I Decided To Take The Limit Increase

I sent off the paperwork this morning to increase Credit Card 4’s limit to $16,300. Good grief that’s a large number!

Well it’s only going to be large for a finite period of time, as I’m going to reduce the limit as I pay it off.

The deal I've made with myself is that I’ll transfer the remaining balance of Credit Card 3 onto it, which reduces the number of cards I have to pay each month, but I’ll be paying both the amounts I was currently paying all onto Credit Card 4 each month instead.

Credit Card 3 was my current focus card, and the one I’d worked out I could pay off by December 31 (to achieve another of my Financial Year Resolutions). To ensure that goal is still achieved, I need to get the total balance on Credit Card 4 to at least $10,000 by December 31. This allows for the amount I was already paying off Credit Card 4, plus the total balance of Credit Card 3.

Clear as mud? To break it down, as at 1 August, the balances of Cards 3 and 4 were:

• Credit Card 3: -$5,466
• Credit Card 4: -$11,197

Once the limit increase is approved & the balance transfer is complete the most the new picture will be:

• Credit Card 3: $0
• Credit Card 4: -$16,663 (it won’t be this much though, as this month's payments on both cards will be applied first)

Then it’s a matter of paying off like crazy between now and December 31. I can’t claim credit Card 3 as paid in full until that goal is reached.

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I Must Be Doing Something Right

In the last week or so I've had three letters from my numerous credit card providers.

The first one offered to switch my card over to a Platinum card, oooh Platinum - shiny! The old me might have been tempted, but the new me checked the fine print and found that the interest rate was over 7.5% higher than I’m already paying, and the ‘benefits’ are of no interest to me or my lifestyle. So thanks, but no thanks.

The second one was offering to double the credit limit on that card, but the interest rate is 19.89% so why would I want to do that? Not to mention it’s one of the cards I've already paid off, so thanks, but no thanks to your ‘generous’ offer. Reminds me I must cancel that one this week, probably not what the bank was hoping I'd do.

The third one offered to increase my limit by $6,000. Like I need more credit at this point! That said, I did consider this one for a moment as the interest rate on this card isn't too bad, it's only 10.49%, so I could potentially balance transfer one of my other higher interest cards (my current focus card is 13.99% for example) and save on some interest charges while I pay them both off?

Even if I do nothing, it’s good to know I’m doing something that is working in my favour. I figure the more debt the banks want to get me into, the more I’m on the right track by getting rid of it!

Credit cards work differently here in Australia to how they do in other countries, like the US. Your total available credit limit impacts your borrowing power for things like mortgages and car loans, so it’s actually better to cancel cards as you pay them off or reduce your limits as you go, just as Ugly Debty has been doing. I guess I’m becoming a ‘preferred customer’ myself these days!

What do you think? Just say no, or should I take the offer and consolidate and save some interest?

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The Ugly Truth – Day 336

The Ugly Truth

Debts

• Personal Loan: -$21,173
• Credit Card 1: -$6,704
• Credit Card 2: -$8,482
• Credit Card 3: -$5,466
• Credit Card 4: -$11,197
• Credit Card 5: (paid in full)
• Credit Card 6: (paid in full) - Hurrah!
• Credit Card 7: (paid in full)

Savings

• Emergency Fund: +$2,012
• Car Fund (Maintenance & Registration): +$1
• Short Term Goal Fund: +$1,006 (Current goal is new bedroom furniture)
• Home Deposit Fund ($60,000 Goal): +$1,000
• UK Tour Fund ($10,000 Goal): +$500

Total: -$53,022 – nearly under $52K!
Debt reduced from last month: +$1,412
Debt reduced from Sep 2007: +$3,750

Not a bad month all up, a smidge over $1400 of my debt reduced. Had a few expenses here and there, including getting my car serviced, nothing major to speak of though.

Paid off credit card number 6, which was a great feeling. That meant the UK Tour Fund didn't see any love this month though, maybe next month I’ll be able to add something.

My pay increase kicked in; as did the tax cuts we were given as part of the last Federal budget, so that’s made a nice change to my take home pay.

A couple of my credit cards increased their interest rates yet again, in fact Card Number 3 jumped 2% in one go! Lucky that’s my focus card now, and I’m still confident I’ll be able to have it paid off entirely by December 31.

That means I’ll hit 4 out of 5 of the 2008 financial goals I’d set myself, which I’m more than OK with.

Roll on payday.

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