Author Topic: Credit Card Balance Transfers  (Read 3029 times)

tracy

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Credit Card Balance Transfers
« on: March 08, 2013, 05:29:44 AM »
Since my husband and I started reading this blog over a year ago, we have made substancial changes in our financial life. We have not bought anything with credit and have made a serious dent in our debt by following the advise of MMM and other mustachians on this blog. One thing we have done is to transfer credit card debt to zero interest or very low interest cards and then pay them off before the zero percent introductory period expires. I recently received two offers and I wanted to find out which you all thought would be the better option - 0% until 4/14 or 1.9% until 9/14. The card I would be transferring from is 9.9% and I owe approximately 12k on it. I can afford to pay $600/month toward my credit card debt.
« Last Edit: March 08, 2013, 05:38:56 AM by tracy »

icefr

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Re: Credit Card Balance Transfers
« Reply #1 on: March 08, 2013, 11:46:22 AM »
Is there a fee for the balance transfer? I would probably take the 0% until 4/14, at which point your balance would be down to ~$4,200 and ~7 months away from payoff. You need $12,000/$600/month=20 months to pay your card off in full, so until 9/14 at 1.9% doesn't give you enough time either, which is why I would take the 0% until 4/14. You can then look for another deal for the last 7 months or so or maybe you'll have come up with a bit more cashflow in the meantime!

Disclaimer: I've never had credit card debt, so I'm not super familiar with how interest is calculated on them.

FrugalToque

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Re: Credit Card Balance Transfers
« Reply #2 on: March 08, 2013, 08:39:29 PM »
Hi Tracy,

A quick check with the spreadsheets reveals two things
1)  If you take the 0% interest deal, you will owe $4200 in 04/14 
What will the interest rate be then?  Are there likely to be other offers like this at that time?
2)  If you take 1.9% interest, you will owe $4302 at 04/14 and only $1314 at 09/14
Whatever interest rate you find by then, you should find that last bit easy to pay off with your $600/mo

Remember, inflation should bring you a bit of a rise in income by then, which you will dedicate to debt repayment (of course!)

So the only real question is:  how likely is it that you'll be able to find a low interest credit card/line of credit at 04/14?
That's not the sort of thing I know about, but you obviously look into it quite often, so you can see the numbers.  You'd be sacrificing about $100 of interest over the course of this pay-down in order to keep your finances a bit more predictable.

That call is definitely yours to make.  I can only provide the numbers.

Best of luck.  It's nice to read positive stories like yours.

Babystepmustache

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Re: Credit Card Balance Transfers
« Reply #3 on: March 21, 2013, 09:36:12 AM »
I'm in the same boat. Just remember to look at the balance transfer fees. Usually 3 - 5%. Tried to get my current card to match the balance transfer rate offers, but they said no. Card Co. I wanted to transfer to wouldn't waive the transfer fee. Trying to decide how much I'm willing to waste on fees to help pay this debt down faster. It's frustrating because at this point I don't want to waste any more of my money on this debt.

I'd love to switch to the Chase Slate card, with 0% transfer fee and 0% interest for 15 mo. It's a no frills card once it's paid off, no rewards. But it's another card. And I will probably max out the credit limit with my balance transfer, which can affect other credit card interest rates on cards I already own. Dicey stuff here.

Good luck