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Balance Transfer Analysis

January 19th, 2012 at 01:41 pm

I did some figuring on the credit card balance that I transferred today. That would be CC4 with the $1416 balance. As long as I pay the balance off by this April, I will be about $60 ahead, compared to not doing the balance transfer.

One way to look at that is - sixty bucks is sixty bucks - the balance transfer was a good thing. Another way to look at it is - Was the hassle worth it to save sixty bucks, or about $6.66 per month over the nine months? My final verdict is that the hassle was worth it. It wasn't really much of a hassle anyway.

Sixty dollars of avoided interest is sixty dollars that went somewhere else. Ultimately it has decreased our total debt load. But, I would feel more victorious if the number were a bit bigger.

The only factor I'm not totally sure about is affect on credit score. I've heard that the credit inquiry associated with opening a new CC dings your FICO score about five points. I also know that having a credit card with a low utilization ratio improves your score. This is a $5,000 limit card, and less than 30% of it is utilized. I hope that the utilization factor has improved my score by more than the 5 point ding. I'll go with that assumption, anyway. So, that coupled with the $60 savings (again, as long as I get it paid off by April), it was a good decision.

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