It has been almost three years since I’ve posted a personal finance update to my blog.
My youngest son AJ (27yo) and I were talking about our personal finances this morning. He’s doing a great job managing his credit cards and credit score.
Talking to my son inspired me to write an update post.
I’ve continued with making balance transfers every fall, moving the balance from one card to the next. Here are a few things I’ve learned over the years:
- Set reminders to alert you to when the 0% interest ends so you don’t end up paying interest
- Plan to transfer your balance at least 3 weeks before the offer ends to avoid paying interest
- Try to find the lowest balance transfer that you can, generally, you can expect to pay 3% to 5%. Every once in awhile I find a 2% transfer fee and Navy Federal Credit Union recently offered to transfer my balance for 0% fee which is unheard of. I’m not in need of a balance transfer until October but I will keep an eye out for a similar offer in a few months.
- Find out if the bank requires you to pay the balance transfer fee up front, or do they just tack it onto the balance. Wells Fargo surprised me when they slapped the balance transfer fee onto the first payment. Thankfully I had the money to cover the extra large payment!
- If you have a large amount of credit card debt you will most likely need to move the money from 2-3 credit cards to another 2-3 cards. Try to consolidate when you can, but remember that you don’t want to max out your credit card with a balance transfer. You still want to try and keep it at 75% to 80% or less of the card’s credit limit.
- Most banks won’t allow you to transfer a balance from one credit card to another on the same bank. For example, I have three personal Chase credit cards and one business Chase credit card. I can’t move a balance from the Chase Amazon to the Chase Slate. Ideally, you will have credit cards from different banks so this shouldn’t be an issue.
- Make a plan for where you’ll be moving your balances next. Check your credit limit and determine if you can move the whole amount over, or will you need to break the amounts into two cards. Here’s an example: Let’s say you have a Chase Card with a $9,000 balance. You have another Chase card with a $12,000 credit limit, but remember you can’t transfer a balance from one Chase card to another Chase card. You find that your Discover card has a limit of $7000 ($5600 is 80%) and your Wells Fargo Card has a limit of $5000 ($4000 is 80%). So you’ll transfer $5,000 to Discover, and $4,000 to Wells Fargo. Next year, you’ll be able to take the balance from those two cards and pay them both off with the Chase card.
- You shouldn’t need to sign up for new cards in order to transfer your balances, but if you do, sign up for them all on the same day as this will be less of a ding to your credit score. If you are struggling financially with a large amount of credit card debt, you may find it doesn’t work out so well to apply for new credit cards.
Now for the update… back in September 2014, our credit card debt was $17,892.93.
Several months ago (October) I did my balance transfers. Discover offered me 0% interest for 11 months with a 2% balance transfer fee so I moved $2234.78 to that card, incurring a fee of $44.70.
I had $9219.88 on a Chase card which had a credit limit of $15,000. The only card that I had available to transfer a balance was my Capital One card, but it only has a $10,000 limit. I decided to go ahead and move the balance even though I was almost maxing the card. I was keen on having just two payments to make (even though they are paid automatically every month with bill pay through my credit union).
My minimum payment for the Discover card is $35 but I decided that this card is going to be paid in full by the time the balance transfer offer ends. I set up a payment initially for $210, but recently moved it up to $230. (We switched trash companies from a widely known commercial company to a local company and are saving more than $20/month).
The balance right now on the Discover card is $1419.48. Six more payments of $230 and one last payment of $39.48 and that credit card will be gone by October 22nd.
The minimum payment for the Capital One card is $95 but I’ve been paying $115. In October, that payment will increase by $230.
The balance transfer offer from Capital One is good for 18 months, so I’ll be moving the balance on that card around June 2018. I estimate that that credit card balance will be at $5149.28.
If I continue to pay $345 per month to that balance, I should be out of credit card debt by September 2019.
My plan after that will be to apply that $345 toward paying off my automobile.
Maybe I can change my header back to “Out of Debt Again” and remove that “Never Gonna Get” part off.