 3% of the total, so I would be saving 7% for the next 12 months or until I paid it off. This is just the first offer I had, so I'm sure I could find one with a lower transfer fee and better points paid for knocking off the debt.

Q. Do you think its worth my time Y/N?

Thanks for reading guys/gals you don't know how much your advice has been appreciated and helpful over the few years I've been here and I look forward to your response.

[Slug]

I would say yes it's worth it, but I have this visceral reaction to every carrying a balance that accrues interest. I think these terms for transfers are getting even better. I think Discover has been offering the 0% with no fee in the last month for qualified folks. You might want to check out one of the card rating sites for the best offer on balance transfers right now.

I wouldn't worry about your credit score. You just made the biggest purchase of your life with the house, and you already have a new enough car so you won't really be needing significant credit anytime soon that I can see.

[amarowsky]

Thanks a bunch for the advice. I'll look into discovers info on balance transfers and maybe consider opening a card to get the money x ferred over. It would be nice to just not have to worry about getting dicked on the 50 dollar finance charge for a few months.

[JoshuaHeckathorn]

Thanks a bunch for the advice. I'll look into discovers info on balance transfers and maybe consider opening a card to get the money x ferred over. It would be nice to just not have to worry about getting dicked on the 50 dollar finance charge for a few months.

The Discover More promo is running through 2/28, and it's really the best deal on the market right now for balance transfers. It's a rare thing to see an offer that waives the BT fee and also offers 12 months at 0% interest. It sounds perfect for your needs, and I wouldn't worry about your credit score taking a little hit for the extra hard inquiry. The savings will be worth it and your score will bounce back soon enough.

[amarowsky]

Discover More Card - Limited Time No Balance Transfer Fees - Apply Online

this is the link for the no balance transfer fee. But I know my credit score (depending on the company) as of when I got my mortgage was in the low 700's (Ive heard it reported in the past six months ranging from 699 to 729). So this link appears to show it needs like Really high credit to get this card. Do you think it would be worth it for me to even apply for it considering my credit may not be good enough?

[Slug]

Of course it's worth applying for.

[jpg7n16]

hmmmm why go through all that?

Your lowest income (after 10% for EF already) is $4714. Add another $500 in income from the rent. So $5214/month.

Your total bills listed are $1752.

That leaves $3,462/month left over. Deduct like $300-400 for food, and you've still got $3k left over -in the worst months.

Meaning your credit card debt can be gone in a month or 2. And all your debt (except mortgage) should be gone in 3 months.


What do you need the card for again??

If you paid off your debt as is, you'd pay $30-60 in interest (10% for 1-2 months). If you pay a 3% fee to transfer, that's $108.

So there's no benefit. You'd pay them $70 for nothing.

[Mithrin]

DO NOT take a balance transfer with any kind of fee!

BT of 3600 @ 3% fee = $108 fee added to your balance immediately.
Monthly interest on 3600 @ 12% (used instead of 10% for simplicity of 1% per month) = $36

Assume you pay $1000/month:
Month 1, 3600+36-1000=2636
Month 2, 2636+26-1000=1662
Month 3, 1662+17-1000=679
Month 4, 679 payment
Month 5, 7 interest charge.
Total payments: 3,685.

Using Balance Transfer:
3600+108 fee=3708 in payments.

Paying it off at 1,000 per month, you'll pay less than $85 in interest (remember that I assumed 12% interest for simplicity). If you find a no-fee balance transfer, you can save $85.

My advice is to just aggressively pay off the CC balance. Messing with BT will only help if there is no BT fee, and even then, it's not a huge amount that can be saved. What I would advise instead is to make a payment on the CC today. You're holding back on making payments because of unknown bills, but how many of those could be charged to the credit card? At least your cell phone and cable bill should be chargeable, and perhaps one or more of the gas/water/electric. So pay a couple hundred towards the card today, and if needed, you can use the card to cover those utility bills when they come. In the meantime, you're not paying 10% interest on that money.

[amarowsky]

Well The only way card. I would apply for is the zero balance transfer fee card . And also discover does have some very good incentives as far as cash back for gas , groceries, and travel . My current card has a accommodating limit and a low Apr.. but poor incentives. Plus I'm gonna look into it and see if it would be possible and safe to transfer my vehicles loan balance on there too .

[jpg7n16]

Well The only way card. I would apply for is the zero balance transfer fee card . And also discover does have some very good incentives as far as cash back for gas , groceries, and travel . My current card has a accommodating limit and a low Apr.. but poor incentives. Plus I'm gonna look into it and see if it would be possible and safe to transfer my vehicles loan balance on there too .

If you want to get the card for its benefits, that should be a separate decision from if you want to transfer your balances onto the card.

You don't have to do a balance transfer to get the card. If you like the benefits on the card, apply for it.

The balance transfer should be evaluated on its own merit. (done for you, see below)

- $192 car loan. $3980owed/6000 burrowed total. @ 5.75%
- $40 minimum for my credit card. owe $3600 @ 10%. This is what I am asking about.

My plan is to pay it off aggressivly,

Since your balance transfer has a 3% fee, this is your baseline for determining which is a better deal:

3600 * 3% = $108
3980 * 3% = $119.40
Total: $227.40

Now what amounts would you have to pay each month at current interest rates before your interest charges are higher than the balance transfer fees?

CC: 6.149 months at $603.02 (total interest charged over timeframe = $108)
Car: 11.419 months at $359.01 (total interest charged over timeframe = $119.40)

If you are going to pay off the debts in that timeframe, or expect to pay more than those amounts each month, the best method is to just pay extra on your current loan.

Since you should have about $3000 free each month, you should be able to easily beat those timeframes.



This means that your balance transfer fee is MORE than your interest costs would have been for the same time period.


Therefore, don't do the balance transfer. Just pay more than $603/month to the CC, and $359/month on your car. You easily have this amount of excess income each month.

[amarowsky]

I should clarify. This card has NO transfer fee and no Apr for 12 months AND the much better incentives. If it was either or I wouldn't bother .

[amarowsky]

And unfortunately I don't have 3k free each month if u notice when I posted that was gross. My net is approx 60-70 % of gross depending on how much I get taxed because my income fluctuates so often . I'd say after bills (minimum) but before roommate rent I have on the lower side 900-1500 " disposable

[jpg7n16]

I should clarify. This card has NO transfer fee and no Apr for 12 months AND the much better incentives. If it was either or I wouldn't bother .

OIC - you're talking about a different card now. Then yeah, you should absolutely do that. You have to beat $0 fee - meaning you'd have to be able to pay off today (which you can't).

So then yeah, take the card, and do the balance transfer. As long as there's no annual fee for the card or something.

And unfortunately I don't have 3k free each month if u notice when I posted that was gross. My net is approx 60-70 % of gross depending on how much I get taxed because my income fluctuates so often . I'd say after bills (minimum) but before roommate rent I have on the lower side 900-1500 " disposable

Current Net Income - Between $4714-6000 monthly*. (*net is roughly 60% of that after my 401k is taken out and 10% for my EF)
- $500 rent from my two friends (both rent 1 room)

I read this to say Current Net Income of $4714-6000/month after roughly 60% (for taxes + 401k + 10% to EF) had already been taken out.

I guess I misunderstood what you wrote. Sorry about that.


Well the decision is much different if you have a 0% transfer fee. That makes it a trivially easy decision to transfer with no fee, no interest charges, and enough income to save away enough to pay off the balance when the interest rate hikes at the end of 12 months.

I def say do it then

[amarowsky]

I think I'm gonna apply when I get back in town from work . I just hope I can get approved for the card . Thanks for everyones advice and number crunching, u guys are always appreciative and so helpful :-)

[dczech09]

I say go ahead with the 0% deal with 0% BT if you can get it. However, make sure you have a plan not to rack up this kind of debt again. From the sounds of it, you did not put a down payment on your house (if you did, it was small) because your paying PMI on it.

Second of all, you stated that you've been living on your credit card in order to keep liquid cash in you checking account. I see absolutely no reason for this. Do you realize that your situation could have been completely avoided through adequately planning? Save up a down payment, save up cash for furnishing, and save up for the first month. These expenses do not justify racking up a credit card balance that will produce interest.

Obviously there is nothing you can do about it now, but going forward make sure you plan things thoroughly so you do not have to rack up this credit card debt.