I am JDW out of middle-America, USA.

I have been a reader of the GRS articles for just over a year now. After hitting the forums only last week I spied the FFJournals and thought "Why not!"

I open this journal with some good news.

With the use of creditkarma dot com, which JDR brought to my attention in his articles, I took one of the advertised mortgage company's offers and applied. It has gone very well... I am about to finish the refinance process on my home. This will take me from a mortgage of 6.5 and a HELOC of more than that, part of it variable, to a fixed %4.5 mortgage.... saving me around $450 a month.


Now the bad news / lesson learned:

I made a foolish choice back in the day right after college - I rolled a couple student loans and my car loan into a 0% credit card (CC) offer. Back then, those offers were a year and half long. Now they expire after a year and I have to roll the whole mess, over 10K, over to another zero offer. This has been going on for....about a decade.

OK, I see a question here I'll have to answer: Yes, I have three credit cards with over 10 thousand dollar limits. (My credit rating is rock-solid well over 750.) Each card offers a 0% balance transfer every two to three months, with the usual 3% fee. The major thing here is that I only use these cards for the zero balance offer, and the movement of this +10K loan, that is it. I don't even know the interest rate on these cards, I never use them that way.

Also, I am saving on interest: Every time I flip the loan to a new 0% offer, I pay 3% of the loan as a fee. This is much better than letting the 0% rate expire, and getting slammed for 12% to 25% interest on over $10,000!

So, this $450 (plus the $300 I was paying into the CC debt) that I'll be saving per month will get put in to the already emergency fund. (Which is at "one month" level; it can support me for one month of no income.) If nothing happens, like a dead car or other emergency, I'll save enough to pay off the over 10K debt in about a year and a half. I'll still be paying the minimum to the CC while building the E-fund, of course.

So the obvious question:
Why not just pay back the loan as I go? At zero percent, paying off the CC as I go doesn't help me, other than the obvious. Building the emergency fund helps piece of mind. When it comes time to flip the balance to the new zero percent offer, I'll take part of the E-fund that I am comfortable with losing, and pay down the principal before moving the principal to the new zero offer, for a smaller 3% fee. This way my money stays in my pocket until the last minute. (and I earn a little interest on the side.)


I'll follow up in this thread explaining the "ever-shuffling cc balance" trick... and the math that bears out why it's worth consideration...or not.

JDW

I would not feel comfortable doing what you are doing, unless I was also paying off the loan. Yes so far you have been lucky and "only" paying $300 in fees per year for your debt, but the success of doing this depends on multiple credit cards continuing a similar offers. Myself my credit is considered excellent, but I've had interest rates on credit cards go up, balances cut, nothing from what I did but companies making decisions looking at the big picture and trying to reduce risk for themselves. Basically, credit cards can change terms at any time (look up the fine print). So at any time this balancing act could be coming down and then you will be paying (say if it's 12% interest) 1200 per year on interest until you pay it off.

After you create an emergency fund I'd use that $450 a month to pay off your debt.

Actually, I have been paying this down at 3 to 5 times the minimum. ($300 / month for last three years, at least.)

Yep, I know about the small print. It's been one of those things that weigh on the mind each month the statement comes in the mail.

This consolidation of the loans to the credit card was a mistake made years ago, when I had little experience /training in handling my expenses. I just didn't do the math or think it through.
Since being laid off from the better paying job (over 5 years ago), I haven't even tried to flip this debt to a signature loan at a bank. The mortgage actually puts me around +95% leveraged vs. the new income.

I was amazed the refinance went forward! - It's FHA, I was told that my credit rating was the tipping point on allowing it to progress.

Thx for the reply!

JDW

How much do you owe in total? What is the strategy your going to use to pay this debt off? What are your monthly payments?



By the way welcome!

Well, the refinance has not yet been completed, so the bottom line has yet to be established (insurance, escrow..)

aaand I quite honestly do not feel comfortable posting all the particulars of my personal monthly budget to the world.

I guess I just wanted to drop this/my journal entry about a successful turn in my budget; which would not have happened if I had not been reading GRS.

oh, and that massively consolidating cheap loans into a temporarily-cheap credit card is a really, really bad idea.

JDW