Sunday, July 12, 2009

Shuffling the Cards

I have a brand new credit card.

It's part of my "let's see if I can get a low-cost, no-interest balance transfer" debt reduction plan.

I get a lot of credit card applications in the mail. I scrutinize each one to see if it will meet my needs. Most don't.

I don't know if it is true for everyone, but I no longer get applications with no balance transfer fees. Most charge 3 or 4% with no ceiling on the transfer charge. It would cost me between $165 and $220 to transfer the balance on my highest card. Hmm--I don't think so!

The card I finally accepted charges 3% but has a $50 maximum. That's the best deal I've seen over the past six months.

I also notice that the zero percent offers have become markedly more limited. Some don't apply to balance transfers at all. Since I have no desire to put additional charges on any credit card, these offers don't attract me.

Others offer zero percent for six months. That's something of a bummer because I fondly recall getting prior offers of 18 months at no interest. The card I accepted is for 9 months.

The usual interest rate after the initial offer period runs out is between 8 and 12%. The one I accepted will go to 11.99% after 9 months, just a tad under what I'm currently paying.

Still, there is at least a $450 benefit to me when I transfer my highest credit card balance.

My highest balance is also the card with the highest interest rate: 12.24% The balance is $5400. Since I'm doing the Dave Ramsey snowball, I only make minimum payments (roughly $113 per month) on this card. Finance charges, which reduce slightly with each payment, are currently $57.34 per month. Therefore, even when I count the addition of the $50 balance transfer fee, I will be applying an additional $463 during the nine zero-interst months to debt reduction.

I assume there will be some effect on my credit score, though this new card has a $10,000 limit, so my $5400 transfer still leaves a lot of room--I understand credit scoring companies like that.

What else did I do with my brand new credit card? Well, I activated it, signed it, and promptly froze it my ice-cube tray along with my other credit cards!


Florence said...

"I activated it, signed it, and promptly froze it my ice-cube tray along with my other credit cards! "
That's one cool credit card!!

Petunia 100 said...

You know, until I read this post, I hadn't noticed something: I don't get oodles of credit card offers in the mail anymore. I used to get them almost daily. I do regularly get "checks" from my existing credit cards, but not offers.

Do you have any rewards cards? If not, how do you pay for everyday purchases such as gasoline? Aside from the cards with balances, do you have a card you pay off monthly? If so, I suggest getting a rewards card and letting those periodic rewards checks turn into a snowflake.

Congrats on the 0% for 9 months, $463 is a pretty big snowflake.

Grace. said...

Yep, I get those checks as well. I immediately rip them up. I do still get at least one credit card offer a week, none of them very good. For most purchases, including gas, I use the cash that I take from my twice-monthly paychecks and put into a separate envelope marked "gas money." I have only one credit card that isn't residing in my ice-cube tray--it's a Bank of America card associated with my checking account which also acts as my overdraft protection. I pay it off each month (usually!) if I have made any charges. I shouldn't even be doing that, but at this exact moment, I don't have my emergency account of $1000 up to date, thanks to a recent tuition payment for my granddaughter.

Sharon said...

I absolutely LOVE that I no longer get credit card offers. We have one Amex Blue card which we use for food and gas occasionally because we get 5% cash back. I try not to use it, as I think I do better working with cash. It'll make a difference for you when most of the money will be going to principle, not interest. You'll be done before you know it!

Wellheeled said...

I've never tried the credit transfer game, even when lots of bloggers were doing it to get interest money. I guess I'm always just too afraid that I'd miss a payment and my interest rate would shoot up to some ridiculous percentage.

Grace. said...

WH--I know that feeling. I don't necessarily recommend doing this often. But especially if one is getting a high credit limit and, even with the transfer, won't be anywhere near the top, AND if one is careful while transferring the balance to make sure BOTH the old and new cards are paid on time, I think the financial benefits are worth it. But as I said in the post, the offers are declining, in amount, in length, in everything.

Debt Help said...

A $50 max balance transfer fee is good in the current credit environment. The best I'm seeing these days is a $75 max.

ro said...

Do you know that once the no interest period ends the 11.99% will kick in and also the accrued financed charges from those 9 months, if the balance is not paid in full.
There is always a catch.

Grace. said...

Ro--I reread the credit card agreement, and I think you are wrong about past accrued interest. I know that is how electronics stores and furniture stores work their "no interest for X months" (or "no payments for X months") plans, but I've never had a credit card company do that.

ro said...

ok. but for me it was actually with a Bank of America credit card not a furniture or electronics store credit card. It would not be in credit card agrement, it would be with the offer agrement, or just call the credit card company to be sure.