Author Topic: Transferring debt to a 0% credit card? Don't yell at me!  (Read 5975 times)

Babystepmustache

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Transferring debt to a 0% credit card? Don't yell at me!
« on: February 28, 2013, 10:28:25 AM »
Here's some background before I ask my question...

We've been paying off debt like good little Mustachians, cutting fat from our budget, living on less, saving more, opening targeted savings accounts, all that good stuff. We're paying off our last credit card after working the debt snowball scenario. Currently, it has a 9.99% rate. We are planning to pay it off in 14 months (barring any major household disasters or child issues). If we transfer the balance to a new card (that I would have to open to get the 0% for 15 mo deal), we would save over $900 in finance charges. We would have to pay 3% to transfer the amount, but that is still much less than the $ we would lose if we keep this debt it on our current card. The last card we paid off is offering 1.99% for 12 months, but would convert to 14.99% after that, leaving us to pay a higher rate for two - three months. Of course the balance would be smaller, but it's still my money wasted. And we'd add the 3% transfer fee to that debt, so we'd only save half as much in fees than if we transferred to a new card.

I know you are all going to yell at me about opening a new card. Here's the deal: I use CC responsibly. Learned my lesson and all that. This debt is from a bad year with little income, major car disasters and other expensive household issues that all happened at once. We didn't have the cash to pay for all of it at the time. We haven't used this card for two years, just been paying it down slowly. We are in a much better financial situation now.  I'm bringing in more freelance money, we're saving a ton more than we used to and we always pay off the few CCs we do use.

I'm torn. I know I shouldn't open a new card, but I hate to see my money wasted as I pay $900 in fees for the next 14 months. Plus there's the whole "can't close a CC account, because it's bad for your credit score" so this card will hang around long past when we pay it off. We have great credit and pay on time. We just need to get this last block of debt paid off and we can start doing even better things (stocks, bonds, college savings) with that chunk of $ we'll have each month.

What say you, Mustachians? Please don't yell. I'm trying here. :)

Paul der Krake

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Re: Transferring debt to a 0% credit card? Don't yell at me!
« Reply #1 on: February 28, 2013, 10:33:46 AM »
As long as this new card doesn't have annual fees or what have you, I see nothing wrong with your approach. 3% trumps 9%.

Babystepmustache

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Re: Transferring debt to a 0% credit card? Don't yell at me!
« Reply #2 on: February 28, 2013, 10:37:11 AM »
It doesn't, thankfully. And once it's paid off, it has some really good benefits (5% cash back) we can use to our advantage by paying it off each month.

Jamesqf

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Re: Transferring debt to a 0% credit card? Don't yell at me!
« Reply #3 on: February 28, 2013, 10:40:55 AM »
Absolutely nothing wrong with opening a new credit card, especially if they give you zero interest and/or bucks for opening it.  I did one a few months ago: $100 credit + 0% interest for 12 months, and a higher cash-back on some things than my previous card.

The only problem is having the self-discipline not to run up more charges than you can pay, and you can do that as easily on one credit card as half a dozen.

BlueBeard

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Re: Transferring debt to a 0% credit card? Don't yell at me!
« Reply #4 on: February 28, 2013, 11:31:59 AM »
Makes sense to me. Shop around a bit for the card you may be able to find a better deal.  I recently have received multiple offers from Citi for 21 months 0% on purchases and transfers.

Another way to play it would be get a 0% purchase card, put all your monthly expenses on it, and pay the minimum.  Apply the difference between the minimum payment and the total charges to the 10% card.  That should lower the effective rate.  Someone smarter than me could help you calculate that.

August West

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Re: Transferring debt to a 0% credit card? Don't yell at me!
« Reply #5 on: February 28, 2013, 02:02:52 PM »
You won't get yelled at - Dave Ramsey does not hang out here.

KimAB

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Re: Transferring debt to a 0% credit card? Don't yell at me!
« Reply #6 on: February 28, 2013, 02:44:36 PM »
Is there a fee to transfer money?  That would be my only question.

follicular

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Re: Transferring debt to a 0% credit card? Don't yell at me!
« Reply #7 on: February 28, 2013, 07:50:05 PM »
it's pretty much a no-brainer---go with the 0% rate and pay off your debt; nothing to worry about. I have this approach on many occasions and have saved big bucks.

Babystepmustache

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Re: Transferring debt to a 0% credit card? Don't yell at me!
« Reply #8 on: March 01, 2013, 08:09:46 AM »
Good to know, August! You all have been so nice. And yes, there is a fee (3%) to transfer, but it is much less than we'll be paying in interest over the next 15 months, so I will pay that to save much more. Looking forward to being debt free next summer!!

emoore

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Re: Transferring debt to a 0% credit card? Don't yell at me!
« Reply #9 on: March 01, 2013, 09:44:37 AM »
Have you looked into the Slate card.  I think its from Chase.  I get all sorts of CC offers in the mail but that one stood out because it was 0% for 15 months with NO balance transfer fee.  Looks like a decent deal if you are going to open a new card anyway. 

needmyfi

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Re: Transferring debt to a 0% credit card? Don't yell at me!
« Reply #10 on: March 02, 2013, 04:38:14 PM »
I approve as well, as long as you don't have problems with temptation.  I wait for transfer offers at 1% transfer fee 0% interest. (0 transfer fee would be better-haven't gotten that one).  After that offer comes in I look through my cards to see who will give me at least 2% no matter what I spend it on. Then I will use the card for "capital improvements", new roof, etc.  My savings rate goes down while it gets paid, but somehow it works for me better psychologically than taking money out of savings.  If someone wants to give you cheap money and you are discipined I say go for it.

Dynasty

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Re: Transferring debt to a 0% credit card? Don't yell at me!
« Reply #11 on: March 02, 2013, 11:38:46 PM »
Then I will use the card for "capital improvements", new roof, etc. 

9 times out of 10, if you offer to pay cash and ask what kind of deal they can give you, you'll come out WAY AHEAD than a measly 2% cash back.

A minimum of 10 to 15%.

Contractors LOVE cash!  Better for you, better for them. 


unpolloloco

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Re: Transferring debt to a 0% credit card? Don't yell at me!
« Reply #12 on: March 04, 2013, 07:27:55 AM »
We've been paying off debt like good little Mustachians, cutting fat from our budget, living on less, saving more, opening targeted savings accounts, all that good stuff. We're paying off our last credit card after working the debt snowball scenario. Currently, it has a 9.99% rate. We are planning to pay it off in 14 months (barring any major household disasters or child issues). If we transfer the balance to a new card (that I would have to open to get the 0% for 15 mo deal), we would save over $900 in finance charges. We would have to pay 3% to transfer the amount, but that is still much less than the $ we would lose if we keep this debt it on our current card. The last card we paid off is offering 1.99% for 12 months, but would convert to 14.99% after that, leaving us to pay a higher rate for two - three months. Of course the balance would be smaller, but it's still my money wasted. And we'd add the 3% transfer fee to that debt, so we'd only save half as much in fees than if we transferred to a new card.


At 1.99% for 12 months (assuming no transfer fees), you'll pay off the debt in about the same amount of time (10 months) as with the 0% card with 3% transfer fees, assuming you put as much towards paying off the debt as you would on the 10% card.

thurston howell iv

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Re: Transferring debt to a 0% credit card? Don't yell at me!
« Reply #13 on: March 04, 2013, 11:32:01 AM »
Sometimes, if you're persistent, you can get them to lower or even waive the balance transfer fees.... Might be worth a shot... Spending less is good!

Babystepmustache

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Re: Transferring debt to a 0% credit card? Don't yell at me!
« Reply #14 on: March 05, 2013, 11:18:56 AM »
Sorry, unpolloloco, there is also a 3% transfer fee on the 1.99% card. So, would still be more money than the 0% with 3% transfer fee.

I think I may see if I can talk them down on the transfer fee. Husband isn't too keen on opening a new account. I've done some research to see what affects your credit score the most-more new cards or cards with higher balances. This one debt is the last cc we have with any remaining balance. Everything else is paid off (except for the mortgage).

Angie55

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Re: Transferring debt to a 0% credit card? Don't yell at me!
« Reply #15 on: March 05, 2013, 05:34:46 PM »
Just a thought. Look at your existing cards and the special offers, you usually are eligible for the BT's without having to open a new account. If you need a higher credit limit you can often try the automatic increase which doesn't do a hard credit pull.

By any chance do you have any high limit Citibank cards? This past year they've been running 0% balance transfers (with 3% fee) adding in 0% purchases after that.

I did a small BT of ~$75. Then used chargesmart to make the extra payment on my student loan. Chargesmart was ~2.9% fee but I was also able to earn rewards on the purchase lowering the net fee.

smedleyb

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Re: Transferring debt to a 0% credit card? Don't yell at me!
« Reply #16 on: March 05, 2013, 06:47:02 PM »
Sometimes, if you're persistent, you can get them to lower or even waive the balance transfer fees.... Might be worth a shot... Spending less is good!

I grew up watching your dad.  It's an honor to be in the presence of the kin of television royalty.

Good advice, too.