topic Should I pay off 0% Interest Wells Fargo Home Projects Account or...? in Rebuilding Your Credit

Should I pay off 0% Interest Wells Fargo Home Projects Account or...?

gamegrrl — Sat, 08 Oct 2011 16:15:56 GMT

It's been a while since I posted here. Right up front, I'd like to say what a great resource these forums are, and that they have been instrumental in really helping me get my financial life on a better track. When faced with a credit-related decision, I always look here for guidance. In this particular case, I can't find anything posted that relates.

Over a year ago, I opened a Wells Fargo Home Projects Visa account through my roofing contractor. Total credit limit: $7,700, with $1500 of that total being attached to a Home Projects Visa card. Zero % interest, 36 months same as cash type deal. I've been paying like clockwork. The payment is $213/month. I realize that the 0% aspect of this account isn't a done deal until the loan is paid off without a glitch. The balance is about $4500, and is reporting as a credit card with a $7700 limit. Even so, I don't think of this as a credit card, per se, even though part of it ($1500) is. When I started making payments on this account, all payments automatically went towards the $1500 portion of the debt that's actually attached to the Home Projects Visa card.

All of my credit cards have $0 balances, though I use them occasionally. I recently paid off one of three student loans. I was able to get a HELOC last spring at a decent interest rate (3.79%).

Here's my quandry: I haven't been all that worried about paying off the 0% Wells Fargo account because, well, it's 0%. Free money, in a way. But I do hate the monthly payment. I earn enough to pay my bills with a little breathing room, but that's about it. I have $10K in my savings account right now which is earning me little in the way of interest, but sure gives me a warm fuzzy feeling just being there.. Should I pay off the Wells Fargo account with some of my savings? Here are the pros and cons I've come up with. What am I missing?

Pros of Paying it Off

Eliminate risk of being hit with interest on total loan if payment is late

The addition of $213 to my monthly cash flow

Better utilization numbers for my FICO scores

Peace of mind

Cons of Paying it Off

It would take almost half my savings

Seems wrong, somehow, to not continue to benefit from 0% interest

I need to double check my paperwork to make sure that there's no penalty for paying it off at this point in the game, but I am fairly certain there isn't.

What do you think?

Re: Should I pay off 0% Interest Wells Fargo Home Projects Account or...?

gamegrrl — Sun, 09 Oct 2011 14:37:33 GMT

I keep changing my mind about this. I've been working so hard on credit repair for the past few years, and I am terrified that I'll do something "wrong" and find myself back in a bad spot. Right now, I'm leaning towards paying this off tomorrow, but I could sure use some input...

Re: Should I pay off 0% Interest Wells Fargo Home Projects Account or...?

guydiver — Sun, 09 Oct 2011 14:59:03 GMT

Well, if it were me, I'd keep the positive tradeline and take the interest free financing. You will be able to keep your savings for a rainy day if needed, and you can always pay it off later if you change your mind. As long as you don't have any other purchases planned where this debt will cause you to have any DTI issue, it's a good deal. If you feel so inclined, use your savings to pay off something that is charging you interest. This account will continue to figure into your AAofA for about 10 years after it is paid off.....so why not ride it out a while longer? No real downside unless you have problems paying the monthly amount. You can always set up automatic payments if you need some peace of mind. Just my two cents. I use my Lowe's account for just this reason.

Re: Should I pay off 0% Interest Wells Fargo Home Projects Account or...?

gamegrrl — Sun, 09 Oct 2011 15:32:55 GMT

Thanks for your response, guydiver!

Actually, it's the "interest free financing" that makes me nervous. I have had this set up as an automatic payment from my bank since day 1. I just hate having the "one mistake and you'll get all this interest piled on you" thing hanging over my head. One misstep (a screw up by my bank, an act of God or whatever) and it's no longer interest free.

Maybe I'm just being paranoid. I could happen.

Other than this payment, my HELOC payment and a student loan, all of my other monthly obligations are things like utilities, insurance and food. The only obligations I have that are charging me interest are my HELOC and student loan, and $4K would barely make a dent in either of those. LOL!

My DTI is in pretty good shape: Until I got this HELOC, my back-end DTI was 16%. Now I'm at 38%. Eliminating this Wells Fargo obligation would take me down to 33%. I don't have any plans to try to borrow money in the forseeable future, so this is probably not a big issue.

I do have plans to add a fence/deck to my house in the spring, and I want to be able to pay cash for those. Hmmm... Yet another reason to hang on to my cash I guess.

Maybe the better question to be asking here is "What can I do to guarantee beyond a shadow of a doubt that my payment to Wells Fargo will never be late?". It's set up as an automatic payment from my bank. I don't have overdraft protection on that account. I wonder if I can tie all my checking account to my savings account, using the latter as ODP. My savings does serve as ODP for one of my checking accounts, but I don't know if it can be used as ODP for multiple accounts.

Re: Should I pay off 0% Interest Wells Fargo Home Projects Account or...?

gamegrrl — Mon, 07 Jan 2013 19:44:26 GMT

I just went ahead and paid this off today. I was weary of worrying that something... ANYTHING... would happen to cause them to charge me interest or fees.

Yay me.

I've already set up an instant transfer to move an amount equal to what my payment was into my savings account every month. I feel better already.

This account was showing up as a credit card, even though only $1,500 of the credit line was attached to a Home Projects Visa card. I always found that annoying.