Balance transfers 2

Just in case anyone is looking at doing a balance transfer, I thought I would mention about how payments are applied in most cases.  I have noticed that in all the credit cards that I have come across is that the payment is usually applied to the lowest interest balance first.  So, for example if I have a balance transfer of  $5000 at 2% and then I use the card for purchases and spend $200, my monthly payment would be first applied in this case to the $5000 which means that the $200 would still be owing at the regular interest rate which for a lot of cards can be around 20%.  In this case, when doing a balance transfer, it is best not to use the card for purchases or else there will be little savings in the end since all purchases would have a higher interest rate.  Also, it is important to never be late on a payment since the promotional rate can be taken away in this case and it will become the regular interest rate.  In all cases, it is best to read all of the small print that is included in your credit card agreement and then call the credit card and ask questions to be clear.

Some of my steps towards freedom from debt....

As I mentioned before, I have quite a lot of debt to continue working through.  A couple of years ago, I decided to move back in my parents to attack this debt.  I rented out my property and the rental income allows me to break even and have about $15 left over.  This and monitoring my spending has allowed me to pay bigger chunks towards my debt than I was able to before.  As of today, I have a total debt of $25,937 (not including my mortgage).  I have brought down my expenses as much as possible and minimize my spending each month.  I am currently working on figuring out how to start bringing in some side income apart from my full time job.  So, I am learning how to complete income tax returns so I can get have a chance to get a part time job during the 2013 tax season.  This is also will help my family, boyfriend and myself save the money of paying someone to complete our taxes every year.  I am also working on decluttering and fixing small things on my clothes, such as sewing back a button or sewing a small hole so I can avoid buying new clothes.  I have also been working on learning how to cut back and save on essentials such as haircuts, oil changes and groceries.  This week coming up I am planning on being able to put about $800 towards my debt.

What are some of the steps that you have taken to pay back your debt?

Balance transfer!

I have taken advantage of a balance transfer that was offered to me on a credit card that I rarely use.  I was offered an interest rate of 1.99%  for six months.  There is also a 1% transaction fee which I asked if it can be waived.  The representative agreed to lower the fee to half so I saved almost $50 just by asking!!!  On a total transfer of just under $10,000, I will be saving about $260 over the next six months in interest charges! This is comparing to the interest costs that I would've paid if I had not done the balance transfer.  I am aware that having a balance on a credit card close to its credit limit can negatively affect my credit score.  In my case, I figured it was okay since I will not be seeking credit in 2012 and I have a good credit score.  To me, it is worth it since I can then put my interest cost savings to lower my debt.  Every bit counts!  I also will make sure to transfer the money back by the end of the promotional end date to avoid paying the regular high credit card interest rates.  I can not wait till I am rid of this debt and not have to worry about it any longer. 



Do you believe it is a good idea or not to do a balance transfer?

Low mortgage rates!!

I’ve been shocked by the low fixed interest rates on 4 or 5 year mortgages currently in Canada.  My understanding is that this is historical and didn’t think they could drop so low, especially slightly under prime!  I’ve been letting people know about this so they can see for themselves if it works for them to switch banks or negotiate with their current one.  In some cases, it could be worth paying the penalty and save a large amount of money.   In my case, my fixed rate is still on the low end since it is 3.79%.  I've started to look into seeing if it makes sense to switch to a different bank that is offering the 2.99% rate.  I know in my case it may not be worth it but there is no harm in finding out, right?  If you are thinking of switching or renewing to the 2.99% current offers, you would have to consider if there are conditions that the bank puts on the mortgage and if so, will be okay for your personal situation?  For example,  what if the bank includes the condition that you are unable to break your mortgage until the term is done, even if you sell your house.  In my case, I would not be able to lock into a 4 or 5 year mortgage that is too restrictive since I know that my life is still in 'change mode'.  More on what I mean by that in the posts to come.

Have you figured out if getting one of these low rates works out for you?

The debt confession.....

I have been struggling with a huge amount of debt since I finished my degree seven years ago, did some travelling and bought my own condo four years ago.  On September 1, 2010, I owed $43,678 in total (not including my mortgage)!  I have been bringing that amount down and today on January 15, 2012, I owe $26,201 (not including my mortgage).  Still a big amount! I have been following other personal finance blogs over the last year to learn how to become more frugal and continue being motivated to pay the debt and build up some savings as well.  Since many have shown that having their own blog has helped, I decided to create one as well which will show my journey into having freedom from debt.  I have learned to understand what mistakes I have made to get myself in this position and what to do to prevent it from happening again.

My goal for 2012 is to pay $15 000 towards my debt and to look at creating opportunities for more income apart from my full time job.  I also want to continue building up my savings to have $2000 more to have a total of $4000. 

Eventually I want to be able to know that the money I make is mine and not that I owe money from each paycheque to debt. 

How long will it take/has it taken you to pay down your debt?