Author Topic: So I've set my hair on fire...  (Read 4768 times)

alsoknownasDean

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So I've set my hair on fire...
« on: November 06, 2015, 03:54:50 PM »
I recently got back from an overseas trip. I ended up putting the whole thing on a credit card (yeah I know).

Whilst that means I've got a debt to repay (with 55 days interest free), I've also got enough in my savings account to wipe the whole thing out.

What should I do about this? Should I transfer the money from my savings account and make the outstanding card debt go away now, or should I try and pay it off within the interest free period from my income?

Thanks :)

BarkyardBQ

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Re: So I've set my hair on fire...
« Reply #1 on: November 06, 2015, 03:57:50 PM »
Why did you save that cash in the first place?

Can you pay it off with income before you are charged interest?

seattlecyclone

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Re: So I've set my hair on fire...
« Reply #2 on: November 06, 2015, 03:58:56 PM »
Go into the credit card website and set up an automatic payment for the full amount on the last day you can repay the loan without interest.

There's no difference between paying it out of savings or your income. Money is fungible.

alsoknownasDean

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Re: So I've set my hair on fire...
« Reply #3 on: November 06, 2015, 04:25:52 PM »
Why did you save that cash in the first place?

Can you pay it off with income before you are charged interest?

My plan has been to keep at least $5000 in a savings account as an emergency fund, and once that balance hits $10K, to buy $5000 worth of ETFs.

I should be able to get rid of the balance within 55 days, but if not I can put $500 or so in at the end to clear it entirely.

Go into the credit card website and set up an automatic payment for the full amount on the last day you can repay the loan without interest.

There's no difference between paying it out of savings or your income. Money is fungible.

I'd have to work out when that date is. Presumably it's 55 days from the first transaction that hasn't been fully repaid.

I don't want to pay any interest on the card, as the interest rate is very high. The savings account earns some interest (3.25%).

By the way, I quite liked Seattle, although I lucked out with the weather while I was there :)
« Last Edit: November 06, 2015, 04:27:38 PM by alsoknownasDean »

Eric

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Re: So I've set my hair on fire...
« Reply #4 on: November 06, 2015, 04:29:08 PM »
$5000 at 3.25% apr would earn you about $13 for a month.  Is that worth the possible interest charges you're risking?

Argyle

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Re: So I've set my hair on fire...
« Reply #5 on: November 06, 2015, 04:31:08 PM »
You have 55 days to pay it?  Are you sure?  Most credit card cycles are less than a month.

Don Jean

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Re: So I've set my hair on fire...
« Reply #6 on: November 07, 2015, 10:54:52 AM »
Money is fungible.

This is one of the most important lessons about money that goes under the radar too often.
Bank Accounts are fictitious walls we put around money to organise and categorise it--they further abstract our understanding from this important concept.
« Last Edit: November 08, 2015, 02:38:11 AM by Don Jean »

alsoknownasDean

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Re: So I've set my hair on fire...
« Reply #7 on: November 07, 2015, 10:39:04 PM »
You have 55 days to pay it?  Are you sure?  Most credit card cycles are less than a month.

55 days interest free is pretty normal for credit cards here. I'd assume that means that I have 55 days to pay it from the date of the transaction, but someone more versed in Aussie credit cards might be able to correct me if I'm wrong :)

After thinking a bit about it, I've decided that i'll put most of this week's pay towards the card. That'll clear up about half of the balance on the card. Then I can either clear the remainder of the card using my savings or wait a while.

I'm thinking about buying some more ETFs soon, and using my savings to both buy ETFs and clear the card would mean the savings would be lower than I'd like. I guess then it's a case of hold off on the ETFs or hold off on the card repayment.

K-ice

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Re: So I've set my hair on fire...
« Reply #8 on: November 07, 2015, 11:04:00 PM »
Be careful. The way cards work in Canada is pay in full or pay interest on the entire thing.

I learnt that the hard way once when paying off a ~$5000 bill from two accounts. My large bill was trip related too :)

I was off by $200. I caught my mistake 2 days after the due date & thru $400 just to be sure.

The next bill had almost $100 in interest charges. interest was on the full $5000 for about 6 weeks, since that is when the first purchase was made. Actually, the first purchase was 6 weeks, the second 6weeks minus a few days & so on. It takes excel to figure out the exact interest charges.

So sure, I would of had about 55 days grace on that first purchase, but screw up by 2 days and get dinged the entire thing.

I was livid because I felt like I was being charged $100 interest on just $200 for 2 days. 

Fortunately, I called & they refunded me the interest, but what an embarrassing hassle.

marty998

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Re: So I've set my hair on fire...
« Reply #9 on: November 08, 2015, 01:21:29 PM »
Dean, the 55 day interest free period commences from the 1st day of your statement period, not the date of purchase.

e.g. if your statement period starts on the 20th of October, and you spent your holiday money on the 10th of November, then you've only got ~34 days interest free. This is because your statement period would end on the 19th of November and the minimum payment would become due around the 14th of December.

In this example you need to either  make a partial payment, or clear the balance entirely between the 19th of Nov and 14th Dec. If you make a payment before 20th Nov then it doesn't actually count towards the minimum due (there's no real necessity to pay early).

FIRE me

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Re: So I've set my hair on fire...
« Reply #10 on: November 08, 2015, 02:40:13 PM »
Be careful. The way cards work in Canada is pay in full or pay interest on the entire thing.

I learnt that the hard way once when paying off a ~$5000 bill from two accounts. My large bill was trip related too :)

I was off by $200. I caught my mistake 2 days after the due date & thru $400 just to be sure.

The next bill had almost $100 in interest charges. interest was on the full $5000 for about 6 weeks, since that is when the first purchase was made. Actually, the first purchase was 6 weeks, the second 6weeks minus a few days & so on. It takes excel to figure out the exact interest charges.

So sure, I would of had about 55 days grace on that first purchase, but screw up by 2 days and get dinged the entire thing.

I was livid because I felt like I was being charged $100 interest on just $200 for 2 days. 

Fortunately, I called & they refunded me the interest, but what an embarrassing hassle.

Yep, no way I'd pay it “last day” as another poster advises. I'd pay at least a week before the interest date or better yet two weeks, and then check the account to make sure it is properly credited.

Interest on these deals is usually retroactive, so mucking about until the last minute can be a very bad idea.

alsoknownasDean

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Re: So I've set my hair on fire...
« Reply #11 on: November 09, 2015, 05:30:21 PM »
Dean, the 55 day interest free period commences from the 1st day of your statement period, not the date of purchase.

e.g. if your statement period starts on the 20th of October, and you spent your holiday money on the 10th of November, then you've only got ~34 days interest free. This is because your statement period would end on the 19th of November and the minimum payment would become due around the 14th of December.

In this example you need to either  make a partial payment, or clear the balance entirely between the 19th of Nov and 14th Dec. If you make a payment before 20th Nov then it doesn't actually count towards the minimum due (there's no real necessity to pay early).
Well if that's the case, then I might just get rid of the balance ASAP. That'll be easier than gambling on due dates for a couple of bucks of interest.

Thanks all :)

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RWD

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Re: So I've set my hair on fire...
« Reply #12 on: November 10, 2015, 06:39:54 AM »
I would also recommend just paying it off immediately and then rebuilding your savings from your income. If you get hit with an unexpected emergency before you've finished rebuilding your savings then you can just put it on the credit card (presumably with the interest-free grace period reset).