Credit Card Balance Transfer Advice – Bender Answered

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Credit card debt relief for Bender

Bender asked:

Hey Matt! Thanks for offering your help!! I have over $5000 in Credit Card Debt with 3 different companies. Bank of America, Capital One, and GE Money. The BoA rate is 0% while the others are almost 30%. I called BoA in an attempt to transfer the high rate balances to the 0% card. Well, I am in between jobs right now and won’t start receiving a regular check again until Feb. I guess it was a bad choice to call and try to consolidate because after explaining what I wanted, they refused the transfer the balances and immediately lowered my credit limit from over $5k to $1,600!! So, in a fit of anger, I transferred my BoA balance AND my GE Money balance over to Capital One. I didn’t want to give BoA another cent of my money. Did I do the dumbest thing ever?? I called CapOne and asked for a lower rate while threatening to transfer THAT balance to BoA for 0%. I was obviously bluffing, but I thought I’d give it a whirl since I realized moving my debt to an almost 30% rate was kinda dumb. Base on a few late payments, they wouldn’t budge on the rate. So what’s my next move?? Should I close the BoA and GE accounts or leave them open and shred the cards? Should I just make it a mission to pay off the CapOne or attempt to move that to a lower rate card or apply for a Lending Club loan? How badly do you think I’ve screwed up my credit score, which was in the high 600’s?? As I said, I will start getting paid next month and should be able to throw, I hope, at least $1,500/month at credit card debt alone. Thanks so much for your time. I hope you get a chance to answer because I’m sort of at a loss. Best wishes and much gratitude, – bender

More detailed on my situation:
2 Credit Cards – Bank of America – $1315.50 – 0% Interest (Limit $5,500) – Capital One – $1551.24 – 29.4% (Penalty Rate for Late Payment) (Limit $8k) Line of Credit for LASIK – GE Money – $2677.98 – 22.98% + Periodic Finance Charges (Limit $3,200) I also have a car payment ($300/mo) and student loans ($200/mo.)

How to pay off this credit card debt

Before I start let me urge you to check out my credit card debt reduction handbook.

Bender, here’s a question:

  • Why did you move all the amounts off the BoA card?  If you are paying 0% interest then you are not, as you put it, “giving them any of your money” anyway.  Since you’re paying 0% you are not giving them any of your money, you are only paying them back for money they already loaned you interest free.

Here is what I would do Bender:

You still have a zero percent card and on top of that, if your credit score is still 660+ you may be eligible to consolidate through Lending Club.

  1. Since you still have a credit card with a zero percent interest and a $1,600 credit limit, the fist thing you should do is try to move $1,600 from the Capital One card back onto the zero percent Bank of America card.  If you are going to do this make sure that any balance transfer fees they may try and charge you will amount to less than the interest you’re currently paying on the Capital One card.
  2. Since your other 2 cards are carrying an interest rate of 30% *cough – gag – eh chem* (sorry… CC companies can make me gag easily) – consolidating debt through Lending Club may be something to consider.  You said your credit score was in the high 600’s… as long as it is still 660 or higher you may be able to get a Lending Club loan at a significantly lower rate than your existing 30% credit cards.
  3. If you cannot consolidate through Lending Club, simply pay minimum payments on the zero percent BoA card while you apply all other available cash flow funds toward the other 30% cards until they are paid off.
  4. Once the high rate cards are paid off, shift your focus to the 0% BoA card and pay it off accordingly.

One other thing to consider is the possibility of consolidating your auto loan into the Lending Club loan.  Depending what your auto loan interest rate is, you may be able to get a lower rate on the Lending Club consolidation loan… although this is not likely so only do this if you can indeed get a lower rate through LC and one low enough to offset the LC loan processing fee.

What do you think?

What would you in Bender’s situation?

If you need debt help or personal finance advice – Ask Matt Jabs.

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1 LeanLifeCoach

Excellent job Matt – The only thing you missed is Don’t Let It Happen Again!

2 BG

Be careful with balance transfers — read the fine print. Most balance transfers cost an immediate 3% (or more) in ‘fees’, even though the APR may temporarily be 0%.

3 Jimmy Kibler

Credit card companies can be difficult to deal with unless you are 3 months behind and then they will work with you and lower your interest rate.

4 Frank @ Turn Key Consulting

The concept of a credit card balance transfer seems simple enough, but there are a number of steps involved that are critical to successfully moving money owed from a high interest credit card to one that offers a lower annual percentage rate. firstly we should consider your current credit situation and second important thing to consider is the amount you wish to transfer. The option to transfer balances from a high rate credit card to one offering a lower APR — or even 0 percent if you qualify — for several months or longer can be a smart financial move.

5 Lakita

One thing I would ask Bender is if the 0% BoA balance something that is going to expire soon? If so, what would the balance be afterward?

6 Robert Espe

Bender asked if he should shred the cards, in his case I would say yes. Shred two, and keep the BOA card in a block of ice. Over $4k paying %30… The highest rate card I was ever offered charged %18, my current rate is %6 (not that I’ve ever carried a balance at any interest rate).

7 Steve in W MA

My perspective: you only owe $5000. If you can count on being able to pay $1500 per month towards that once your new job starts, then it is basically gone debt. Just sit tight and pay them off. Paying them off in four months means you’ll only be paying about $300 in total interest. Then don’t run up a debt ever again and you’re good. You can save $1500 a month which will give you a cool $8,000 or so in cash by Christmas time.

8 Lynda

Hi Matt,
This is my situation. I have $24,000 in credit card debt, $28,000 in a home equity loan, and a first mortgage of $123,000. A year ago my home was appraised at $155,000.
Hours at work have been cut down to 32 hours and raises have been frozen for a year and half. I live in a small tourist town where the biggest employer is an Indian Casino where I am lucky enough to be employed at. Good paying jobs aren’t around. I want to point out that I’m single & 61 yrs. old and don’t have another income. I have a 401K but I don’t want to touch it.
My question is should I just continue to sweat out each month on my required payments,or see if I can increase my 2nd mortgage to pay off the credit cards which will cause my monthly payment to go up or file for bankruptcy?
I know there are million of people that are in worst situations than I am but the stress is getting to me. Filling bankruptcy will be an embarrassment to me personally but if I have to bite the bullet and do it so be it.
I have started snowballing throwing an extra $10 but it’ll take forever to pay off
one credit card.
Any suggestions?
Thank you for your time—–

9 Matt Jabs

Hi Lynda, I would make bankruptcy a very last option. Continue making your payments and possibly see about getting a second job to earn more.

10 Shanti Rozo

Hey, you used to write great, but the last few posts have been kinda boring… come on! 😛

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