Rolling Over $20K of 0% Debt in Three Weeks - Fairly Complicated

[Drchaos]

Funds arrived in my checking account this morning.

 

Just competed the following:

 

Pay off Bank of America Card $20,011.38 - New balance $0

Pay down AMEX another $7.200 - New balance $12,308.90 - 59.6% Useage 49.2%

 

When I attempted to deposit the funds into my Inherited IRA the website prompted me to send a check instead of letting me enter the ACH information as I did with the withdrawal.  I will call my broker today to see if I can expedite this.  I have about a week so there are no worries with this transaction but if I have to send a check to refill the ROTH later my 30 day window would be a couple days smaller.

 

Credit scores are the same for now.

[Drchaos]

Well, you learn something new every day.

 

Just got off the phone with my broker and unlike a traditional or ROTH IRA there is no 60 day rule for an inherited IRA.

 

There is no way to put the money back so the $23,365 I took out is a taxable distribution in 2022 (no penalties, just added to taxable income).

[hdporter]

5 hours ago, Drchaos said:

Well, you learn something new every day.

 

Just got off the phone with my broker and unlike a traditional or ROTH IRA there is no 60 day rule for an inherited IRA.

 

There is no way to put the money back so the $23,365 I took out is a taxable distribution in 2022 (no penalties, just added to taxable income).

 

One:  I have considerable empathy for you.  It's not pleasant news to learn that you've accelerated a tax liability.  Plus, since I assume that you took only enough of a distribution to fund your "temporary" cash needs, you now have to pony up the tax (by Dec 31, if you're potentially subject to underpayment penalties).

 

I dread every time I do an internet search through the tax regs, looking to make sure I have a solid understanding of a subject at hand and don't overlook any underlying detail.  I'm a frickin' accountant and still that quest frustrates the freak out of me!  So, bottom line, I can understand how you might miss this "nuance" of IRA withdrawals.

 

(btw, that "nuance" isn't surprising ... the IRS really wants bequest IRA balances liquidated as soon as they possibly can mandate.  The original owner has kicked off; any further deferral starts making a lie out of the adage re "death and taxes"! )

[Drchaos]

18 minutes ago, hdporter said:

 

One:  I have considerable empathy for you.  It's not pleasant news to learn that you've accelerated a tax liability.  Plus, since I assume that you took only enough of a distribution to fund your "temporary" cash needs, you now have to pony up the tax (by Dec 31, if you're potentially subject to underpayment penalties).

 

I dread every time I do an internet search through the tax regs, looking to make sure I have a solid understanding of a subject at hand and don't overlook any underlying detail.  I'm a frickin' accountant and still that quest frustrates the freak out of me!  So, bottom line, I can understand how you might miss this "nuance" of IRA withdrawals.

 

(btw, that "nuance" isn't surprising ... the IRS really wants bequest IRA balances liquidated as soon as they possibly can mandate.  The original owner has kicked off; any further deferral starts making a lie out of the adage re "death and taxes"! )

In a previous year I took a 60 day loan from a traditional IRA and paid it back in time.  Later that same year I did the same thing with a ROTH IRA.

 

Because I had done this years ago with two different accounts my memory was that one of them was the Inherited IRA.

 

It was an easy mistake to make.

 

I am pretty sure my next three years will have higher incomes than this one so I this may work out to my advantage although it was not my intent.

[Drchaos]

It seems my dispute has been settled.

 

Transunion has finally caught up to my earlier AMEX payment and now shows 78% useage.

 

At this point I have paid the card down below 50% useage and paid of the BOA card completely and am waiting for these payments to show up before pulling the trigger.

Edited November 8, 2022 by Drchaos

[Drchaos]

At this point Equifax and Transunion are both showing a credit score over 760.

 

Today is the day I pull the trigger.

[Drchaos]

Deleted

Edited November 17, 2022 by Drchaos

[Drchaos]

Applied for seven credit cards, here are the results:

 

 

 

Navy Federal Credit Union Platinum Credit Card0.99%N/A12 Mo0% - Approved $7,100 limit

Union Bank® Platinum™ Credit Card0%15 Mo15 Mo0% - No instant decision, they will let me know in a 7-10 days

Edward Jones Business Credit Card0%N/A12 Mo0% - No instant decision, they will let me know in 24-48 Hours

Wells Fargo Reflect® Card0%21 Mo21 Mo3% - Approved $19,000 limit

Bank of America® Unlimited Cash Rewards0%18 Mo18 Mo3% - Approved $10,000 limit

Chase Freedom Unlimited0%15 Mo15 Mo???Discover IT0%15 Mo15 Mo3% - Denied

Discover IT - Approved, setting up account, limit unknown

At this point BOA had not reduced the limits on my two existing accounts so I do not know if they will do so or if I can move my existing $38K limit for a total of $48k.

Edited November 17, 2022 by Drchaos

[direct]

If I am reading this correctly, much of your debt is related to your business.  This is a trap that many people get stuck in...they use personal credit cards to finance their business which tank your personal scores and makes it difficult to get out of.  

 

My suggestion is to pay down your personal cards to under 10% utilization (on a per card basis) and once your FICO scores are in the high 700's, apply for business credit cards that don't report to personal.  You can be maxed out on 0% business cards and other than Capital One and Discover Business, most do not report to your personal reports.  As long as you make your payments on time, you can be approved for more business cards and keep your personal cards with little to no balances which will keep your FICO scores high.

[Drchaos]

13 hours ago, direct said:

If I am reading this correctly, much of your debt is related to your business.  This is a trap that many people get stuck in...they use personal credit cards to finance their business which tank your personal scores and makes it difficult to get out of.  

 

My suggestion is to pay down your personal cards to under 10% utilization (on a per card basis) and once your FICO scores are in the high 700's, apply for business credit cards that don't report to personal.  You can be maxed out on 0% business cards and other than Capital One and Discover Business, most do not report to your personal reports.  As long as you make your payments on time, you can be approved for more business cards and keep your personal cards with little to no balances which will keep your FICO scores high.

I paid down the credit cards enough to get my scores in the 760s.

 

Once I have the new cards I will transfer the AMEX balance (Due Feb 28) to cards further out and make further transfers to get negative balances and refund checks to retrieve some of the cash I used to pay down the cards.

 

My business income next year will allow me to pay all of the cards off if that is what makes sense at the time.

 

My current liquidity problem is due to some decisions I made that will pay off in the long run.

 

Using personal credit to get 0% loans for my business is not a trap but a ladder.

[direct]

On 11/19/2022 at 2:25 PM, Drchaos said:

I paid down the credit cards enough to get my scores in the 760s.

 

Once I have the new cards I will transfer the AMEX balance (Due Feb 28) to cards further out and make further transfers to get negative balances and refund checks to retrieve some of the cash I used to pay down the cards.

 

My business income next year will allow me to pay all of the cards off if that is what makes sense at the time.

 

My current liquidity problem is due to some decisions I made that will pay off in the long run.

 

Using personal credit to get 0% loans for my business is not a trap but a ladder.

 

[direct]

I understand what you are doing, but if your personal scores are in the 760 range, it would make sense to get 0% APR business cards and pay off your personal cards.  Your FICO scores will most likely get you into the 800 FICO score category and you will then be able to leverage your 0 balance personal cards and 800 FICO scores for more business credit cards as you need them.  Essentially doing the same thing you are doing now with personal cards, but using business credit cards that don't report to personal.

[shifter]

On 11/19/2022 at 2:25 PM, Drchaos said:

Using personal credit to get 0% loans for my business is not a trap but a ladder.

It's always a ladder. You're not the first and you're not the greatest. It's a ladder until it's not. That's how traps work. They spring when you don't expect them. 

[Drchaos]

So far I have received four of the eight cards I was approved for (assuming the last one is also approved).

 

The next step is to create a negative balance by using a BT to overpay one of my existing cards.

 

Any feedback about which companies will accept an overpayment and send a refund check would be appreciated.

 

Which ones will do so the fastest would also be helpful.

 

If I remember correctly the last time it took me about three weeks to get paid.

 

[centex]

There are far too many red flags here that OP is choosing to ignore or, alternately, has willing chosen to place themselves at risk. 

 

For future readers...what has occurred is NOT a suggested course of action in the current fiscal climate, and co-mingling personal and business finance is NEVER recommended. 

[Drchaos]

13 hours ago, direct said:

I understand what you are doing, but if your personal scores are in the 760 range, it would make sense to get 0% APR business cards and pay off your personal cards.  Your FICO scores will most likely get you into the 800 FICO score category and you will then be able to leverage your 0 balance personal cards and 800 FICO scores for more business credit cards as you need them.  Essentially doing the same thing you are doing now with personal cards, but using business credit cards that don't report to personal.

I did get approved for $25K on the Edward Jones business credit card but I think I will need to generate at least $10K from the personal cards.

 

I also want to roll the remaining AMEX balance to a card with a longer BT deal.

Edited December 2, 2022 by Drchaos

[Drchaos]

Here is an update on the approvals:

 

Navy Federal Credit Union Platinum Credit Card0.99%N/A12 Mo0% - Approved $7,100 limit  - card received

Edward Jones Business Credit Card0%N/A12 Mo0% - Approved $25,000 limit - card received

Wells Fargo Reflect® Card0%21 Mo21 Mo3% - Approved $19,000 limit - Card not received yet

Bank of America® Unlimited Cash Rewards0%18 Mo18 Mo3% - Approved $10,000 limit - card received

Discover IT - Approved, $6,000 limit - card received Citizens Bank 0% Balance Transfers 4% fee 0% rate 18 Mo - Approved $13,000 - card received   Union Bank® Platinum™ Credit Card0%15 Mo15 Mo0% - No instant decision, they will let me know in a 7-10 days

 

Chase Freedom Unlimited0%15 Mo15 Mo???Discover IT0%15 Mo15 Mo3% - Denied, already had a Chase Freedom Card (thought I still had Chase Slate)

[Drchaos]

Still waiting to receive the Wells Fargo card before I start doing balance transfers.

 

Never did receive any answers about which card I should overpay to generate a refund check.

 

I plan to use BOA as a spender as it has a 1.5% cash back rewards with 18 months at 0% so I prefer not to send any BTs to BOA cards.

 

Any ideas?

[hdporter]

17 minutes ago, Drchaos said:

I plan to use BOA as a spender as it has a 1.5% cash back rewards with 18 months at 0% so I prefer not to send any BTs to BOA cards.

 

You're leaving at least 33% on the table; there are a handful of 2% (or better) reward cards.  My favorite right now is WF.  If I can bring myself to bring it into my spend routine, I intend to switch to X1.

 

Your card app/rollover saga fills me with some trepidation for you.  Under the best of times lenders grow leery of multiple apps and demonstrated high utilization (over 50%) on some cards.  These aren't the best of times.

 

I outlined my key concerns with your debt strategy early on in this thread.  Your immediate vulnerability arises from the prospect that one or more lenders may pare back your limits with an aim to reduce their risk.  This could ultimately shut down your refi options across the board.

 

I'll again advise that until such time as you get utilization of each individual card under 30%, you consider other finance options (incl installment loans) that will take pressure off your reliance of revolving credit.

 

That said, I'm pulling for you and wish nothing but the best success going forward.

 

 

[shifter]

24 minutes ago, hdporter said:

You're leaving at least 33% on the table; there are a handful of 2% (or better) reward cards.

He's talking about using BofA as a spender until he maxes it out (or some lesser number) and leaving the balance there for 18 months. So in essence a slow BT process, which is more valuable than the extra 0.5% CB. 

[Drchaos]

1 minute ago, shifter said:

He's talking about using BofA as a spender until he maxes it out (or some lesser number) and leaving the balance there for 18 months. So in essence a slow BT process, which is more valuable than the extra 0.5% CB. 

Correctamundo.

 

Also, I moved the credit limit over from an existing card so the BOA card now has a $48K limit.

[hdporter]

39 minutes ago, shifter said:

He's talking about using BofA as a spender until he maxes it out (or some lesser number) and leaving the balance there for 18 months. So in essence a slow BT process, which is more valuable than the extra 0.5% CB. 

 

Got it.  (A lot to keep up with here ;).  I'm tuning in sporadically in SAS mode ... <short attention span>)

[centex]

2 hours ago, Drchaos said:

Still waiting to receive the Wells Fargo card before I start doing balance transfers.

 

Never did receive any answers about which card I should overpay to generate a refund check.

 

I plan to use BOA as a spender as it has a 1.5% cash back rewards with 18 months at 0% so I prefer not to send any BTs to BOA cards.

 

Any ideas?

Spending on a card is not often viewed as a good idea because of how payments post.  You will need to 1) pay close attention to the order in which they process payments AND 2) have a plan in place to have the BT zeroed out in time so you don't jump into this sort of nonsense again. 

 

BT arbitrage has ALWAYS had risk, but perhaps none such as the current climate.

[Drchaos]

9 minutes ago, centex said:

Spending on a card is not often viewed as a good idea because of how payments post.  You will need to 1) pay close attention to the order in which they process payments AND 2) have a plan in place to have the BT zeroed out in time so you don't jump into this sort of nonsense again. 

 

BT arbitrage has ALWAYS had risk, but perhaps none such as the current climate.

I understand your posts advising caution but I am shouldn't be the target audience for these posts.

 

I had everything worked out and got approved for all of the cards with fairly high limits aside from my error with Chase (applying for a card I already had).

 

My cash flows over the next couple years will be plenty to repay these cards.

 

Right now I need to generate cash in the short term to avoid making a withdrawal from an Inherited IRA,

 

To do so I need to do a balance transfer using a couple of the new cards to generate a negative balance in one of my existing cards to generate cash.

 

I would like some feedback so I don't end up wasting time I don't have by sending a balance transfer to the wrong card company and having them refuse to take it.

[hdporter]

1 hour ago, Drchaos said:

I understand your posts advising caution but I am shouldn't be the target audience for these posts.

 

I had everything worked out and got approved for all of the cards with fairly high limits aside from my error with Chase (applying for a card I already had).

 

My cash flows over the next couple years will be plenty to repay these cards.

 

Your reply is directed to @centex; because we have both expressed similar concerns, I hope neither of you mind if I put in 2 cents more ...

 

The most immediate concern has nothing to do with your ability to repay this debt.  I'm satisfied that you're confident of your income prospects and it's not my place to question that.

 

The "red flag" waving in the wind here is that you're actively engaged in credit behavior that tends to invite adverse action from creditors:  high utilization (over 50% of individual credit lines) and multiple account openings within a short time.

 

You admittedly are in a tight cash position at the present time.  If you're subject to adverse action by the creditors on whom you rely as a cash source, you could find your debt rolling operation prematurely shut down.  I'll suggest that you've opened yourself to the risk of enduring some real hardship.

 

I'm not saying such action is inevitable; just that I don't envy the risk level that you're operating under