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So in October of last year we opened up a Chase Freedom card with 0% APR for 12 months. We have NEVER paid a cent of interest on any credit cards and we typically spend waaay under our means.
We're business owners, and we had a little situation in which a client owed us a very large amount of money that halted our cash flow for several months. During this time, we used the Chase card for our expenses rather than our normal method of paying everything in full every month. We now have about $2,800 that we owe on the card (that we won't be having to pay interest for until November 2010). We technically had this money in savings to pay off it, but it makes me nervous to have < 4 months' expenses in there, so I didn't want to withdraw from it and lower our safety net.
Now the client situation has FINALLY been resolved (halle-FREAKING-leujah!) and we have more than enough to pay off the balance of the card.
My question is... rather than paying off the card immediately, since we have quite a bit of time until we'd be charged any interest, I was thinking of putting the $2,800 in a 3- or 6-month CD and getting some interest off of it, and then paying the card before November 2010 ends (after the CD reaches it maturity). Can anyone think of a reason I shouldn't do this?
Please note that there is no risk of "temptation" or anything with not paying off the card immediately. We don't abuse credit cards.
My only paranoia is if it will have any ill effect on my credit score from carrying a balance (the amount is about 5% of my total credit line), which at the moment is in the high 700s.
Last edited by thepinksquid; 03-25-2010 at 03:35 AM..
My question is... rather than paying off the card immediately, since we have quite a bit of time until we'd be charged any interest, I was thinking of putting the $2,800 in a 3- or 6-month CD and getting some interest off of it, and then paying the card before November 2010 ends (after the CD reaches it. Can anyone think of a reason I shouldn't do this?
Yes, its a matter of using debt strategically and following your initial plan. The gain you'll get by not paying it off and opening a CD is almost nothing ($10~$20 before tax).
You used the debt strategically to deal with an account that was taking longer than expected to collect. But now that you've collected you need to pay the debt as the initial reason for the debt is no longer true.
Quote:
Originally Posted by thepinksquid
Please note that there is no risk of "temptation" or anything with not paying off the card immediately. We don't abuse credit cards.
Why is that? Are you two beyond all human folly? In reality there will be a big bias towards not paying it off, your current thread is after all trying to rationalize not paying it off.
Yes, its a matter of using debt strategically and following your initial plan. The gain you'll get by not paying it off and opening a CD is almost nothing ($10~$20 before tax).
You used the debt strategically to deal with an account that was taking longer than expected to collect. But now that you've collected you need to pay the debt as the initial reason for the debt is no longer true.
Hmm... I suppose it really wouldn't be that much money made with interest anyhow. I was, in my head, thinking more along the lines of $200 or so, but a quick look at current rates made me realize my estimate was too high.
Quote:
Originally Posted by user_id
Why is that? Are you two beyond all human folly? In reality there will be a big bias towards not paying it off, your current thread is after all trying to rationalize not paying it off.
I just didn't want to be jumped all over by some people with the "any credit card balance in EVIL" mentality. I probably didn't have to say that, but I figured I'd just let people know that paying it off won't = charging more to it.
In the long run it's no sweat to us to just pay it off, so that's what I shall do. I just was thinking I could make a little $$ on the balance.
Eh, you won't make any money, but I would keep the balance on the card, and the savings in the bank until November.
Yes, I believe some of us are "above human folly" enough to be responsible with credit cards. It's called self discipline. I have on many, many occasions taken advantage of 0% offers and paid them in full at expiration.
In this day and age, cash in the bank is king, and I see having the cash in the bank as more of a safety net than a zero credit card balance. I like to keep my money in the bank as long as possible.
Sounds like it really makes no difference financially what you do. There is no gain or loss (or at least so minimal it is not even worth acknowledging). So do what makes you feel best. I will say this.... seems like those 0% interest deals are almost gone so you might consider taking advantage of that for the next 6 months.
However, I would consider increasing your savings net to avoid this situation alltogether in the future. So next time you have this problem, you won't have to worry about the credit card issue .
Now the client situation has FINALLY been resolved (halle-FREAKING-leujah!) and we have more than enough to pay off the balance of the card.
Been there, done that -- and reaction was JUST the same!
In light of it -- I'd pay it off, too. 2800 bucks isn't that much debt in the grand scheme of things -- waiting to pay it off wouldn't garner that much in interest, OR not waiting won't help or hurt your credit score by much either.
However, I would consider increasing your savings net to avoid this situation alltogether in the future. So next time you have this problem, you won't have to worry about the credit card issue .
Oh yeah... this situation was a combination of start up costs and a large, large, large sum of money that was very overdue. I doubt it will happen again.
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Originally Posted by Tallysmom
Been there, done that -- and reaction was JUST the same!
I've learned a very good lesson from it all... be extra careful when doing work for family members!
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