We have gathered up quite a bit of available credit (like rolling tumbleweeds) in our debt journey (enough to hang our self with a rope, but lemme try to keep this post positive).
Consequently we used to get a lot of telemarketing calls trying to get us to use these credit cards by transferring higher interest debt onto a card with a low balance transfer rate.
Apparently, while I had my head in the sand, the Irishman started to play along. Hence our debt story where we had amassed $250K of consumer debt up to D-day. (I kid you not, go read about it here).
So fast forward to March 2012, more affectionately known as D-day, I put my big girl
ie panties on and start wrangling this debt monster. Strategy becomes my game. Hey, I got nuthin’ else.
My Dad was always talking about this points card that paid him 5% cash on gas and grocery purchases. He used to
brag about getting a cheque every few months for 50 bucks. Well, I’m not about to turn away free money for stuff I need to buy anyways. The next time I was enticed with said card I bit. I knew the 5% was only for a six month period, but since I was living day-to-day at that point, that was a long time. Yep, like he said $50 cheques started rolling in every second month.
My first six months of how-to-get-out-of-debt-hell were rough but eventually I was able to uncurl myself from the ball of fetal positioning I had assumed. That was around the time that the little cheques (which all went to debt repayment, aren’t you proud?) stopped coming in so frequently. Time to start a new strategy, which I did but we’ll save that for
when I have nothing else to write about another post.
So I stopped using that money-making card but they continued to tempt me with the allure of low rate cash balance transfers. I bit again. This time to pay off our truck loan of $12,000 which was at 5% interest. We paid a 1% balance transfer fee and .99% interest, thereby saving 3% interest. The catch was that we had to be sure to pay off the balance transfer within the six months of the low interest period, after which the rate would sky rocket to 18% of something ridiculous. I had a plan to do this and come hell or high water, this is what we would do.
And we did.
That was so awesome when that debt was gone. Not only had I saved the interest but I had done something highly creative (or so I like to think).
I’ve done it once again but this time I’ve put the cash advance against our Big mortgage (aka a $hitload of consumer debt). Oh and the nice credit card company saw we were such good payers that they increased our limit to $25K. Oh and I’m such a good negotiator that they waived the balance transfer fee of 1% and I’m paying only .99% interest.
OK, so I’ve just gone and done the math, people, using the really cool calculators at VERTEX 42.
The results are shocking.
For less than $200 in interest charges that I will pay to my
loan shark credit card for a balance transfer of $24,700 @ .99% interest rate, I will save the following on my consumer debt mortgage of $226K @ 2.79%:
- $22,192.38 in interest over the life of the mortgage
- Number of payments decreases from 652 (25.08 years) to 554 (21.31 years).
I do not make this up.
- For this strategy to work, you absolutely, positively must be sure you can pay the full balance transfer by the date that the interest rate hikes (pretty please, do not take this point lightly… note to self put a disclaimer page on my blog)
- I accomplish the point above by having my e-fund fairly well funded, so worst case is I take that money to pay the balance transfer if needed
- Do not make the stupid mistake I did (* see below), which was have a (annual) recurring payment charged to the credit card. You will pay interest on this and it screws up your savings by the complicated way that they apply the payments, even if you pay this amount in full.
- I repeat, you must use this balance transfer credit card for only this!! No other charges. Full stop.
*We forgot that we had used the card last January when we were using it for other things to sign up for CAA. Well this past Jan, our renewal was charged to the card. Consequently, we have a bit more interest on our credit card. I was bummed that my strategy was messed up. Looking back, I should have called CAA right away and maybe I could have got it reversed and charged to our normal credit card. Because it made me so grumpy I just wanted to not think about it. I’m estimating the impact for this month was about $4 in interest, so no biggie, but then I still have 5 months to go, so I think this will have an impact for the remainder of the term. It’s complicated how they apply the payments and calculate the interest on cards with diff rates. Suffice it to say, if you use my strategy, don’t ever let any other charges go on that card!!!
There you have it folks! What do you think? I’m actually quite surprised that I cannot find anything on the web about this. I think I’m brilliant, but if you think there are factors I haven’t considered or mistakes I’ve made, then please, I’m all ears.
This is a journey. And we are all learning.