Author Topic: Help me make peace with my 0% credit card balances!  (Read 2127 times)

roadtrippers

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Help me make peace with my 0% credit card balances!
« on: December 09, 2015, 04:51:19 PM »
Hi all--
Been mainly lurking for a while after reading MANY MMM posts. While I don't want to post a full case study at this time (they remind me of those dreams when you are at school and suddenly realize you are naked), I would like a little help from the MMM community re: coming to terms with my cc balances. As you may be able to tell, I am desperately hoping to avoid face punches and hair on fire sermons, but will read and respond to all suggestions. Seeking approval from complete strangers---maybe that should be my journal title!

DH and I are 50 and 51, with a FIRE plan for 55. We are teachers, and will have small (mine) and bigger (his) pensions at 55--possibly soc security but not factoring it in. We have 500K in 457s and 403(b)s. Our only debt besides the ccs is our primary mortgage (167K) and a 40K mortgage on a beach condo which is a rental and personal use property. We are maxing out our 457s with the catch up provision.

As of now, we also have 17K in balances on 0% credit cards. The majority of the debt (14K) is the result of a lawsuit in which we are the plaintiffs. The lawsuit involves our condo and our ability to use/rent it. If/when we prevail, we will have more rental opportunities, increasing our income and the value of the condo. However, the lawsuit isn't over, and that balance will go up if we have to go to trial.  Another 3K of the balance is for DD's LAST semester of college--just paid it this week! Whew! Done and no additional debt for us--and only a little for her.

I keep trying to convince myself that the debt is no big deal, it's interest free, and that it is far better to continue maxing retirement contributions than to cut those back in order to pay down the debt more quickly. We have made lifestyle changes as well, and are still working on paring down our monthly budget in order to throw more at the debt (restaurants/groceries were horrible). We also throw extra money at the debt whenever we get it--teaching summer school, rental income, etc.

As I type this, I am queasy as I anticipate face punches. Of course it's a big deal! It takes up space in my head, and affects our ability to fund other investments. If we REALLY cut back, we could pay it off in no time. However, we also have a teensy weensy addiction to travel, including an annual visit with the Mouse...there, I said it. The travel is not part of the debt, though--promise.

Anyway, does anyone want to talk me off the ledge? Or push me over it? Have at it, and thanks!






BarkyardBQ

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Re: Help me make peace with my 0% credit card balances!
« Reply #1 on: December 09, 2015, 04:56:32 PM »
When does the 0% expire?

roadtrippers

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Re: Help me make peace with my 0% credit card balances!
« Reply #2 on: December 09, 2015, 05:03:44 PM »
When does the 0% expire?

Various dates--one in March 2016, one in July 2016, one in June 2017. Throwing more at the earliest expiring one and hoping to kill it by March.

JLee

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Re: Help me make peace with my 0% credit card balances!
« Reply #3 on: December 09, 2015, 05:13:35 PM »
As long as they're paid off before they start charging interest, you're mathematically better off doing that while maxing retirement accounts.  It would bother me to have them, though...but not enough to get me to back down on my 401k.

roadtrippers

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Re: Help me make peace with my 0% credit card balances!
« Reply #4 on: December 09, 2015, 05:17:23 PM »
As long as they're paid off before they start charging interest, you're mathematically better off doing that while maxing retirement accounts.  It would bother me to have them, though...but not enough to get me to back down on my 401k.

Thanks--that was my thinking as well. They definitely bother me, though.

BarkyardBQ

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Re: Help me make peace with my 0% credit card balances!
« Reply #5 on: December 09, 2015, 05:21:07 PM »
OK... I'm going to suggest something that may send all your face punches my way... but you can do with the information as you please.

Aside from the obvious fact that you should definitely not carry those balances when the higher interest rates begin.
I also don't know your real numbers, so this is just a hypothetical option, it may not work for you.

We operate on the notion that not only is money fungible, but that it's time and space can be manipulated within certain limitations. We are working for another 9-10 years in our plan. Therefore, we have 9-10 years worth of income to work with, obviously some of that money is out of reach. However, in the short term it can definitely be manipulated.

Here's our example:
We use two 0% credit cards (Blue Cash Preferred, Citi Double Cash), to put all of our yearly spending on. We load all our investments as quickly as possible, basically bringing home enough cash to cover cash expenses (mortgage, 2 utilities), and the rest is transitioned to savings accounts to set us up for the following years IRAs. The cards get paid off at the end of the year when we've had a few months of full paychecks, but could be stretched into 2017 before the 0% ends. Unrelated, doing this actually nets us about 6% growth on cash for the year from interest and cash back.

My suggestion:
Find the cards that work for you and have long 0% intro rates. Stop putting expenses on the current cards and start working to pay them off. Start putting new expenses on the new cards so you can pay them off later. You will start rolling expenses into future years... but you continue investing. When you hit 55, finish maxing your 457s for that year and then stop. Work and pay off the remaining card balances. Retire.

You will still have to manage your expenses better and make some cuts, but with that idea it could become manageable, without the need to decide between investing or payoff.

0% debt is great tool, if used responsibly.

« Last Edit: December 09, 2015, 05:35:34 PM by BackyarBQ »

dandarc

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Re: Help me make peace with my 0% credit card balances!
« Reply #6 on: December 09, 2015, 05:22:03 PM »
Yeah.  So long as you pay them off before the interest starts piling up you're good.

We would have been the first to really test our Condo's "no more than 30% of units rented out" policy last year so we elected to just sell the thing.  Guess $950 / month rent could be a better deal than $85K in hand, but it sure didn't seem that way at the time.

roadtrippers

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Re: Help me make peace with my 0% credit card balances!
« Reply #7 on: December 09, 2015, 05:39:35 PM »
Here's our example:
We use two 0% credit cards (Blue Cash Preferred, Citi Double Cash), to put all of our yearly spending on. We load all our investments as quickly as possible, basically bringing home enough cash to cover cash expenses (mortgage, 2 utilities), and the rest is transitioned to savings accounts to set us up for the following years IRAs. The cards get paid off at the end of the year when we've had a few months of full paychecks, but could be stretched into 2017 before the 0% ends. Unrelated, doing this actually nets us about 6% growth on cash for the year from interest and cash back.

I definitely don't think I have the fortitude for this plan, but it looks interesting, and hey--if it works for you!  I use ccs for all my spending (paying off each month), but am working on cc travel churning--just at the beginning stages of this.