Finances & Money

Planning to Go Back into Credit Card Debt

Since paying off our credit card debt last year (then again after buying a MINI Cooper), we haven’t carried a card balance more than a few weeks. Generally, I pay off our card balance even before the statement is sent out. It’s a great feeling to not have credit card debt rolling over and accruing interest!

But the truth is that we’re now back in credit card debt. But the beauty of this time is that it was planned. If you recall, last year I signed up for the Discover Business Card to take advantage of the 12 month 0% interest rate specifically to pay for tuition this year. Well, the plan was to wait until January to pay tuition (which I did), and then pay off the balance about a month later when I got reimbursed from work for the $4950 bill.

But then yesterday it dawned on me that I could use that $5k reimbursement as a 0% loan! Since the 0% offer doesn’t end until late this year, I can take up to a year to pay off the balance while using that money to pay off other debt that is accruing interest.

And believe me, I am disciplined about paying off CC debt now. I won’t be waiting till the last second to get rid of it! One reason is because I’ll have another $7,500 this year in tuition payments that I have to pay out of pocket myself (Summer and Fall semesters). My employer only covers $5,200 per year. Thus I intend to pay off the first $5k before paying for the next tuition around May/June.

So what will I pay down with this “0% loan”? Well, I’m already on a mission to pay off my student loans from my undergraduate degree as that’s our highest interest rate on our remaining loans. Now, before you yell at me because that debt is “good debt” or that we can deduct the interest paid, I have to admit that we no longer qualify for the student loan interest deduction due to our combined income, along with the income from our other ventures including this site. Actually, we couldn’t deduct it last year either, so there’s really no point in keeping these debts around any longer.

So right now, my student loan is at 6.25% (if I recall correctly), while Stacie’s is at 5.75% and the truck is at 4.5%. Additionally, in just 3 more months of on-time payments, Stacie’s rate will drop down to 5.25%. Woohoo! It’s only been 3 years of payments to get to that point, thanks to deferring the loans for a bit and then consolidating them.

So I expect to get the reimbursement in under 1 month (I just got the papers signed yesterday), and then I’ll send it off to the lender and reduce our debt scale down to about $7,000 for my loan. However, I’ll have to add $4950 to our credit card debt scale 🙁