Credit Cards, Debt, Financial Independence, Saving
August 11, 2016
If you are struggling to make a dent in a large credit card balance, and you have a strong FICO score, I want you to look into what could possibly be the ticket to finally being able to pay down your balance. As reported by NextAdvisor, the Citi Simplicity Card offers 21 months of no interest payments on balance transfers or new purchases. That’s nearly two years to make progress paying down your credit card debt.
I am also pleased to see there is no annual fee. And, somewhat amazingly, Citibank says it will never charge a late fee. While I am always going to insist that everyone can-and should-pay their bill on time, it’s nice to know there’s no nasty fee if you trip up. (And keep in mind, that late payments will negatively impact your credit score, so don’t you ever think there’s no price to pay for late payments.)
The one cost that you will pay upfront is to transfer balances over to this card. And that charge is 3% of the amount you transfer. But paying $300 for the opportunity to pay off a $10,000 balance with the interest ticker turned off is still worth it as long as you are serious about getting the debt paid off.
So before you pay for the transfer, I want you to take a serious look at your monthly spending with an eye on freeing up enough money to get your balance paid off in the 21 months. If you have a $5,000 balance you will need about $240 a month. With a $10,000 balance about $475 a month will polish off the balance before interest starts being charged in month 22.
Don’t tell me you don’t have options. Everyone can figure out a way to save. Scale back the data plan on your phone, cut the cable, gift friends and family your time (babysitting, gardening, handling a few weekends of kid-shuttling to games/activities). You get the idea. Strategic nips, tucks and cuts can quickly add up to hundreds of dollars a month in savings. And I can’t think of a better motivation than to know you will be out of credit card debt in 21 months.
Answer Yes or No to the follow statements.
I pay all my credit card bills in full each month.
I have an eight-month emergency savings fund separate from my checking or other bank accounts.
The car I am driving was paid for with cash, or a loan that was no more than three years, and I sure didn’t lease!
I am contributing at least 10% of my gross salary to a retirement plan at work, or I am saving at least that much in an IRA and/or regular taxable account.
I have a long-term asset allocation plan for my retirement investments, and once a year I check to see if I need to do any rebalancing to stay on target with my allocation goals.
I have term life insurance to provide protection to those who are dependent on my income.
I have a will, a trust, an advance directive (living will), and have appointed someone to be my health care proxy.
I have checked all the beneficiaries of every investment account and insurance policy within the past year.
So how did you do?
If you answered yes to every item, congratulations. If you are working on improving on a few items, I say congratulations as well.
As long as you are comitted to truly creating financial security, I applaud you. If that means you are paying down your credit card balances, or are building up your emergency fun with automated payments, that’s more than fine. You are on your way!
But if you found yourself saying No to any of those questions, and you’re not working on moving to Yes, then I want you to stand in your truth. No matter how good you feel, you have some work to do before you can honestly know what you are on solid financial ground.