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Regular Contributor
Posts: 154
Registered: ‎07-25-2008
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Need a math wiz!!!

Hi all,

 

I'm trying to figure this out, but it makes my brain hurt! Smiley Tongue

 

DH and I recently purchased a new home, and of course we felt compelled to buy new furniture. We also had to buy some appliances for our old home, which we still own and rent out.. We financed the purchases through the furniture company's lender on an offer of no interest for 12 months. After the 12 months, the accrued interest and new interest rate become ridiculous. We knew we wouldn't have it paid off in 12 months, but we also knew we could transfer it to a lower-interest credit card when the deal got close to expiration.

 

Well, now we're getting close to that time, and I can't decide which is a better deal. We owe about $10,000 and will need about 24 months to pay off. We have two options. One cc is offering us 0% for 12 months with a 2% transaction fee, and remaining balance will revert to 17.99% (no accrued interest). The other option is 4.99% for 24 months with zero transaction fee. I'm having a hard time calculating which is the better deal. Can anyone help a math-challenged English major? Smiley LOL

Valued Contributor
Posts: 1,607
Registered: ‎09-15-2012
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Re: Need a math wiz!!!

The 4.99% will only cost you $500 a year on a $10,000 balance assuming that you are referring to APR.  But, we need to know how much you are paying down in the first 12 months to do any serious calculations on the 0% offer. The transaction fee will be $200, but the interest during the second year could be well over $1,000 If you don't make good progress during the first 12 months.


In My Wallet: Amex BCP (12/12) $32,000, Chase Freedom (12/12) $16,500, Citi Forward (12/12) $14,600, Cap1 Quicksilver (6/12) $14,000, Barclaycard Rewards (5/13) $10,500, Citi Thank You Premier (6/15) $6,800

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Valued Contributor
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Registered: ‎02-18-2010
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Re: Need a math wiz!!!

take the 5% no fee for sure.

 


Starting Score: EQ 583 TU04 619 EX 592 (lender pull) 2010
Previous High Score: EQ 700 TU04 712 EX 726
Current Score: EQ 740 TU(Discover) 750 EX(AMEX) 747
Goal Score: 740+ all around


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Regular Contributor
Posts: 154
Registered: ‎07-25-2008
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Re: Need a math wiz!!!

Thanks! I knew I left something out of the equation. Smiley Frustrated I would probably pay it in half in 12 months...divide the starting balance by 24 and make those payments. I would be entering the second year with (give or take) about 5k balance. Only issue is that the required payments would likely be much much lower, making it very easy to lapse into smaller payments and drag it out beyond 24 months. That's why I'm trying to get my head around the various scenarios.

Established Contributor
Posts: 766
Registered: ‎01-16-2012
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Re: Need a math wiz!!!

assuming you stick to 24 months, the 4.9 option will cost about$520, while the 0 then 17.99 will cost about $700
In wallet: Ink Plus 10k, AMEX TE 25k. In bag: CSP 16k, USAA WMC 15k, Hyatt 13k, United MPE 12k, AMEX HHonors 3k. In SD: Cap 1 QS 5k, Discover IT 7k. FICO 08 says my EQ is now 844, was 510 in 2010.
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Re: Need a math wiz!!!

[ Edited ]

In a situation where you only pay off $5,000 in the first 12 months, you would be paying under $75 a month in interest during the second 12 months, but you would need to pay that balance off in under 6 months to end up in a better scenario. Better scenario means spending under $300 in Interest. 

 

Basically - take the 4.99% offer. 

 

First month:

5,000 * (17.99/12) = $74.95 interest. That is after a $200 transfer fee you paid early on. 

then you pay 5,000*.08333 to reduce debt = 416.67

 

Second month:

$4,583.3 *(17.99/12) = $68.75 interest. 

 

Third month:

$4,166.66 * (17.99/12) = $62.46 interest

 

That's $206 interest in just 3 months. So, I will stop there. 


In My Wallet: Amex BCP (12/12) $32,000, Chase Freedom (12/12) $16,500, Citi Forward (12/12) $14,600, Cap1 Quicksilver (6/12) $14,000, Barclaycard Rewards (5/13) $10,500, Citi Thank You Premier (6/15) $6,800

Last App: June 27, 2015
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Registered: ‎02-18-2010
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Re: Need a math wiz!!!

Original amount  
 $10,000.00Transfer feeRate 
 0%4.99% 
    
payment #BalancePaymentInterest
1 $10,000.00($438.67)($41.58)
2 $9,602.91($438.67)($39.93)
3 $9,204.18($438.67)($38.27)
4 $8,803.78($438.67)($36.61)
5 $8,401.72($438.67)($34.94)
6 $7,997.99($438.67)($33.26)
7 $7,592.58($438.67)($31.57)
8 $7,185.48($438.67)($29.88)
9 $6,776.69($438.67)($28.18)
10 $6,366.20($438.67)($26.47)
11 $5,954.01($438.67)($24.76)
12 $5,540.10($438.67)($23.04)
13 $5,124.47($438.67)($21.31)
14 $4,707.11($438.67)($19.57)
15 $4,288.01($438.67)($17.83)
16 $3,867.17($438.67)($16.08)
17 $3,444.58($438.67)($14.32)
18 $3,020.24($438.67)($12.56)
19 $2,594.13($438.67)($10.79)
20 $2,166.25($438.67)($9.01)
21 $1,736.59($438.67)($7.22)
22 $1,305.14($438.67)($5.43)
23 $871.90($438.67)($3.63)
24 $436.85($438.67)($1.82)
25 $(0.00)($438.67)$0.00
  total interest

($528.06)

 


Starting Score: EQ 583 TU04 619 EX 592 (lender pull) 2010
Previous High Score: EQ 700 TU04 712 EX 726
Current Score: EQ 740 TU(Discover) 750 EX(AMEX) 747
Goal Score: 740+ all around


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Valued Contributor
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Registered: ‎02-18-2010
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Re: Need a math wiz!!!

Original amountTransfer feeRate after intro 0%
 $10,000.002%17.99% 
    
payment #BalancePaymentInterest
1 $10,200.00 $(425.00)0
2 $9,775.00 $(425.00)0
3 $9,350.00 $(425.00)0
4 $8,925.00 $(425.00)0
5 $8,500.00 $(425.00)0
6 $8,075.00 $(425.00)0
7 $7,650.00 $(425.00)0
8 $7,225.00 $(425.00)0
9 $6,800.00 $(425.00)0
10 $6,375.00 $(425.00)0
11 $5,950.00 $(425.00)0
12 $5,525.00 $(425.00)0
13 $5,100.00($467.54)($76.46)
14 $4,708.91($467.54)($70.59)
15 $4,311.96($467.54)($64.64)
16 $3,909.06($467.54)($58.60)
17 $3,500.12($467.54)($52.47)
18 $3,085.05($467.54)($46.25)
19 $2,663.76($467.54)($39.93)
20 $2,236.15($467.54)($33.52)
21 $1,802.13($467.54)($27.02)
22 $1,361.60($467.54)($20.41)
23 $914.47($467.54)($13.71)
24 $460.64($467.54)($6.91)
25 $0.00($467.54)($0.00)
  total interest($710.52)

Starting Score: EQ 583 TU04 619 EX 592 (lender pull) 2010
Previous High Score: EQ 700 TU04 712 EX 726
Current Score: EQ 740 TU(Discover) 750 EX(AMEX) 747
Goal Score: 740+ all around


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Valued Contributor
Posts: 1,607
Registered: ‎09-15-2012
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Re: Need a math wiz!!!

Things we all learned today:

 

When one has access to Excel, they can give better answers than the lazy guy on the iPad. 

 

Great job, Mauve. 


In My Wallet: Amex BCP (12/12) $32,000, Chase Freedom (12/12) $16,500, Citi Forward (12/12) $14,600, Cap1 Quicksilver (6/12) $14,000, Barclaycard Rewards (5/13) $10,500, Citi Thank You Premier (6/15) $6,800

Last App: June 27, 2015
Regular Contributor
Posts: 184
Registered: ‎02-06-2013
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Re: Need a math wiz!!!

I won't add anything to the figures above other that they are all correct.  Comparatively, both deals need about $450 a month payment to end at paid in full in 24 months.  But the 4.99 deal over 24 months racks up about $50 less in interest over the same period of time (the other deal with 17.99% for a year's time is a real financial drag).  Top it off with a $200 balance transfer fee and you're $249 more out of pocket with the 0%/12mo+17.99%/12mo deal versus 4.99%/24mo.

 

Best of all, you can model all this yourself if you know the right website. Smiley Happy

 

http://www.calculatorweb.com/calculators/creditcardtrancalc.shtml

 

One thing to add to all this...my wife and I were in a similar situation a couple of months ago where we needed to pay off some "toxic" debt (i.e. higher interest credit cards) and we wanted to do it with a 0% credit card.  One of the options we considered was the Penfed Platinum Rewards Visa.  We needed a gas rewards card anyway but Penfed is doing a 0% for 18 months offer through the end of this month (March).  We applied and asked specifically for the credit limit we needed in order to do the balance transfer (unlike waiting for another company just to grant us a specific number).  The amount was approved and we began the balance transfer process immediately.  Best of all, Penfed allowed us to balance transfer from a line of credit as opposed to a credit card, which is were one of our debts was.  There is a 3% fee but it's capped at $250.  A Penfed card is not easy to get approval for but I put that out there as an option.


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