As usual, I’m not an expert, just another guy that likes having extra cash, so please speak with a trusted individual and do the research before making any major decision with your money.
I had a pretty surprising response to my first post on credit, so I’d like to share another way to beat the curve, this is a little tougher to pull off, and a little more complicated to judge the value of then the regular credit card game; but can have a good payoff if the situations and (pay attention Kevin) the math is right. It’s a bit long winded but the process is just as important as the outcome and I hope that even if you don’t have the same situation I do that you will be able to see how you can apply it to your own. This trick will work for you if you are in the following situation:
- You have debt that you are currently paying off, that is liquid. Which means that paying it down expands your available credit. Good examples are credit card debt, and what I’ll be using in my example, Equity lines.
- You currently have a credit card (or two) that is not carrying any debt.
- That credit card company has extended you a special bonus offer for a reduced interest rate or a grace period.
- 1 time per check fee of 5% of the balance, or $150 whichever is less – Okay, because my limit is $8,000 and I’ll likely use the whole thing as this is an unused card I will end up paying $150, so I will consider this a cost of the investment and subtract it from my earnings later on. Also important because it means an early full payment would probably mean I’ll lose money (as I hadn’t given the investment time to mature) so I made sure I can change my autopay type on that card from being “balance in full” to “monthly
- If not payed off by April the balance shifts to being 15% + Prime (around 20%, OUCH!) – Wamu allows you to schedule payments, so I can automatically schedule my payment for a safe date before the bad interest comes in and steals all my profits away.
- Can’t be used to pay off other Wamu debt – Since I’ll be using this to pay off my equity line, (check the rules for your equity lines as some don’t allow for this sort of hijinks) and not another Wamu debt. I’m in the clear.
- Limit is spending cap on card, and there are penalties for going over your limit. – Easy enough as I don’t use this card for other purposes normally, I’ll write the check for $8000 minus fees ($150), or $7,850.
- Must continue to make minimum payments on credit card while going – Ugh. Makes the math more difficult, but you can see my spreadsheet below.
So in my example, for the work and the risk I make $223. Not bad for maybe a half hours work. 🙂 Your mileage may vary.