I have $7000 in cash. What should I pay toward first?
I would really love to get rid of my truck payment and play the balance transfer game while contributing towards each 0% card.
Thanks
Under the circumstances I'd suggest paying off the 3000 dollar card because in March it's interest rate is likely to skyrocket. Keep the rest in reserve for emergencies.
I would really love to get rid of my Truck payment and play the balance transfer game while contributing towards each 0% card.
Getting 0% Balance Transfer may not be easy. Most institutions would look at a credit score that is quite high. So you may not be eligible. Plus there would be some hidden terms and conditions. Say if you are already on Balance Transfer on existing cards; you can't opt for Balance Transfer to another company and the cost would then be loaded. As you already have got 0% on a large balance, I am assuming you have done it once. The card companies may not allow it again.
Car Loan $17,000 @ 3.4% $532 a month payment Credit Card $3000 @ 0% interest till March 2019 Credit Card $3800 @ 0% interest till Nov 2019 Credit Card $5000 @ 0% interest till Jan 2020
Assuming you are paying off USD 100 per month towards the other cards ... the best way is to pay of USD 3000 towards the 0% March 2019 card as the interest rates may be quite high once it hits March. Paying this off may also improve your credit score.
Keep the balance USD 4000 as emergency funds. By Oct 2019; pay off the balance on the USD 3800 card from the emergency funds; to avoid the higher interest rates and Knock off the USD 5000 card of as much balance as possible. The priority should be to get rid of this balance ASAP. Then rebuild the emergency fund and then pay off the Car Loan with aggressive payments.
To effectively answer this question, we need details on what happens to those credit card interest rates when they rise. Let's assume for now that they all rise to 17%, which is slightly below the national average. Let's also assume you don't pay retroactive interest - that would make paying those debts even more important FWIW.
Those assumptions mean that come March, you can save $3000 x (0.17-0.034)/12 = $34 a month in interest by paying off the $3000 credit card rather than putting $3000 towards your truck loan. Note how I computed that by finding the difference between your two interest rates on the credit card and the car loan. So, unless you can come up with an additional $3000 to pay that March credit card before the APR jumps, best to put $3k towards it now.
Meanwhile, what to do with the remaining $4k in cash you have left over? That entirely depends on how much money you can save before your next credit card APR jumps up. If you use it to pay down your truck loan today, you'll save about ($4000 x .034) x 9/12 = $102 on interest before November (9 months away). BUT come November, if you haven't been able to save more money to pay off that $3800 credit card, you'll start paying ($3800 x .17)/12 = $53.83 per month for that credit card interest. So within two interest payments, you'll have lost all the $102 savings against your truck loan.
These numbers aren't accurate to the decimal place, since the interest payments decrease as you pay off the principal, but they're pretty close. Moral of the story, high interest debt = very very bad. Pay it off ASAP. The credit card debt will be even more of a drag if you have to pay retroactive interest. Potentially MUCH worse.
EDIT: You say "I would really love to get rid of my truck payment", but I would look at it differently, since you're only paying 3.4% interest (relatively low). I would say: "Gee, I'd really love to get rid of my high interest debt and then work on my truck loan!". It's certainly your prerogative to play the balance transfer game, but as my numbers above show, it only takes a slight miss and 1-2 credit card interest payments for that to be a losing strategy. Remember, once you've paid off your high-interest debt, you can then work on your car loan free of worry about any high interest debt, and you won't have paid too much interest in the meantime.
- Car Loan $17,000 @ 3.4% $532 a month payment
- Credit Card $3000 @ 0% interest till March 2019
- Credit Card $3800 @ 0% interest till Nov 2019
- Credit Card $5000 @ 0% interest till Jan 2020
You have $7,000 cash and from comments stated you're paying at least $100 per card while in 0% interest state.
There's a balancing act with debt repayment, you want to minimize interest, but you also don't want to put yourself in jeopardy of missing payments by having too little cash on hand in case of an emergency.
At a minimum per year you can pay ~$3,600 ($100/month * 3 cards), which means if you used all your cash on hand of $7,000 you'd be able to pay $10,600 toward your $11,800 in credit card debt by January 2020.
If you can find a way to up that from $300/month toward credit card debt to $500/month, you could pay off all the cards by Jan 2020 and have $1,200 in cash on hand as a little emergency fund. Then, after Jan 2020 you could roll that $500/month into a larger emergency fund and extra truck payments.
If there's no possible way to put more than the ~$300/month toward the credit cards, then you will need more time on one of the balances and if you can get another 0% transfer with low fee then it will likely make sense to do so, but you should probably pay off the March balance soon and then try for that transfer on the November balance, that should get you enough time to pay them all off without additional transfers after that one. And after they are paid off you can switch over to the extra emergency fund/truck payments as you would have otherwise.
You should keep in mind that once you got rid of a card, its monthly rate will become available for other purposes.
So I think that for now you should keep your money. In March, you should pay off the remaining $2800 of the "March card" (am I right that there are two payments for $100 are still pending there?). This gives you $100 per month as "free" money and $4200 of remaining money.
In November, your balance of $3800 will have reduced by 10 × $100 = $1000. Your cash of $4200 will have increased by 8 × $100 (from the "free money" which went to your first card), so you'll have $5000 by then. Paying off the $2800 will leave you with $2200 cash and $200 per month of free money (from both cards)
By January, your "$5000 card" will have been payed off by 12 × $100 and will thus have $3800 of balance. Your cash, which was $2200 in November, will have increased by $400, so you have $2600 now. Paying them leaves you $1200 to pay for your card. If you do so by $300 a month, you are done four months later.
Afterwards, you can put the free $300 a month towards your emergency funds, your car loan or split it up.
This was all to avoid paying "big interest" on these cards. If you can do a balance transfer again, you should do it, but you should not rely on being able to do it once again.
Note that these considerations should only be your starting point. You should consider that this way, you'll have a low emergency funds at some time in-between. But on the other hand, any money that you are supposed to earn additionally in the mean time can either keep your emergency money high or can be used for paying off your car loan, reducing the interest there.
As described, only the car loan is worth paying, and even that if you can't get better return than 3.4% on your money elsewhere. Others are a waste of money: It is always in your best interest to carry an interest free loan until the last day, assuming that you can guarantee you will be able to pay it off.
If you don't have the discipline to set aside money and not spend it, you have to weigh the risk of not being able to repay your credit cards when the time comes. On that note, the first credit card will soon stop being interest free at which point they'll slap you with a late fee and huge (20%?) interest. So if you asked this question 2 months later, the answer would be "forget the truck, pay the credit card". Will you have more money by then to deal with the credit card? If not, maybe start there for now.
