Credit Card Debt

Found $500!

February 25, 2020 by tanya

I recently obtained a business loan to use in connection with a transfer of some of the business card debt I have. After the lender deposited the new loan funds into my business account, I started the process of paying off the card.

Something told me to call the bank to confirm the balance due on the card before making a payment online. When I listened to the uncircumventable automated list of account details, I learned that I had $500.33 of cash rewards available on the card.

When I listened to the uncircumventable automated list of account details, I learned that I had $500.33 of cash rewards available on the card.
~ single girl

What?!!! I had no idea I had these rewards available! When I looked at the card information online, my account showed that I had zero dollars of rewards, so hearing that I had that much money available was extremely surprising. That’s a lot of money! It’s just over the amount I was paying in monthly finance charges (about $483/month!).

I waited to speak to a representative and we went through the process of applying the available rewards to the balance of the business card.

LESSON: Before paying off a credit card with “rewards,” confirm what rewards you might have available so you don’t miss out on them.

I’m grateful for this win.

Money Move – Balance Transfer Remix

February 21, 2020 by tanya

Last month, I applied for 2 credit cards for my business. My aim was to use the cards to transfer the balance on the business credit card that I’ve had for years. The balance on the business credit card was around $22,000 and the interest rate was ridiculous (over 22%). My monthly payments of $1,000 weren’t going very far. Out of the $1,00) payment, $493 of it was going toward the finance charge.

I thought that both of the cards I applied for had a 0% interest rate. I was wrong. Both had a 0% interest rate, but I later found out that with one of the cards the introductory rate didn’t apply to balance transfers. The balance transfer was my sole purpose for applying for the card! So I needed another solution.

I thought that both of the cards I applied for had a 0% interest rate. I was wrong.
~ Single girl

I found a company that offers unsecured business loans through Lending Club. Though the rate isn’t 0%, it is still less than half of what the rate on the business card previously was. And, though there’s a loan fee, when I consider how much I was paying in finance charges every month, I’m still saving money. Even when accounting for the loan fee, I should be saving about $100 a month on this portion of the balance of the credit card (approximately $11,800). I’ve already transferred $10,000 of the business card balance to the 0% interest card, so I’ll be saving about $250 per month on that portion of the balance. In total, I’m coming out ahead at roughly $350 per month.

Here are the terms of the business loan:

Loan Amount: $12,000
Loan Fee: $718.80
Interest Rate: $9.9%
Term: 24 payments of $554

The plan is to be really aggressive in paying off both the 0% card balance as well as the business loan. Though I’ve been paying $1,000 per month on the card, I’d like to increase that amount to $2,000 per month. After all, the purpose of making these money moves is so that my payments can make a bigger dent in the balances, not so that I can prolong the payoff period. If I can get both of them paid off by the end of this year, I’d be DELIGHTED!

My goal is to be financially responsible and fiscally savvy when it comes to both the business and my personal finances. An aggressive plan to pay off the business’ debt is a good step in that direction.

Money Move – A Balance Transfer

January 21, 2020 by tanya

In addition to all of the personal debt I have, my business has a credit card as well. I finally stopped using it when I came to terms with the fact that I was treating it as a crutch. I had ceased my use of personal credit cards, but continued to use the business card. You can find more background on this here, and below you’ll find a small excerpt from what I initially wrote about the card.

 So, the problem here is obvious, right? Though I almost eliminated my use of credit cards on the personal side, I continued to maintain my same old bad habits. I simply narrowed the playing field of stupidity. Instead of being stupid with the credit cards in both my personal and business lives, I just limited the credit card use to the business side.  

 Ah . . . but when you work for yourself and you are the key producer in the business, the business is integrally linked to the person. I make all of the decisions about what money will be spent, when and on what things. I control the credit card.  Though I knew I couldn’t use a personal credit card to get certain things, I could find a way to make it a business expense. I could justify going to Capital Grill for a meeting on the business side. I could justify traveling to another state, staying in a nice hotel, and eating fine food for a business conference. Could the business afford it? No! Could the business pay for it? Absolutely. I had the business credit card.

Though I stopped using the card 5 months ago, and have made over $5,500 in payments since then, the balance is still about $22,000, which means it has only gone down by about $3,000. When I started this journey, the balance was a few hundred dollars short of the $25,000 credit limit. Each month, the minimum payment required is $635. I’ve been paying at least $1,000.

I’ll be able to pay off the high interest balance card and not pay any interest for 12 months.
~ Single Girl

I’m tired of not seeing the balance go down more. This week I applied for a couple of 0% business credit cards for the business so that the $1,000 per month payment can go farther. I ended up getting two cards – 1 from Capital One and another from American Express. I needed to get 2 cards because neither company would give me the full $22,000 that I needed to cover the full balance. Between the two of them, I’ll be able to pay off the high interest balance card and not pay any interest for 12 months.

The American Express card has a balance transfer fee of $300. The Capital One card has no fee. The $300 transfer fee makes great money sense to me because my finance fee for just 1 month with the current card is $493. Over the next 12 months, I should save several thousands of dollars in finance fees.

I’d love to be able to pay off the entire balance within the next 12 months. With my 2020 goal of increasing annual gross revenues in the business by over double, I believe it to be doable. I’m excited about getting this done so I can make more traction in getting that credit card paid off.

Money Move – A Debt Consolidation

November 22, 2019 by tanya

Audio version of this post, read by the author.

Technically, I’m out of credit card debt. Last weekend, I applied for a debt consolidation loan for $26,000 to cover all of my credit card debt . . . and I actually got the loan. I was kind of surprised because, just this summer, I applied for a debt consolidation and got neither the amount I needed nor a rate that made any sense.

This time, I got a loan covering what I needed, as well as an interest rate much lower than what I’ve been paying on my credit cards. I used Lending Club and they’ve already wired the funds to pay off 2 of my 3 remaining credit cards. I’m waiting on the last payoff to hit my 3rd credit card account.

I hadn’t planned on applying for a consolidation this weekend. I was going through my mail and saw that Discover offered me a personal loan that I could use for consolidation. I was curious. What would they offer me? How much could I get?

They offered me the $26,000 to cover the balances on my credit cards, but at a rate of 17.99% for 5 years. The monthly payment on that would have been $660.09. The terms for $23,000 over 7 years would have been at 19.99%, with a monthly payment of $510.60.

A loan at that interest rate wouldn’t be helpful to me.

Since I was already in the consolidation mindset, I decided to see if I could get a loan with another company. Lending Club came through with the following terms:

New Loan: $26,000
Origination Fee: $260
Interest Rate: 5.89%; 6.57% APR
Monthly Payment: $790

Here’s a summary of what I was paying and the approximate interest I would have paid:

American Express: 15.99%
Discover: 5.99% on $3,020.13 of the balance; 22.74% on $10,000
Credit Union Credit Card: 14.40%

Considering the interest rates that I had on my credit cards, I think the consolidation is a good move. If I had less debt and was looking at a shorter payoff window (i.e., if I expected to pay off all of my debt within a year or less), doing a consolidation wouldn’t be as helpful. Given that I was paying between 14.40% and 22.74% on the majority of my credit card debt, there is a clear savings for me, as someone who has a fairly long debt repayment journey.

My overall goal with the debt consolidation was to get more bang for my debt payment buck. I wanted to end up with a monthly payment that was equivalent to what I’ve been paying separately to my different credit card creditors, with a substantially lower interest rate. That way, each payment would make a more substantial dent in the balance.

With the debt consolidation, I will make a total of 36 payments (3 years) of $790. I love that there’s a finite date. I don’t know why that’s significant to me, but it makes me feel good. If makes me feel that, at the very latest, I will have all of this credit card debt knocked out within 3 years.

With the debt consolidation, I’ll be saving about $3,800 in interest – at least.
~ Single Girl

Total interest on the $26,000 debt consolidation loan over 3 years is $2,394.53. If I pay it off in 2 years, the interest would be $2,118.27 – about a third of the amount of interest that I would have paid if I didn’t do the consolidation and left things status quo. Based on a 2 year calculation, with the other credit cards – as is – I would have paid about $6,225.25 in interest. With the debt consolidation, I’ll be saving about $3,800 in interest – at least.

The debt consolidation will require a rework of my debt snowball plan. Since all of the credit cards are now wrapped into one loan, my lowest balance is now my 2016 IRS tax balance. The next one is my 2017 tax balance. Here’s what the order of attack is now.

Under the new order of my debt snowball debts, this loan is going to be the 4th debt that I attack. I’ve first got to address the 2016 IRS bill, the 2017 IRS bill, then my car. While I’d love to say that I’ll pay this off next year or the year after, I recognize that I have to pay off almost $40,000 before I even get to this loan.

This is a very appropriate payoff order. Since the IRS charges significant fees and interest, and has the power to freeze my accounts, I’m glad that I’ll now be focused on getting them paid off as quickly as possible.

While the $790 monthly payment might seem high, it’s around the total of what I’ve been paying on the credit cards independently.

Chase Monthly Payment: $182 (recently paid off)
Credit Union Card Monthly Payment: $181
American Express Monthly Payment: $252
Discover Monthly Payment: $265

What I was paying prior to paying off the Chase card was $880 per month in total on credit cards.

A Note on Celebrations

I’m not going to forego my debt payoff celebrations even though the credit cards are consolidated into one loan. I will not wait until the full $26,000 is paid. Instead, I’ll do the celebrations in milestones. Every time I pay off an amount equal to what a particular credit card balance was, I’ll get to celebrate. For example, if the balance on my credit union credit card was $6,992 as of July, 2019 (when I fully committed to my debt-free journey), once I’ve paid off that amount on the consolidated loan, I’ll get to do a little celebration. My personal policy for celebrations is that I am allowed to celebrate the payoff of the debt with an amount equal to 1% of what the balance of that debt was as of July, 2019. So, when I’ve paid off $6,992, I’ll get to celebrate using up to $70 (i.e., 1% of $6,992, rounded up to the nearest dollar).