$89K Later, We're Back To Where We Started

[swedishhands]

Beginning in May, we decided to refi our home and payoff as much short term debt as we could. Two weeks before closing, disaster struck when our MyFico Credit Watch notified us that LW score tanked 50 points sending it to EQ635 when a Home Depot Interest Free Credit offer triggered one month early, accrued interest was applied to account balance sending it over the Credit Limit.  A call to Home Depot corrected the situation and two weeks later when refi closed, we paid it off sending the score down another 5 points to 630.  Over the next two weeks we paid off a total of $89K.  On Sunday, when Citi Advantage finally reported we're back to EQ697, EX697 and TU711.

 

We still have $17,300 on two cards that we are paying interest on.  $11K (CL = $11,500) on Chase and $6300 (CL = $7000) on BOA.  Monthly expenses will go on Citi Advantage which we will use instead of debit card is at $950.

 

Our question for Credit Boards is:  We have a PenFed with a  positive balance of $269 and a credit limit of $22K.  We received a 12 month 0% Balance Transfer Offer last week.  Is it okay to Balance Transfer approximately $10,900 (just under 50%) and borrow the remaining $6400 from retirement account at 5.75% and pay to $0 the last two cards and only operate on the Citi Advantage card on a monthly basis paying it off every month and not pay interest on the Citi Advantage card?

[Sidewinder]

23 minutes ago, swedishhands said:

Is it okay to Balance Transfer approximately $10,900 (just under 50%) and borrow the remaining $6400 from retirement account at 5.75% and pay to $0 the last two cards and only operate on the Citi Advantage card on a monthly basis paying it off every month and not pay interest on the Citi Advantage card?

 

What does "okay" mean?

 

[swedishhands]

Okay means, is it advisable to take advantage of the Balance Transfer offer?  We don't have enough cash remaining to pay off the other two cards, but we want to pay as little interest as possible.  So, we want to utilize the BT offer in the amount of $10,900 or so interest free and borrow the remaining $6400 from a loan from her retirement account which does not show up on a credit report

[Sidewinder]

OK.... it sounded like you were asking for someone's permission.

 

It goes without saying that no interest is better than yes interest.  I have to assume that the BT offer from Penfed limits you to 50% of available credit?  Or is that the limit you've set for yourself, in order to enhance your util ratio for scoring purposes?

 

If it's the latter, then since you've already closed on your refi, I don't see an advantage to gaming your score like that.  I would transfer the whole balance if PenFed will let you.  If your score goes down by five, ten, fifteen points, then meh.  Those points wouldn't bring you as much advantage as would leaving a retirement account untouched.

 

Another thought would be to shop for no-fee balance transfer offers, like Chase Slate or American Express Everyday.  Not knowing your whole profile, it's not possible to hazard a guess about the likelihood of approval for a 5-digit line from those guys.  The reason it's worth trying is the no-fee thing; even a 3% fee might be an impact when the balance is that high.

 

That was my strategy - used my no-fee BT offer from Discover to move my highest balance to 0%APR.  Obviously I had to pay a fee once I transferred to another card after the 12 months, but that was the plan:  the fee was smaller because now it was a percentage of a smaller balance. 

 

 

Edited July 4, 2019 by Sidewinder

[swedishhands]

The PenFed Credit Limit is $22K.  We can transfer the whole thing in one swoop.  Total Available credit on 7 Credit cards is about $76,900.

 

Remaining balance is $17,300/76,900 =.226 or 22.6% overall utilization

 

In your opinion, you don't think putting $17,300 on a $22K card will screw things up to much while leaving the others at $0 using only the Citi Advantage Card for monthly expenses to be paid in full each month.

[Sidewinder]

"screw things up" means what?  Do you have another home purchase or vehicle purchase coming up?

 

You have a chance to quit paying interest on a large CC balance. The cost of doing so is an ugly util ratio for a while.  Your portfolio won't be winning the CreditBoards beauty contest during that interval, but I have to trust that that's not important to you, compared to saving a buttload of $$ on interest and leaving your retirement nest egg unmolested in its incubator.

 

[cv91915]

You are in the the middle of an unnecessarily risky plan.

 

I know it's too late for par 1 of this feedback, but it isn't for part 2.

 

1 - Converting unsecured debt to debt secured by your home is an unnecessary risk to your home, and way too many people end up paying MORE interest over time because they stretch the debt payment out over the entire life of the mortgage.

 

2- Borrowing money from a retirement account to pay credit card debt introduces unnecessary risks (if you become separated from your job, the entire balance could be due in full, or you will have to pay a penalty and income taxes on the unpaid balance).

 

 

 

 

Edited July 4, 2019 by cv91915

[swedishhands]

The PenFed Credit Limit is $22K.  We can transfer the whole thing in one swoop.  Total Available credit on 7 Credit cards is about $76,900.

 

Remaining balance is $17,300/76,900 =.226 or 22.6% overall utilization

 

In your opinion, you don't think putting $17,300 on a $22K card will screw things up to much while leaving the others at $0 using only the Citi Advantage Card for monthly expenses to be paid in full each month.

[hegemony]

what are you trying to accomplish? you have not really defined "okay" and "screw things up"

 

focus on what saves you $$$ in terms of the interest you are paying and let FICO be damned until you are rid of this debt.

 

also be careful to not run the cards up again after moving unsecured debt to secured.

[DPB]

2 hours ago, swedishhands said:

The PenFed Credit Limit is $22K.  We can transfer the whole thing in one swoop.  Total Available credit on 7 Credit cards is about $76,900.

 

Remaining balance is $17,300/76,900 =.226 or 22.6% overall utilization

 

In your opinion, you don't think putting $17,300 on a $22K card will screw things up to much while leaving the others at $0 using only the Citi Advantage Card for monthly expenses to be paid in full each month.

Are you planning to apply for more credit?

If not, put the whole balance on PenFed and pay 0% interest so you can pay the balance down faster. You shouldn’t care what your FICO score is if you’re not applying for anything. 

[insolent1]

Borrowing money from a retirement fund is usually a poor idea. 

[hegemony]

1 hour ago, insolent1 said:

Borrowing money from a retirement fund is usually always a poor idea. 

FTFY

[CTSoxFan]

15 hours ago, insolent1 said:

Borrowing money from a retirement fund is usually almost always a poor idea. 

 

14 hours ago, hegemony said:

FTFY

FTFY.

 

If it means you and your family will be on the street or some other dire consequence, then it may be a good idea.  But generally I would agree as that circumstance is <1% of the time.

[steelers1]

If your main goal is to pay off debt (interest vs. NO interest), then it's a no brainer.

 

I would much rather take a small hit on my FICO scores than my wallet.