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Regular Contributor
Posts: 185
Registered: ‎01-18-2011
0

Pay taxes out of savings or use Discover's offer of temporary increase CL

I'm hoping you guys can give me your best recommendations in my situation. This year on tax day, I owed about $4,000 in taxes to Uncle Sam. Originally, we were going to do a 120-day installment agreement, which would have cost about $80 in penalties and fees. Instead, we decided to put it on our Capital One Venture card, since the fee for making a credit card payment in the full tax amount was $84 (very similar to what it would have cost us to set up the installment plan with the IRS). However, unlike the IRS, we get to collect Venture miles on both the $84 charge, as well as the $4,000 charge for the taxes themselves. Clearly this was the better (cheaper) alternative.

 

Originally my plan was to pay the Venture off right away using our savings account, since I didn't want to owe interest on the balance as that defeats the purpose of putting it on the card in the first place. However, the next day, I received an offer from my Discover card for a temporary CL increase of up to $3,000 for balance transfers. There is an initial APR of 0% for 12 months, after which the full interest rate applies. Since we had planned to pay it off in 4-months using the original IRS installment plan, paying it off in less than the 12 months will not be a problem.

 

On paper this sounds like a good deal. Impact to util will be negligible since the increased balance will be offset by the increased CL. And no interest on it for up to 12 months, without having to touch the money in our savings.

 

I'm posting, because I want to ensure I'm not missing anything here. I've never done a balance transfer before, so is the 0% APR only for an interest rate that would have normally been charged on top of the usual card APR, or does this really mean I can float this charge at ZERO cost for up to 12 months?

 

And lastly, I currently have 3 cards, only one of which (the Venture) posts a small balance (~$1,000) each month. Posting a balance (whether interest-bearing or not) will activate a dormant card and show that I am carrying a balance on 2 cards. Not sure what impact this will have on my credit score (815 FICO last time I checked), but we're about to buy a car next month, so I'm sensitive to any negative score changes.

 

Thoughts?

----------------------------------------------------------
Fico Scores:
EQ - 811 (Feb '14)
TU - 829 (Mar '14)
EX - 814 (Mar '12) - Lender Pull
Established Contributor
Posts: 662
Registered: ‎02-20-2013
0

Re: Pay taxes out of savings or use Discover's offer of temporary increase CL

This is an interesting exercise in balance transferring while trying to minimize fees and maximize points.

 

Your limited card selection makes your choices very limited unless you consider applying for a new credit card.

 

If you're sticking with your current lineup, just pay it off from savings. you're paying $84 in fees to the government versus gaining 4k miles on venture which is equivalent to $40 roughly.

 

Not worht the hassle to save $48 unless you want care to get more creative.

 

 


DCU ( pulled 3/29/13) EQ04 683 | Amex (pulled 3/28/13) EX 760 | US Bank (pulled 3/28/13) EX 753
CreditKarma (4/19/13) TU-TR 701 | TU Vantage 788 | USAA FAKO (3/31/13) EX 728, EQ 699, TU 737 |
Inquiries (4/18/13) EX 13 | EQ 13 | TU 14
Established Contributor
Posts: 662
Registered: ‎02-20-2013
0

Re: Pay taxes out of savings or use Discover's offer of temporary increase CL

I wouldn't even bother with the discover offer. They are trying ot make some quick cash off of you through their balance transfer fee - about 3%. That offer is a non-starter.


DCU ( pulled 3/29/13) EQ04 683 | Amex (pulled 3/28/13) EX 760 | US Bank (pulled 3/28/13) EX 753
CreditKarma (4/19/13) TU-TR 701 | TU Vantage 788 | USAA FAKO (3/31/13) EX 728, EQ 699, TU 737 |
Inquiries (4/18/13) EX 13 | EQ 13 | TU 14
Senior Contributor
Posts: 6,276
Registered: ‎08-16-2012
0

Re: Pay taxes out of savings or use Discover's offer of temporary increase CL

815 FICO!
Jesus, Mary, and Joseph !! That's a bomb score!

I share the same concern as NJ- what is the balance transfer fee?
If it's 3%, that's another $120.
However, given the present value/future value of that money... If you paid it off in exactly 12 months, it could be beneficial to your budget :-)
Marriott PR$25k | BCE $24.5K |BankAmericard Visa $25k| BOA Better Bal $17.5k |Wmt Discover $12.5k | BR Visa $17.5k | Amex Delta Gold $10k | Discover IT $10k | Paypal Extras MC $15k | Amazon Store $10k|Smile Gen $7.25k | Dillard's $10k | West Elm $4k| Express $3.05K | Mypoints.com Visa $4.5k | Freedom Visa $1k| Amex Surpass $1k
Regular Contributor
Posts: 185
Registered: ‎01-18-2011
0

Re: Pay taxes out of savings or use Discover's offer of temporary increase CL

I didn't get to the 815 easily, believe me. Had my share of financial mistakes in the past. Lowest point was 580 about 11 years ago, and didn't break 800 until last year so it's been a long process. But lots of good advice along the way, including this board, which is why I return.

On topic, I will check the paperwork from Discover when I get home, but pretty sure no BT fee. Otherwise I would have tossed the offer immediately. My guess is they are interested in me putting a balance on their unused card.
----------------------------------------------------------
Fico Scores:
EQ - 811 (Feb '14)
TU - 829 (Mar '14)
EX - 814 (Mar '12) - Lender Pull
Regular Contributor
Posts: 185
Registered: ‎01-18-2011
0

Re: Pay taxes out of savings or use Discover's offer of temporary increase CL

You're right, there is a BT fee. 2%.

So I feel like its not worth it, but someone correct me if I'm wrong.
----------------------------------------------------------
Fico Scores:
EQ - 811 (Feb '14)
TU - 829 (Mar '14)
EX - 814 (Mar '12) - Lender Pull
Senior Contributor
Posts: 6,276
Registered: ‎08-16-2012
0

Re: Pay taxes out of savings or use Discover's offer of temporary increase CL

It's only worth it if you would not pay off the balance early.... Because then you aren't paying interest for a full 12 mos. basically, the 2% fee is like paying inflation, and if you take the full 12 mos to pay it back.. You'd get your money's worth. At least, that's what I think haha...
Dang! I hope I make it to 800!!
Marriott PR$25k | BCE $24.5K |BankAmericard Visa $25k| BOA Better Bal $17.5k |Wmt Discover $12.5k | BR Visa $17.5k | Amex Delta Gold $10k | Discover IT $10k | Paypal Extras MC $15k | Amazon Store $10k|Smile Gen $7.25k | Dillard's $10k | West Elm $4k| Express $3.05K | Mypoints.com Visa $4.5k | Freedom Visa $1k| Amex Surpass $1k
Contributor
Posts: 365
Registered: ‎02-25-2013
0

Re: Pay taxes out of savings or use Discover's offer of temporary increase CL

[ Edited ]

do what you feel comfortable with.

Starting Score:567Walmart TU 701, Credit Sesame 722, credit secure 701 credit karma 694Last Score: 689 TU/Walmart CK 645 Goal Score:800 CLUB
Last HP:2/2015 Util:9% CL:82KTake the myFICO Fitness Challenge
Senior Contributor
Posts: 6,276
Registered: ‎08-16-2012
0

Re: Pay taxes out of savings or use Discover's offer of temporary increase CL

+1@ mcf. That's what it really comes down to. I just wouldn't pay the bt fee for 12 months of 0% and then pif right away as that would result in an unecessary interest cost via the bt fee! Lol
Marriott PR$25k | BCE $24.5K |BankAmericard Visa $25k| BOA Better Bal $17.5k |Wmt Discover $12.5k | BR Visa $17.5k | Amex Delta Gold $10k | Discover IT $10k | Paypal Extras MC $15k | Amazon Store $10k|Smile Gen $7.25k | Dillard's $10k | West Elm $4k| Express $3.05K | Mypoints.com Visa $4.5k | Freedom Visa $1k| Amex Surpass $1k
Established Contributor
Posts: 662
Registered: ‎02-20-2013
0

Re: Pay taxes out of savings or use Discover's offer of temporary increase CL


mcf wrote:

do what you feel comfortable with.


No offense, but that's terrible advice. You don't learn how to manage your personal finances by finding your "comfort zone". You learn by doing what makes better finacial sense for your own situation and goals.


DCU ( pulled 3/29/13) EQ04 683 | Amex (pulled 3/28/13) EX 760 | US Bank (pulled 3/28/13) EX 753
CreditKarma (4/19/13) TU-TR 701 | TU Vantage 788 | USAA FAKO (3/31/13) EX 728, EQ 699, TU 737 |
Inquiries (4/18/13) EX 13 | EQ 13 | TU 14
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