I’ve been going along merrily paying these dratted credit cards. Discover was at 12.24% and I was okay with that. I haven’t wanted to do any balance transfers because I didn’t want to mess with my credit score since we were supposed to refinance our mortgage at the end of 2009. That never happened because we are running too hard, I’m too tired and I can never get caught up on housework.
I misplaced my Wells Fargo debit card at home somewhere about two weeks ago and one day last week I was out and had to use one of my credit cards that I haven’t used in a very long time. I used it at four places, I paid for postage online at usps.com, bought gas, paid for a gift card at Walgreens and for some unknown reason our broadband company wouldn’t take the regular debit card so I had to use a credit card.
Actually, come to think of it, that’s when I misplaced my Wells Fargo card, trying to pay the broadband bill by phone. Hmmm… maybe it dropped down the side of the couch… but I digress.
Because I hadn’t used the credit card in quite some time (I’ve just been paying down the balance), when I tried to access the account online to make sure the auto-payment happened as planned, I got a message instead that said they were sorry but they couldn’t allow me to have access to my account and to call an 800 number.
So I called the number and had to go through an automated process in which I was asked to verify that I had made the following purchases with my credit card. That was actually really convenient because I had not listed them in Quicken yet, so I did so as they listed each one.
After I verified they were all my purchases, I pressed numbers through to a representative.
She said she had no idea why my account would not be accessible to me, and while she had me on the line she asked me if I had any other credit card balances because they were offering a great balance transfer offer. She said they are offering zero point nine percent interest until October on all balance transfers, and she told me I had $4262.00 available on the card for balance transfers. I asked her how much it would cost to do the balance transfer and she said 4%.
We owe Discover $1903.00. Each month I’ve been paying $200 on this card from one of Mr. A’s business accounts. We charged one of his pieces of equipment on this card last year.
Using another of Vertex42′s Excel spreadsheets, this time the Credit Card Payoff Calculator (free for personal use), here is what it will look like:
If we stay with the current rate of 16.49% (OUCH, I just told one of my readers via comments that all my cards were under 14%!!) and continue to pay $200/month, it will take 10.27 months to pay off, and we’ll pay $150.42 in interest.
If we wanted to pay the card off in six months, it would be $332.59 per month and the total interest would be $92.57.
However, if we go with the credit card balance transfer, it is going to cost $76.12 initially to do the balance transfer.
Here’s where it gets tricky. The introductory interest rate isn’t going to stay at 0.99% for longer than six months. And that brings me to another little glitch… of course the payments each month will NOT be going to that balance transfer. It will probably be applied to the amount currently on the card. Then the rate will go up to who knows what? These are all questions that need to be asked before doing this balance transfer.
Regardless of the answers, we must absolutely pay this amount down in six months. If we pay $318.08 each month for six months, we could pay off that amount and the interest will only be $5.50 plus the balance transfer fee of 76.12. So 81.62.
Which has suddenly become my new favorite. I am going to talk with Mr. A because I think it might be wise to make a lump sum payment on that card first, then do the balance transfer for the smaller amount.
We should have the money from his business to pay an additional $703 on this card right now. That leaves a balance of $1200. The balance transfer fee would be $48.00.
We could continue to pay $200 each month (or more if possible), for six months. The total interest would be roughly $3.50. So between the balance transfer fee and the interest, we would be paying about $51.00.
That is a lot better than $150.42 at the rate we’re currently paying, which is $200 a month. The minimum is currently $47.00.
Now here is the final scenario that comes to mind. Leave the balance at Discover, but pay $703 right now.
If we pay an extra $9.73 per month, for a total of $209.73 the interest will be $58.37.
So in reality, we’ll be saving a whopping $7.37.
The card with the balance transfer offer has a credit limit of 10,200 and the rate is currently 9.5%. The balance is currently 5936.09. This means my debt to credit ratio is at 58%. If I add an additional $1200 onto the card,the debt to credit ratio will be 70%.
What to do, what to do.
One added benefit of doing this balance transfer will be that I can discontinue tracking one more account (making one more payment, reconciling, etc.).
What do you think I should do?
The results are in! Ten people voted and nine thought I should go with Scenario #4. Thank you for voting and your encouragement! Go here to read The Discovery Card Plan with our goal for getting this card paid off.
You can read my first Update on the Discovery Card Debt Reduction Plan and see if we’ve been able to keep to the plan.