We recently sat down and looked at all the interest we’re paying on credit card debt and tried to figure out how we could cut it down.

First, we called the 2 cards that have an interest rate (the 3rd of our cards is already at 0%) to see if they could lower the rate. They both would not - although, both pointed out that the rate for this month would be lower, since the prime rate had dropped. They were correct, each fell a bit, so that the 2 cards are at 11% and 10%, but we still weren’t happy with this.

So I looked around for any 0% balance transfer offers, found one for discover, and applied. We were approved, and the $6.5 balance on our citi amex (previously at 11%) has now been moved over to this new discover card. The discover card 0% rate is good until next april. Now with the citi amex card balance at 0, we can move our $16k usaa mc balance over to citi amex, using their 0% balance transfer offer which will be good until this October.

A couple of thoughts about all this swapping around.

First off, I realize that some people are not keen on the 0% balance swapping. That’s fine, stick with your beliefs, whatever you feel is right. I don’t like paying interest, period. If I can find a way to NOT pay interest, I’m going to use it! Now, having said that, it is true that in the past, we have transfered a balance over to a new 0% card, and then run up the balance on the old card. Not good. THIS is the practice that one should not be keen on - with good reason. It got us into this mess! We are on a plan now, and there will be no more debt racking up!

Next: Credit cards are tricksy. They like to play favorites with the balances. Take the citi amex. We had a balance of 6.5k on there at about 11%, with a credit limit of $20k. They have offered us additional 0% balance transfers. Sounds great, right? that’s 14k of unused credit we could be using at 0%. Perfect!

Not so fast! If we had transferred a balance while we had a balance NOT at 0% (the $6.5k was at around 11%) — then every payment we sent in would automatically go toward the 0% balance, and NONE toward the 11% balance. That would mean that the $6.5k balance at 11% would NOT GET PAID DOWN AT ALL, until the 14k at 0% balance was GONE. That would be a lot of months, with a LOT of interest each month, which is the entire reason we’re doing all this swapperoo-ing — to AVOID INTEREST. No thank you, Citibank, get another shmuck to fall for it.

So, we are now currently WAITING. The $6.5k balance has been transferred, and I’ve even sent in about $60 so that the balance on the card is a CREDIT of around $60 (I’m anticipating the finance charge). I am waiting until after the next statement to instigate the next balance transfer, just to make SURE that there will be NO BALANCE that may incur finance charges during the time we have a 0% balance as well. In the meantime, I’ve switched our main debt snowball payments from the $6.5k balance on the citi amex (that is now on the discover card) to the $16k balance on the usaa mc, which will be moving over to the citi amex. Pay down the one with the interest charges first, is my philosophy.

Finally: the $16K balance will only have a 0% interest rate until OCTOBER. That is REALLY pushing it. Hopefully we can get that paid down before it reverts back to an interest rate, but even if we don’t quite make it, we will still have saved a bundle on interest. It seems like an awful lot to pay off by October, until we do a few calculations.

Some artillery in our arsenal:

• one month (i think it’s May) we’ll have 3 paychecks from my husband instead of the usual 2, he gets paid bi-weekly
• we’re expecting $1k back from our state taxes, and
• of course can we all say together, TAX STIMULUS! That’s another $1600 that will be going toward debt

So along with our usual debt snowball, we’ll have an additional $4400 going to debt between now and October (and that’s not counting the $2.5K from the bonus that’s heading over to debt this month!) It may be crazy, but my goal is to get that 16k GONE by october! Let’s run some numbers to see if it’s doable:

Seven months between March and October to pay off $9100:

$9100 / 7 months = $1300 a month.

That is doable, baby. Very doable. We may have to crank it up a notch, but we can do it!

So the moral to this post is: Credit card companies are tricksy, we must watches them, yes we must!!

Related Posts:

• March 27, 2008 -- update on the no-interest / savings thoughts (0)
• March 21, 2008 -- number crunching: the interesting interest (3)
• April 12, 2008 -- update, and questions we’re asking ourselves (2)