My move back to the U.S. from England recently, generated a bit of ‘international moving expenses’ for us. My favorite was the $1,100 unexpected surprise I got having to pay for extra storage and the radiation screening by homeland security of our shipping container with all our stuff in it. It felt a bit like the sign I always expect to see at the airport, ‘You Will Be Stripped Search For Your Protection’.
Anyway, I hate debt but after moving back I wanted to see what other financial surprises were waiting so I did not pay off the one card I used for those moving expenses. I’m glad I didn’t. As I began to worry about the economy a few months ago I decided the interest I was paying on the balance was better than letting go of the cash I had at hand. As I’ve said over and over, in economic downturns, cash is king.
Yes, I admit, I am the get out of debt guy and there I was, carrying some debt. I was paying way more each month that the minimum payment, or as I now like to call it, the maximum profit for the bank payment. It was a dilemma between wanting to hold on to my cash and let go of it to reduce the debt. It was that age old struggle of trying to find the right balance.
I’ve watched so many people in the past get into difficult situations by being so freaked out about carrying debt that they use every last penny to pay it down. But that all or nothing approach leaves them in a terrible situation should an unexpected expense appear.
For example, my daughters car suddenly needs a new EGR valve. It has been many years since I worked on my cars but once the local mechanic quoted $700 to replace it for her, I got my hands dirty real quick. I even took the EGR valve off and cleaned it out but that didn’t work. It needs to be replaced. The replacement part is about $275. And when the engine light pops on unexpectedly, that’s one of those expenses not in the budget.
So with all the economic doom and gloom swirling around us I wasn’t sure if there still were some good balance transfer credit card deals to be had, but I was wrong. There still are.
So what Pam and I decided to do was to accomplish two goals at the same time. You see, in all the years since our bankruptcy in 1990, Pam has not had any credit in her name alone. But lately we’ve been talking about the fact that if anything happened to me she would not have much of a credit report or credit score if she needed one.
So this turned out to be perfect opportunity for us to apply for a card in her name, do the balance transfer and then pay the debt off at 0%. I mean really pay it off. The goal is to divide the transferred debt by the 15 months of 0% interest and pay that bill off in full using the banks money for free. At the end of that time she’ll also have gone a long way to reestablishing her new and good credit and the debt will be gone.
If that logic and approach makes sense to you, use the balance transfer link, like I did to find a great balance transfer deal.
It’s interesting that getting out of debt does not mean that you have to be credit adverse, just credit smart. It’s about finding balance, finding that point at which the use of credit does not become a burden for you, but an advantageous tool to use for your benefit.
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Steve, I read your blog religiousy as I have a strong interest in personal finance and hope to one day do some financial coaching/counseling as I can see it’s very needed. I have also struggled with the “to use a card or not use a card dilemma.” My husband and I both lost our jobs in 2007 and now are in sales working for commission and never knowing what our income will be from month to month. Unfortunately, although we did our best to cut expenses, most of them didn’t change due to job loss, including the two investment properties we owned that went “under water” as a result of the poor real estate market. When one of those properties needed extensive repairs to be able to re-rent, we put $7,000 on a cc. Here’s what I do. Some of the cards we currently owned were offering 0% for 6-12 months or 3.99% FOR THE LIFE OF THE BALANCE! This is obviously the best choice, as the cc company is hoping (and they’re probably right) that most people won’t pay the balance within the promotional period. So now all the debts have been transferred to cards with low interest rates and we are able to make significant progress in paying them off, while not incurring any new debt and trying to build up some savings.
People need to be real honest with themselves when doing a transfer about their ability to pay back within the promotional period and their commitment to using it as a tool to get out of debt.
Karen,
Sounds like you made some really smart moves. Keep up the good work and thanks for reading.
Don’t be afraid to comment on other questions as you move forward. Even just an encouraging word means the world to people in trouble. Think of it as your first step towards you dream of coaching.
What people fail to realize in the “to use a card or not use a card dilemma” is that the card is merely the tool, not the problem. As an instrument to make a financial transaction a credit card is the safest instrument you can use to do that. Better than a debit card.
The reason people get into problem with cards is either bad life luck such as natural disaster, job loss, accident, divorce, etc. or emotional issues surrounding their spending like compulsion, addiction, co-dependent spending, etc.
What people fail to understand is that blaming the “card” for their troubles is like blaming the kitchen knife for being plunged in the body of another and killing them. Do we sue the knife manufacturer?
Big hug.
Steve