Thanx Dan. But again Outofdebt has "Free Borrowed Money". There really is no need to hurry to pay it off. At least not to the extent he should interrupt his emergency account. The situation you describe is markedly different.
Thanks...yeh, part of me definitely wants to do that. My gut feeling (and they say your gut reaction never lies) is to pay off all the debt. Then, I would just have 5K on the Citi card at 0% which would be pretty easy to pay off in 12 months. I've been carrying balances on credit cards for over 10 years (before my BK and now after) and this is a golden opportunity to pay all of them off and never carry a balance again. However, the downside to that scenario is that it would wipe out my savings completely. But, of course, it would wipe out 5K in 12% card debt at the same time! I think I'm gonna sleep on it for a few more weeks and then try to make up my mind. $5,000 might not seem like much money to some people, but to me it's a decent piece of change. Not a fortune by any means, but definitely not something you should take too lightly.
I think you can make a strong argument for going in either direction. That's why this is such a tough decision. Either choice I make has some positive and some negative effects attached to it. If I can get approved for a 5K AT&T card with 0% for 12 months, I could then move all of my debt to 0% for a year. I could probably pay at least half of that off in 12 months, then it goes up to prime plus 4.99% and I'd have my Capital One account open with 6K of available credit in case they offer me a better rate than Citi. Taking this road preserves all of my savings, but still leaves me 10K in debt (albeit at 0%). The other option is to pay off Cap One with my 5K in savings now, pay off the 5K on Citi in 12 months, and have ZERO credit card debt this time next year. Heck, either way, I think I'll come out ahead. And as far as an "emergency fund" goes...to be honest, I've never really had more than about 1K in savings for the past 6 years anyway, and I've never had one of these so-called "emergencies". I've always been able to get by somehow during "tough times". This doesn't mean that tomorrow something really bad might happen to me and I'll really be in a bind, but chances are good that something like that won't happen if you ask me. Anyway, thanks alot for all of this great advice...I really appreciate everyone's input and experience!
HAVE you checked out Money market accounts. On the CD you could use more than one with differing maturity dates so that the whole 5000 is not tied up for a long period of time.
Actually, to be honest, I only looked at CD rates a few weeks ago and you had to lock in for over 3 years to get about 4% on your money. Most CD's 12 months or shorter were around 2% - 2.5%. However, I'm going to call my bank on Monday and ask them for some recommendations. Money market accounts are risk free, so maybe that's an option for me. Thanks again!
I read the "emergency fund" argument and here is my take on it. If an emergency were to arrise, he would exhaust his savings and still have the credit card debt on the card. If he paid his credit card debt off, and an emergency came up, he could use his credit card and still be in the same boat. Either way an emergency is going to hurt - it is either going to exhaust his savings, or max out his CCs. IMHO one of the main reasons for having credit cards is to deal with "emergencies" ie unexpected car repairs, etc... I think an analysis of the interest rates is the wisest course of action. As long as he can carry the debt at an interest rate =< his savings rate then it makes sense to hold the savings. If the interest rate on the debt load exceeds the savings rate, then it makes more sense to pay off the debt.
pay off the debt and you won't worry about transfers. Just like on buying my Audi A4 - at the lousy 12.95% Cap One rate - hey, lots of people LOST 100% of their money in the market - I lost some too. Hell buying the AUDI was the BEST INVESTMENT DECISION during 2002 LOL! At least I only lost 20% on the A4 - the second I drove it off the lot.... Shares in blue chips were losing 10% value a day in many cases LOL! I took a 72 month term for payment flexibility - that I will complete within 12 months. I have no balances - other than $119 for my new DELL Preferred ACCT power backup. WHEN YOU HAVE gotten to the point of NO BALANCES, you really wonder why you ever did carry any balances previously? Every body has the option - start up that budget and pay off the highest rate cards first. THEN, if you want a new car and its $40-50K, its not an issue. My utilization at this point is 13% - 87% available credit. (i do have a Cap One amount showing at this point as well...) NO BALANCES lets you go for the BIG TICKET ITEMS -Homes, cars, trains or very high quality POT. I also will say one of my biggest educators was AMEX! By letting me do what I want, but FORCING me to have the cash to pay it very 30 days, they allowed me to literally avoid interest or accumulate balances. The Green Card and its reporting were and are imminently helpful. arrffff - dogman
Of course it is nice to have savings, but it is not smart to pay more than 10% on loans at the expense of keeping a savings account. Build your credit and think of it as your emergency fund. You will not be able to borrow money when you need it unless you have it available. I use my home equity line of credit as my emergency fund. Whenever a good offer from a card comes along I take it and make money with it, this builds my credit and lowers my costs. I treat my credit as a business. This is not for everyone. I am sure everyone has a different opinion on the subject of credit. I know people that like to buy everything cash. They have no mortgage, they rip 0%APR offers. Just my opinion. www.creditsense.com
Be careful to read the fine print for AT&T Universal. They approved me for $6000 but $1800 is actually reserved for Cash Advances at 19.99%.
Wow, thanks alot for all of your replies folks. I'm going to print this entire thread out and read everyone's comments again and then try to make up my mind in the next week or so. I didn't think I'd get this many responses, so thanks again for everyone's advice. Like I said, I think you can make a good argument either way. There are pluses and minuses with every decision you make in life. I'm going to apply for the AT&T Universal card and if they approve me for 5K at 0% for a year, I'll probably transfer the remaining 5K from Cap One and see what my comfort level is like then. If it doesn't feel like the right thing to do, I'll just pay off either the Illumina or the AT&T card with my 5K from savings. However, if they don't approve me for the AT&T card, it's also very tempting to pay off Cap One in full with the 5K in cash. That way, the only CC bill I'll get each month will be from Citi and I'll be able to send them $400 - $500 a month which would pay it off in under 12 months. Prior to my Ch. 7 BK in 1995, I carried balances on several credit cards for almost 8 years. Then, within two years of filing, I was back at it again...carrying more balances!! But at least I was paying on time. Anyway, my point is that it's a very appealing thought to be in a situation where I'll be able to erase all of my credit card debt in less than 12 months. Getting just one CC bill a month (from Citi) would be like heaven compared to what I've been used to receiving in the mail. Thanks again for everyone's advice on this board...you guys offer a wealth of experience and knowledge.
BALANCE TRANSFERS have nothing to do with the CASH ADVANCE LIMIT... I DON'T CARE WHAT THE CASH ADVANCE LIMIT IS...IT CAN BE $0.00 FOR ALL I CARE...
If they told him he could be approved for a $5,000 credit limit like they told me a $6000 credit limit, there is a good chance it includes the cash advance limit as well. My $6000 limit as reported on my credit report is actually $4,200. The cash advance limit is at a rate of 19.99%. If I tryed to transfer $6000 over to my credit card , at a 0% BT for a year, from another CC would'nt $4200 be at 0% and $1800 at 19.99%?
Total Credit Line $7,500 Credit Line for Cash $975 This is my CAPITAL ONE account...I can charge or BT "UP-TO" $7,500...or do a CASH ADVANCE at a bank for $975.00. ONE HAS NOTHING TO DO WITH THE OTHER...(except...if you charge or BT $7,000...you could only CASH ADVANCE...UP-TO $500 including the fees)
I had a similar situation last year. I was fresh out of grad school and making big bucks. Boyfriend at the time told me to pay off my ccs. I wanted to have 3-6 months in an emergency fund in my savings account. I started paying huge chunks on my ccs but did not pay them off. (I had 2 ccs) . Meanwhile...a year after I started working, my company had major layoffs and I only got a 2 month severance. I still haven't found a job and I have been living off of the nearly 10K in savings I had. It's now almost gone unfortunately If I had had no savings, cash advances on a CC would cost me a ridiculously high APR plus fees. I'm glad I did pay down some of my debt but very glad I still had the savings.
Hi Diane: Citi actually issued me an Illumina card with a 5K limit for purchases and a 2500 limit for cash advances. My BT rate is 0% for 12 months with 5K available, the purchase rate is 9.74% with 5K available, and the cash advance rate is 19.99% with 2,500 available. In your situation, I'm virtually certain that you could do a 6K BT with all of it at 0% (not 4,200 at 0% and 1,800 at 19.99% like you say). The 19.99% only applies to cash advances. Hope this helps!
Thanks for your advice, and I'm sorry to hear about your situation. I know a number of people who've been laid off for months and haven't been able to find new jobs (decent ones, anyway). I have to admit that fear is in the back of mind. If I use all 5K to pay off my Cap One card, and then lose my job...uh-oh. The good thing is I could actually live on unemployment for six months (it's enough to pay all of my living expenses, but just barely). After that, I'd have some problems definitely. Are you getting any unemployment benefits from your state?
George, Does your Credit Report Report report the cash advance plus your credit line as your credit limit? This is very confusing to me. I was assuming that the original poster receivd some indication from his pre-approval application from AT&T Universal that he would get a $5000 credit limit and he was planning to use that credit limit to the max to pay off another card. I was trying to tell him that even when they say he may recieve up to a certain credit limit sometimes it is in the form of a Cash Advance (At least that was the case for me) because they report my credit limit as both the advance and credit line. I admitt I am a CC newbie but this is really complicated to me.
OK Now I understand . You are assuming that because you qualifyed for a 5,000 credit limit on one card that Universal will give you one as well. I thought they said you would get a 5,000.
