Financial Advice

[firebane]

Looking for some advice and wondering if what I am thinking is a good though process or could end up hurting me.

In 2004ish I opened a OD with a Credit Union in Vancouver and have never been able to pay it off. The OD is $2,000 and it currently charges 21% interest rate.

I later then got a secure credit card through Capital One which I have done well with and they just recently said I can increase my limit on it up to $5,000. The interest rate on this card is 14.9% for purchases.

I am thinking of accepting the new limit on my card and paying off the OD through the credit union thus freeing me up with extra payments to a company per month as well as having a lower interest rate.

I know my payments will increase to the credit card but they will be at a lower interest rate.

I know this may seem like a no brainer for some but I want to see if I'm thinking the right way here.

[Team_Mclaren]

You sure thats a LOC not a Credit card? That's a retarded rate for a LOC.

If you can qualify for a new CC with promotion low rate for 6/12 months, i'd go with that and pay off that 2k. I think ATB or MBNA has one of those.

http://www.creditcards-offer.ca/bala...fer-cards.html

[BavarianBeast]

Holy shit. 21% on a LoC..

Pay it off with your CC, 16% is better than 21%.. Though it is never good to pay debt off with debt.

[06civic]

Purchase interest is different than Cash Advance interest. You need to look at the fine print and see what the rate is..
It will probably be the same rate as your LOC

If your LOC rate is really that high you probably have bad credit, which explains why you have a secured card. Its better off just to have a disciplined payment plan and just pay it off..

[roopi]

With what you described you would save 6.1% in interest however what is the rate that Capital One is charging you to transfer the balance. This usually varies from 1% to 3% of the balance being transferred. You should check this before doing anything.

Since you are with Capital One I suggest you try asking them if you qualify for the Smartline Platinum MasterCard. The card has no annual fee and no standard balance transfer fee. They are offering 0% on balance transfers until January 2016 and then after that it is 9.9%. It's worth a call since you already have a card with them they might just let you switch it over.

Link to card details:
http://www.capitalone.ca/credit-card...um-mastercard/

[spike98]

This is pretty much debt repayment 101. Its called the Avalanche strategy. Highest interest debt paid off first, then the next, and so on.

Don't close the LOC account as its your oldest credit account and having it in good standing and $0 balance will help with your credit.

Also do not draw cash from the credit card to pay the LOC as cash withdrawls from your CC will most likely hold a very high interest rate (ie no better than the LOC).

[firebane]

I actually just double checked its not a LOC its overdraft protection. When I opened the account they referred to it as a LOC but now its referred to as overdraft.

So essentially I'm stuck in a massive overdraft with a interest rate of 21%.

There wouldn't be a transfer of the balance. I would be talking to the Credit Union to pay the balance off with the credit card and then closing the account.

[firebane]

Originally posted by spike98
This is pretty much debt repayment 101. Its called the Avalanche strategy. Highest interest debt paid off first, then the next, and so on.

Don't close the LOC account as its your oldest credit account and having it in good standing and $0 balance will help with your credit.

Also do not draw cash from the credit card to pay the LOC as cash withdrawls from your CC will most likely hold a very high interest rate (ie no better than the LOC).

Hmm a payment to a bank through a credit card would be considered a cash payment?

[roopi]

Originally posted by spike98

Also do not draw cash from the credit card to pay the LOC as cash withdrawls from your CC will most likely hold a very high interest rate (ie no better than the LOC).

You can use the balance transfer feature of a credit card to pay off the LOC which would qualify for the 14.9% rate and not the higher cash rate of 19.8%.

[roopi]

Originally posted by firebane


Hmm a payment to a bank through a credit card would be considered a cash payment?

If you use the balance transfer no it would not be. It would qualify for the 14.9%. If you can't do the balance transfer through their website then call them and they can assist you with it.

[firebane]

Well they can't do balance transfers on overdraft setups. And my other bank isn't accepting payments over credit card.


I have one more possible option to look at but it would mean if it worked that I would be at 19% interest instead of 21%

[riander5]

Go open a LOC and pay off your over draft protection - problem solved

[firebane]

Originally posted by riander5
Go open a LOC and pay off your over draft protection - problem solved

This doesn't alleviate my situation though. It puts me right back to where I was with 2 accounts. I am trying to eliminate one to help with monthly payments.

[flipstah]

21% on an LOC? Shit.

Uhh, you just gotta shuffle debt around to the lowest interest rate, which will be tricky.

MBNA Platinum MC has 0% balance transfer for 6mths. Same as ScotiaBank Momentum VISA.

Then as someone mentioned, avalanche pay.

[Mitsu3000gt]

Open an unsecured LOC (5-6%, they hand them out like candy), and pay off both your overdraft and your CC. Then, never buy more than you can afford to pay off on your CC and slowly pay down the unsecured LOC which will have a fraction of the interest as your CC or overdraft. You will only have one debt at a fraction of the interest you were paying on your CC or overdraft.

[tpurcell4]

Lower your interest cost. Split up the debt for now until you can pay off the high interest account.

If you can qualify for a larger loan at a lower rate (either line of credit or personal loan) do so and consolidate as much of that 21% overdraft that you can, and then start paying off the debt as aggressively as you can.

[Black Gts]

I had to do some consolidating to buy a house. I was an rbc customer for years and they didn't offer anything. Td was chomping at the bit for my debt, and it worked awesome. Moral of the story shop around, your bank is already getting everything you got why would they help you.

[pheoxs]

I think what is more important than trying to deal with finding the lowest interest rate is simply cutting back your spending and getting it paid off.

Even at 20% interest that 2000$ overdraft is only 40$ a month in interest. Yes in proportion to the debt it's a lot, but you could cutback your spending and just get rid of it sooner than trying to apply for other cards and sorting out balance transfer eligbility

You've been struggling with this since 2004, that is 11 years. If you literally cut back your monthly spending by 100$ you'd have it paid off in 2 years...

Suggestions:
Eat out less, it's astonishing how much people spend eating at restaurants
Bring your own lunch to work
Cut back on any drinking / smoking / drug usage
Cut back on costly activities (Watch a movie on Netflix instead of going to the theatre)
Look at reducing your phone, internet, or TV plan
Sell a bunch of useless stuff that your not using anymore, everyone has crap in the basement/storage they don't need and is just accumulated space
Try to pick up more hours at work or consider a temporary second job. Or even a cash on the side type thing, help friends move / shovel side walks / etc

100$ a month cutbacks isn't a lot. Try to start tracking where your money goes and find a way to reduce it and get yourself out of this situation.

[firebane]

Originally posted by pheoxs
I think what is more important than trying to deal with finding the lowest interest rate is simply cutting back your spending and getting it paid off.

Even at 20% interest that 2000$ overdraft is only 40$ a month in interest. Yes in proportion to the debt it's a lot, but you could cutback your spending and just get rid of it sooner than trying to apply for other cards and sorting out balance transfer eligbility

You've been struggling with this since 2004, that is 11 years. If you literally cut back your monthly spending by 100$ you'd have it paid off in 2 years...

Suggestions:
Eat out less, it's astonishing how much people spend eating at restaurants
Bring your own lunch to work
Cut back on any drinking / smoking / drug usage
Cut back on costly activities (Watch a movie on Netflix instead of going to the theatre)
Look at reducing your phone, internet, or TV plan
Sell a bunch of useless stuff that your not using anymore, everyone has crap in the basement/storage they don't need and is just accumulated space
Try to pick up more hours at work or consider a temporary second job. Or even a cash on the side type thing, help friends move / shovel side walks / etc

100$ a month cutbacks isn't a lot. Try to start tracking where your money goes and find a way to reduce it and get yourself out of this situation.

Its not really about my spending at all. Its just a lot of bad choices I made in the last few years. I never had anyone who was good with this financial stuff so it took me a long time to figure things out. I've secured good employment now so I'm trying to rectify the choices I made earlier.

[EK69]

1) make sure you don't go to an ATM and withdraw cash from your credit card that way. The money you withdraw starts accumulating interest right away daily.

2) apply for an MBNA platinum plus card. They always have 0% promo for a year and charge 1% balance transfer fee. Don't do a direct balance transfer to the Vancouver place. Give them your bank account info and they will transfer the cash to your bank account. Pay the Vancouver place off however they let you (online bill payment to them, write them a cheque or whatever they will take)

Go to redflagdeals personal finance section and read up on the MBNA thread there for the latest info.