Excellent strategy GrimJack. Your experience confirms what has been said about the importance of getting ANY of these cards to a zero balance.

IBJanky, you are understandibly reluctant to draw that Juniper line any higher, so your decision to get the ball rolling by using Fleet to pay off MBNA is a good starting point. Hang on to GrimJack's advice though and keep looking for the less obvious choices.

Let us know when you get that teaser offer from your paid off MBNA card!

zender, assume I have 10k in my 401k. I borrow it and take possession. I immediately change my mind and use the money I borrowed to repay the loan before any payments are due. There's no tax due.

Assume the case of a fellow who has earned only 10k in his life. He places the entire 10k in his 401k and borrows it. Now he earns another 13k. He pays 3k in taxes on that 13k and uses the other 10k to repay the loan. He then retires and withdraws the 10k and pays taxes. He's earned 23k in his lifetime, and paid taxes on 23k. There is no double taxation. Of course he pays the loan back with after tax dollars. Just as he'd pay back the credit card loans with after tax dollars. You are missing the fact that there are 'double earnings' involved.

Put the myth to bed please.

"The truth of the matter, as I see it, is that folks who get in trouble with card debt and then get themselves out of trouble via repayment from another source tend to get in trouble again with credit card debt as soon as they are able. "

I guess I wasn't clear in my suggestion that the 401k loan be a temporary conduit to getting better terms on the credit card. I did not suggest paying off the loan. However, I think it much better for people to learn to manage their money rather than to 'give up' and decide they can't handle it. But I've never been one to assume that I or anyone else will be right on the median line. I know the knee jerk reaction is 'cut up the cards' but IMO people can learn their lesson. Of course I speak only from personal experience, not from some hypothetical POV.

WalStMonkey said:

<< He's earned 23k in his lifetime, and paid taxes on 23k. There is no double taxation. Of course he pays the loan back with after tax dollars. Just as he'd pay back the credit card loans with after tax dollars. You are missing the fact that there are 'double earnings' involved. >>

Your example illustrates that the individual has had to earn 13k to pay back a 10k loan. All the while he's not earning on the 10k he would have had invested otherwise, which is another loss that hasn't been addressed. On top of that, he's probably not contributing new pre-tax money to his 401k account while he's repaying the loan, which is the norm at least at my company. So you've got opportunity cost to also factor in.

I agree with you that 401k loans are almost tax neutral to borrowing from alternate loan sources as far as principle is concerned, but what about the interest that many laud as being 'paid back to myself'? My personal opinion is that all other sources should be exhausted completely before relying on a 401k loan. 401k money is all the majority of Americans are going to have to see them through retirement. Sans that the burden is going to fall on the government and I think we would probably all like to avoid that.

WalStMonkey said:

<< ..arguing against 401k loans under any circumstance. There is almost no chance that the OP would not have his 401k money intact in less than 90 days under my suggested course of action. He'd have saved a boatload of interest, which he then could have used to up his contributions. >>

I am indeeed arguing against 401k loans. I think they are a bad deal for individuals. Since the OP doesn't have a 401k the point in this thread is moot anyway.

EricGo said:

<< GrimJack, using the cash advance to start the BT game is CLEVER. Very clever.
Kudos. >>

dcwilbur said:

<< Excellent strategy GrimJack. Your experience confirms what has been said about the importance of getting ANY of these cards to a zero balance.

IBJanky, you are understandibly reluctant to draw that Juniper line any higher, so your decision to get the ball rolling by using Fleet to pay off MBNA is a good starting point. Hang on to GrimJack's advice though and keep looking for the less obvious choices.

Let us know when you get that teaser offer from your paid off MBNA card! >>

Do you guys think I should do this instead of just paying off the MBNA card first?

I think the premise here is that I'm hoping that once I pay off the MBNA and Citibank, is that they will offer me teaser rates (for only 6 mos. probably). Then after that 6 mo. promotional period, I'll have to re-evaluate everything again and "rotate" the money around again, correct?

What do you guys think? Use GrimJack's creative strategy, or just do the simplest and transfer the entire MBNA balance onto the Fleet card?

IBJanky said:

<< What do you guys think? Use GrimJack's creative strategy, or just do the simplest and transfer the entire MBNA balance onto the Fleet card? >>

Start generating some large payments and transfers to any of these cards and you will see some balance transfer opportunities appear. You've got about $15,000 of available credit between these five cards, so any way you are able to move the money around (and get any of the accounts to zero) will be beneficial (whether you use the Juniper card or a combination of the others).

The transaction costs are going to kill you though. Get on the phone to each of these companies and tell them you want to do a balance transfer. Ask them what is the best rate and what are the fees. More often than not, you will find that they will offer to waive the fee and/or give you better interest rate and duration than anything they mail to you. If they don't, hang up and call the next one on the list, then call them again and talk to a different CSR! Don't pay transaction charges!

dcwilbur said:

<< The transaction costs are going to kill you though. Get on the phone to each of these companies and tell them you want to do a balance transfer. Ask them what is the best rate and what are the fees. More often than not, you will find that they will offer to waive the fee and/or give you better interest rate and duration than anything they mail to you. If they don't, hang up and call the next one on the list, then call them again and talk to a different CSR! Don't pay transaction charges! >>

I just called Juniper and asked if they could lower the rate or waive the transaction fee ($35)

They said NO to both

Do it anyway?

IBJanky said:

<< OMG, guess what came in the mail today?

"teaser" checks from MBNA

0% APR until April 2004, then the regular rate of 17.99% after that. Hopefully I get more promos before it ends >>

there ya go...first use Fleet checks to paydown MBNA to ZERO before using MBNA teaser checks....watch out for transaction fees though

go for it, but be mindful of fees...moving balances several times will incur several fees.

try to get MBNA to raise your credit line AFTER you pay it off in full and BEFORE you use the promo checks

Beware the $75 fee from MBNA. Ouch that hurts. No such a low available credit line, this is a teaser for a moron. If you have say a $10,000 credit limit, this would be a different story. Here is a footnote to my earlier story. MBNA used to offer me a zero BT fee (waived for BT but $35 for using the checks) I noticed they raised it to $35, then $50...I guess they moved it up one more time to try and catch unsuspecting customers. a $75 fee (for six months adds a functionally equivalent 7.5% (75/2000=3.75% annualized)to the cost of the money for that six months making it not a very good deal.)

Lets go through the numbers.

Right now in interest you pay $19.50 a month on your MBNA (1300*.1799/12), $15.50 on your Citibank and $26.70 on your fleet...for a total of $61.70 a month (or $370.20 over 6 months)

After you take my advice you will pay $9.95 a month on the fleet plus a one time $35 BT from Fleet plus a one time $35 from Juniper for a total of $130.00.

There you go. Over 6 months you save $240.00 just for doing this over what you would pay if you took no action.

If you decide you don't want to spend this $35 on the Juniper transaction fee how does it affect you? Well you would pay $26.67 a month on the balance you currently have with Fleet ($3560) plus $2.16 a month on the MBNA balance you move to Fleet ($1300)plus a one time fee of $35 for a grand total of $207.98.

So my method saves you $240 and paying off the transferring the MBNA balance saves you just $162.22. Ok so you can throw about another $650 from the Juniper card onto the Fleet to save another $9 a month for 6 months or $54 extra for that 6 months added to the $162.22 equals $216.22 in savings which means you still save another about $24 by using my method

You should double check my numbers. I used a spreadsheet, so I think they are right. Do you have access to excel? Its great for these types of things.
This should show you that balance transfer fees for low balances, even at better rates is not always a good thing...you need to run the numbers. Its not as intuitive as you think.

So which one do you do? In my mind the answer is clear. You have a choice to stick out your hand and get $240 or stick out your hand and get $216...which do you choose? I think it is pretty obvious. And in addition, you get the opportunity to start getting teaser rates from the two cards you paid off (MBNA and Citibank), not just the one (MBNA). Which you can do the same trick in 2 months. Remember it will be a few years before you pay off these accounts, so figure if you save $20 now it pays you back something month after month after month. If you left that balance on your 19% card for instance, over three years that's like saving another $12.00 and that doesn't figure in compounding. Or think about it this way, you get back a bonus of $60% over three years on the money you save right now.

Ok numbers discussions can get kind of confusing, but think it through. I have presented to you the 'best' option, but it requires an additional phone call. Oh and also think about this. Assuming a marginal tax rate of 33% saving this extra $20 now is like earning an extra $30 before taxes.

What I am saying is every little bit counts. The big bonus comes when you get balance transfer offers in 45 days from MBNA and Citibank and can offload that Juniper Balance. Then Juniper will send you a BT offer and you can move it right back at a lower rate. remember the BT offer you are getting from MBNA is with a balance on your card and a slow pay history. Once you pay this off expect in the next month or so to see a better offer.

And here is another tip: MBNA (Discover no longer offers this) allows you to transfer the BT money directly into you checking account. You give them your routing number and account number and they put it there. You take that money and send a check (or pay online using your cc's payment method as I do) and teh cc company has no idea anyone other than you paid them off. Pus you get a cancelled copy of your check as proff you paid the thing. I don't trust third party to third party payments. I always have done this. You would need to see if Fleet will give you this option. If they ask why, tell them you want a cancelled check as your receipt.

So do all that I said, and then take the teaser rate you got from MBNA and move $2000 more off the juniper account for the next 6 months at a 7.5% effective rate, saving you $199 in interest ($2000*(.1999/12-monthly interest)*6months = $199) and costing you $75 netting you yet another $125 over that six month period. and bringing your balance on Juniper down to $2938 which you can now pay off in 6 months paying $500 a month per month.

Then you are really making progress, and you'll see what sort of BT rate Juniper sends you after you pay them off.

Good luck

OK, I hope my long winded explanations have helped. I apologize if I have gone on too long.

Here is a table I used

Now:-----Cur Bal--------rate-----monthly int-------------Available Limit
Juniper---4300--*------0.1999---71.63083333------------15,750
MBNA------1300--*------0.1799--19.48916667-------------2000
Citibank--1778--*------0.1049--15.54268333-------------2200
Fleet-----3560--*------0.0899--26.67033333-------------6000
---------------------------Total:133.32

Future
Fleet---6000-----------0.0199--9.95--------------------6000

MBNA Pay off option
MBNA (new)-------------1300-------------0.0199--2.155833333
Partial Juniper (new)---650-------------0.0199--1.077916667
MBNA (old rate) -------1300-------------0.1799--19.48916667
Partial Juniper (old)---650-------------0.1999--10.82791667