Planning to Go Back into Credit Card Debt
Since paying off our credit card debt last year (then again after buying a MINI Cooper), we haven’t carried a card balance more than a few weeks. Generally, I pay off our card balance even before the statement is sent out. It’s a great feeling to not have credit card debt rolling over and accruing interest!
But the truth is that we’re now back in credit card debt. But the beauty of this time is that it was planned. If you recall, last year I signed up for the Discover Business Card to take advantage of the 12 month 0% interest rate specifically to pay for tuition this year. Well, the plan was to wait until January to pay tuition (which I did), and then pay off the balance about a month later when I got reimbursed from work for the $4950 bill.
But then yesterday it dawned on me that I could use that $5k reimbursement as a 0% loan! Since the 0% offer doesn’t end until late this year, I can take up to a year to pay off the balance while using that money to pay off other debt that is accruing interest.
And believe me, I am disciplined about paying off CC debt now. I won’t be waiting till the last second to get rid of it! One reason is because I’ll have another $7,500 this year in tuition payments that I have to pay out of pocket myself (Summer and Fall semesters). My employer only covers $5,200 per year. Thus I intend to pay off the first $5k before paying for the next tuition around May/June.
So what will I pay down with this “0% loan”? Well, I’m already on a mission to pay off my student loans from my undergraduate degree as that’s our highest interest rate on our remaining loans. Now, before you yell at me because that debt is “good debt” or that we can deduct the interest paid, I have to admit that we no longer qualify for the student loan interest deduction due to our combined income, along with the income from our other ventures including this site. Actually, we couldn’t deduct it last year either, so there’s really no point in keeping these debts around any longer.
So right now, my student loan is at 6.25% (if I recall correctly), while Stacie’s is at 5.75% and the truck is at 4.5%. Additionally, in just 3 more months of on-time payments, Stacie’s rate will drop down to 5.25%. Woohoo! It’s only been 3 years of payments to get to that point, thanks to deferring the loans for a bit and then consolidating them.
So I expect to get the reimbursement in under 1 month (I just got the papers signed yesterday), and then I’ll send it off to the lender and reduce our debt scale down to about $7,000 for my loan. However, I’ll have to add $4950 to our credit card debt scale 🙁
Dude, you’re not paying anything down…you’re just shifting the debt around to take advantage of different interest rates. It sounds like a small thing, but don’t think of this as paying down! When I saw you post title, my stomach knotted up in sympathy for you LOL
Just be very VERY careful with this 0% rate…don’t forget the credit card companies love to play games, and “GOTCHA” is their favorite.
Ditto what DFR said. You’re really not paying anything off, but eliminating debt’s that carry interest. But then again, if you don’t pay off your cards before the 0% ends, this will all be for nothing as you’ll most likely lose 12-18% on the credit card.
While I agree with the other commenter’s that it is shifting debt, I would rather have 0% interest than anything above that. As much as I would love to pay off my student loans, I want to clean up the credit cards first. I think it would also help to shift student loan debt to 0% credit cards in order to pay pure principle faster. My credit card debt has to go first before I go back into a controlled state of credit card debt. Even still it’s a risky move to borrow money from a 0% card and treat it like a loan. They can change the APR for any reason at any time, so nothing is ever in your favor. Hope it works for you though.
What other ventures are you involved in? I need to make additional income to pay down my debt.