Originally Posted by freespirited
Some of you suggested paying off the 0% card first, but I am not sure why. $3800 at the 24% rate is $456 in interest for 6 months. The difference in interest rates between the cards (28% and 24%) is only 4%. 4% of $3800 is $152 annually. I would be saving, minus the $100 transfer fee $356 dollars between now and June. The difference between the 28% and 24% is not that big on a $3800 dollar balance. I can't see paying that one off first being a better deal than throwing all my money at the bigger one, kwim? Please explain if you have a different POV. Keep in mind that I *think* I might be able to pay these cards off, if market conditions work in my favor, in one year. I can't see it taking more than two years.
I'm one of the ones who suggested that. There are several reasons why I'd do it that way.
1) You cited credit card debt that's close to half your family's annual income. That's huge. It never even crossed my mind that you might have a way to pay the card off in two years, let alone only one. I never plan anything based on thinking I might be able to pay something off. If I don't know exactly where the money will come from, it's not a planning point.
2) Many introductory 0% offers charge retroactive interest on the whole amount, if the full balance isn't paid off at the end of the introductory period (usually six months). That would be six months of interest on $3,800 at 28%, if the card isn't paid off completely
in time. That would really
hurt, and I'd want to completely eliminate any possibility of it happening.
3) I would never carry a balance on two different cards at all. I have two cards, but the second one was opened for a specific purchase, and has had a zero balance for about a year - the purchase was paid off immediately, and I don't use that card. The only reason I haven't canceled it is because an occasional vendor takes one of the "big three", but not another. I find it cleaner and easier to keep things under control if there's only one card in use.
Basically, if I were sure
I could pay off the 0% card before the new rate kicks in, then I'd probably put the $5,000 on the card that's already carrying interest...but I'd have to have the exact source of every penny of the $3,800 figured out before I'd do that.
Everybody does things differently, though. I'm very
debt-averse. Until Aaron died (we both kind of lost it for a while), I only used my card in the first place, so I could get the cashback bonus. It was paid in full days ahead of the payment due date every month. I hate
carrying debt - always have.