I’ve Paid For This Twice Already…

Archive for the ‘credit cards’ Category

My statement finally posted for my Capital One card. The current balance (basically the interest accrued before I transferred the balance to the Citicard) was $28.13. Since I have $37.10 in snowflaking money already in my bank account waiting for me to use it, I zapped off a payment of the entire $28.13 immediately. Which means I still have $8.87 left to snowflake to the Citicard.

My Capital One card… is done. Balance $0.00, which is where it will stay for the foreseeable future. I know I didn’t “pay it off” in the strictest sense since it was a balance transfer, but it is still progress and it still feels good. Let the interest-fee accelerated paydown begin! As soon as I have my ebay profits figured out I’ll be sending off a combined snowflake. But that topic’s for another post….

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So the transfer is done. I’ve moved a little over $5100 from Capital One to a Citicard through a promotional 0% interest for 12 months no transfer fee offer. It’s there, I’ve even made my first snowflake payment to it, and my Capital One balance stands at $0.00. That will change when my next statement posts because I will have some residual interest to pay, but that will be done quickly and the Capital One card will be done for good.

So, what have I done? Did I make the right decision? Would I do it differently if I did it again? And do I have any lasting concerns about making the move? NCN asks all that and more in Day 17 of 33 Days and 33 Ways to Reduce Debt and Increase Savings: Carefully Consider Surfing Credit Card Balances.

First off, I definitely made the right decision overall in surfing my balance to a new place. I was paying first 10.9%, then 9.9% in interest every month and there was no need for me to do that. I had called Capital One to get a rate reduction, which is how it went from 10.9% to 9.9%, but I had much better options at my disposal than that. Moving the debt to lower interest was definitely the right long-term move. I wish I had had the initiative to move it sooner.

There are a few things I would do differently if I did it again. This new card we got with the promotional transfer had an initial promotion that if you bought something with the card in the first 90 days, you’d get Thank You points equaling a $50 gift card. So I did, and I shouldn’t have. Not that anything bad happened, but by the time my payment cleared and a new billing cycle started (there was no way I was locking some little purchase accruing interest behind a huge balance transfer) I’d probably paid close to $50 in interest to Capital One. So basically, I wasted that time and money. I should have foregone the gift card and just transferred my balance right away. The other thing I would have done differently is that I would have done this a while ago. Even if I couldn’t pay it all before the promotional period ran out and I had to pay a balance transfer fee on a much smaller balance to transfer it somewhere else for a better rate (the non-promotional rate on this card is not great), it still would have saved me a *lot* of interest in the long run. But I didn’t. At least I have now.

I do have a few lingering concerns. I am convinced this was a positive move, but I wonder if there was another option that made better long-term financial sense. I had an offer from my Bank of America credit card of a 2.99% interest fixed for life of the balance with a 3% (no cap) transfer fee. Even with the fee, this would have worked out to less money spent overall when looking at all of my debts together, because I could have started just paying the minimum on the credit card debt and focused on paying off my 9% and 7% interest student loan debts. Should I have gone to 2.99% fixed and started aggressively paying off student loan debt instead? It would have worked out to some savings in the long term, but I decided it was more important to me to rid myself of credit card debt first. This 0% offer was the most expedient way to accomplish that. But I still wonder if by making the choice to do it this way, I’m revealing that I still don’t have the best financial sense. I mean, it should be all about the numbers and emotions should stay out of it. But I’m still human.

The other thing I still ponder is if this whole balance transfer move is another case of me counting on future income to solve past problems. If we don’t pay off the card by the date the 0% interest expires, then we revert to a higher interest rate (a variable rate right now at about 13%) than we were at with the Capital One card. I’m counting on our income to stay steady or rise, and our expenses to stay steady or fall, to do that, and it is a risky gamble. However, I’m going into this with my eyes wide open, versus the last time I counted on the future to pay for the present, and I know I have a few options if it doesn’t work out as I’ve planned. At the end of the year, if the balance is low enough, I can just pay the interest until it is paid off, which since the balance will be lower than now, will result in less interest being paid overall. Or if I have a good transfer offer with a minimal fee, I can move the remainder of the balance to one of my other two cards (back to Capital One or over to Bank of America), both of which send me balance transfer offers regularly for very low rates. I also now have an emergency fund to fall back on - not to pay off my credit card, but to cope with life’s little emergencies that may come up to try and derail our progress. So I am feeling much better about this situation than I have in the past. But still I do wonder…. am I becoming smarter about my money or just coming up with more creative ways to mess it up?

Only time will tell. But I think I’m on a good path with this whole balance-surfing thing. I think.

~J

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Thursday morning while doing my daily financial tasks, I checked on my Capital One account online. There I saw the electronic payment of $5104.63 and my current balance of $0.00.

Yes, this was a balance transfer. I’ll get to that part. But the just… joyful feeling that came over me at seeing the $0.00 balance cannot be denied or really explained. It just is.

I sat there and stared at it for a minute or two, and then logged out and logged into my Citicard account. And there, in black and white, was the matching transaction, a current balance of $5104.63 through an electronic payment to Capital One. And the feeling this time was… not quite relief, but definitely a mellow feeling. A feeling of “Okay. Now, it can begin. The paying down of debt without dollars going to interest. The unrelenting attack on the principal. Here it comes. Watch out.”

I would have liked to make a payment right then. At least a symbolic one. A $1 “Here I come, debt!” payment. But with change comes adjustment, and I only get 4 electronic payments a month, and for now, until I get into the rhythm of things, I need to use those payments wisely. So no symbolic thumbing of the nose at the debt.

But the yard sale is today and by 2pm I will have some ammunition for a good nose thumbing. I hope it is a lot.

~J

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So, I’ve used credit cards irresponsibly in the past. There is no question of that.

And, it has been a very long time (if one can call multiple years a long time) since I have done that. It could be said I have seen the error of my ways and learned from it. That’s my story at least.

And I stand here looking at a future conundrum. Not a current conundrum, because there is no way I am going to start using a credit card right now while I am still in credit card debt, no matter how organized or efficient I might think I could be at it.

But at some point in the future, I will have no credit card debt. And I might, then, start using a credit card again.

Say it isn’t so!

This is what I keep thinking about. I started this blog in part to help myself learn about and make better financial decisions. And I think, in many ways, I am accomplishing that. I’ve become better at tracking my money. I’m much better at not spending it. I’ve increased the amount I snowflake by a whole lot. And I have learned a lot of things about…. credit cards. Some bad, but some potential good too.

It is all about my coupon/rebate/freebie loving nature. The word is… cashback. Say it with me…. cashback.

Doesn’t that sound so… nice? Enticing? Happy? I know it is supposed to. I know it is supposed to give me nice happy warm feelings of gooeyness right inside my stomach. Cash………back.

If I am going to spend money anyway (which I am, I mean, one needs to eat) and I can get basically a rebate on everything I buy in the form of 1-5% (depending on the car and the purchase) back in cash at a later date well…. wouldn’t that be a *good* thing? Wouldn’t that help me out?

But what about all those studies you hear about that when you use a credit card, you inherently spend more? I believe that it is generally true. I know for myself, before I started the zero-based budget and completely tracking all my spending, I was definitely spending more with my debit card than I would have if I was carrying cash. The flip side to that is I may not have spent as much at the point of sale carrying cash, but when I carry cash I tend to be sucked in to those little purchases, the latte factor if you will. I never bought more actual lattes than when I used to carry spare cash in my car ashtray and I drove past a Starbucks taking my son to and from preschool. So I may spend less at the grocery store if I have cash, but I spend any change on a pretzel on the way out and a vanilla half-caf latte the next morning when I am barely awake.

Since I have started the “hard-core” budgeting and the zero-based every dollar working for me philosophy though, I have reduced overall spending. I may still spend too much at the grocery store, but I definitely pay more towards my debt every month and have more available cash left over to do so. So I could handle a credit card, right? I mean, I’m doing this right now with a debit card with is also a bitty piece of happy plastic….

I guess it comes down to… do I feel credit cards are inherently evil? Do I think I could behave responsibly with them and make *credit* work for me in the same way I want to make *cash* work for me? Do I really believe I have changed in the core of my nature?  And is the cashback (I still love the word….) worth it?

I don’t know yet. I still have at least a year to find out though.  The best lessons take the longest I guess.

~J

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On Sunday I paid my Capital One card $352.08 (which included my minimum payment this month of $109). That put my balance at $5,104.63. I then logged in to my Citicard account and initiated a balance transfer with my 0% for 12 months no balance transfer fee offer of $5,104.63 from my Capital One card. It was pretty easy, actually, I could choose the appropriate offer right there on the screen and if I had wanted to, I could do the transfer right to my checking, or split it between up to 4 cards. I now understand how people start credit card arbitrage.

As of right now, the transfer hasn’t posted yet to my Capital One account but it has been removed from my available credit on my Citicard and I am sure it is just a matter of time. I feel on edge. I think I will feel a little weird and unsettled until this is completely done and I get into the routine of paying Citicard. The money will still post the same day when I pay them just like with Capital One. I can’t do my instant reactive mini payments anymore, I am limited to 4 online transactions a month. But I still can do multiple mini payments just not quite as many or as frequently. I’ll have to track what I want to pay on a weekly basis I think and designate a certain day of the week (like Fridays) my “payment” day. Now that I am in the budgeting groove and used to tracking things intently I don’t think it will be too hard of an adjustment. At least I am not limited to one payment a month.

One thing I will not miss is paying interest! I cannot wait until my interest for the past month posts to my Capital One account and I can just… pay it and be DONE with it. For good.

$5104.63 split into 12 monthly payments breaks down to $425.39 a month. A little more than I have been averaging. I paid $421.45 last month and I think I can consistently do better than that the more fine tuned the whole tracking money thing becomes. It will take a lot of work and a lot of luck but I am feeling positive about it happening. My goal is to make it happen in 11 months so that bumps it up to $464.06/month. Ambitious.

But we can do it. Or at least, we can try really really hard. Focus. Don’t lose sight of the goal. Every dollar works for us. And maybe I could have a few good months contracting? And a lot of craigslist sales. And come on yard sale this weekend!

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