Wednesday, June 21, 2006

The Brand New Debt Payoff Plan - Sort Of...

Once all of my balance transfers are complete, here's what my debt will look like (some variation will occur due to pending finance charges, etc.). I've included my "old" debt for comparison.

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CC #1 is showing at 5.9% but it actually has about $1,000 at 9.9%. The 5.9% was a balance transfer and the rate stays until the balance is paid in full (I love balance transfers like that!). Because of the low rate in general that is guaranteed, this will probably be the last of the credit cards to be paid off.

CC #2 will be ZERO!! Woohoo! Going from $23,000 to $0.00 in 5 months - I wonder what special offers they will give me. If they give a low balance transfer rate for the life of the transfer, I may end up shuffling some debt around again but I have to decide if it's worth it when or if the time comes.

CC #4 will have $8,000 at 3.9% until Nov '06. After that, the rate will go to 16.49% which doesn't please me. Since I only have 6 months before either paying the higher rate or completing another balance transfer, this card will be paid off first. There's too many "if"'s to keep a low balance on this card. I'm not sure if I can get the whole balance paid off before the nice interest rate expires, but I sure am going to try!

CC #6 is a relatively small balance that is good through March '07. I also do not need to make any payments until then. I have reviewed this card's terms because sometimes when an offer sounds too good to be true - it is. Cards that offer no interest and no payments until a certain time sometimes charge you for back interest if you do not pay it off in full before their offer is up. Luckily, this card does not have that. However, the rate will be over 23%. That's not good. Probably in February I will pay this off in full and not pay as much to one of the other cards.

CC #7 will have $7,500 until June '07. So basically a year before the interest rate goes to over 16%.

My Prosper loan is set at 9.9% with a balance of $3,465.

I know I will pay off CC #4 first. Even though it is a lower rate than other debts, it only lasts 6 months before raising the rate. It also is the only joint credit card between my husband and I. Paying it off first will help both of our credit scores (by lowering both of our credit utilization ratios). Balance transfers can be a great thing, but there is risk involved. Some cards will raise your rate to above 20% if you are a day late on a payment.

I was thinking that I would pay off the Prosper loan next, but I'm not sure. There is the other balance transfer sitting on CC #7 that expires in about a year. I could keep transferring the balance back and forth to keep a low rate, but the one card does charge a balance transfer fee of around $60 every time. I am really on the fence with this one.

So, as it stands right now...here's the order....

1.) CC #4
2.) CC #7
2.) Prosper Loan
4.) CC #1
* CC #6 will be paid off probably in February '07 in one payment

I know I will know more once CC #4 is paid off and perhaps that will make the decision of who to pay off next easier. I just don't want to have a balance transfer offer come back and bite me.

Any thoughts?

2 comments:

Chitown said...

Sounds like a good plan Tricia. Best wishes and keep up the good work!!!

Tricia said...

Thanks Chitown!!