Here is what I did next,
- Check my credit score (always, know where you are before you pounce)
- Apply for a card with good balance transfer offers (fee should not exceed 2-3% for 0% APR of 1 year)
- If you can find another CHASE SLATE equivalent, kuddos to you. I think SLATE has the best deal for balance transfer.
- I didn’t see another card like SLATE with FEE-less, 0% balance transfer for 15 months.
- So I went for the second best; CHASE FREEDOM card, which charges 2% transaction fee for balance transfer with 0% interest for 12 months. This means, the true annual interest is 2%, still heck of a lot better than the 6.8% student loan interest.
- If this same 15k of principle were still held by my student loan servicer @ 6.8%, I would have accrued $1020 each year. Even worse, for those who are making IRB payments, where their student loan is going through negative amortization*, the interest accrued each subsequent year is getting exponentially larger!!!
- But with the 2% interest of FREEDOM card, the interest on 15k for 1 year is $450.
- Again, this is net guaranteed tax free savings of $1020- $450= $570, or more if loan has negative amortization. 4.8%+ GUARANTEED tax free annual return for this financial move.
So at the end of 2.25 years,
With a few mouse clicks and writing 2 checks,
I have saved $1845+ in interest on 15k of student loan.
If you follow the same principle and move debt with even higher interest rate (some are as outrageous as 9-11%), your savings will be even more.
If you increase the amount of debt flow, IE. let’s say you shift debt around in 3 x the magnitude proposed above(=45k), then you would have enjoy ~6k of tax free savings in 2.25 yrs.
To recap the flow of my debt is such:
15k @ 6.8% interest with Dept of Education –>
15k @ 0% interest as balance on my SLATE credit card for 15 months –>
15k @ 2% interest as balance on my FREEDOM credit card for 12 months
2 transfers over 2.25 years, with $1845 saved. Amount of time I spent doing this? Less than 2 hours… I paid no taxes and had the total peace of mind in knowing exactly the minimum financial reward of my effort 🙂
The other amazing added bonus that comes without any effort is: as I carry large balance, and then PAY OFF large balance, credit card companies love me, and offer me more sweet deals, literally begging “to carry my student loan debt.” The credit bureau also loves me and gives me amazing credit score 🙂
If a mom with a young kid and 80+ hr work week, and a tutoring side job can manage this, you can too!
Likely, you’ll be more successful than I am. No one told me how to do this, I figured it out by baby steps, mistakes, and some painful lessons. I hope this can benefit you and set you free from debt sooner than you would have otherwise.
*negative amortization *loan balance is getting larger in spite of payments because payments are too small to even cover interest monthly, let alone starting to reduce principle. Those who are on IBR/PAYE in residency without making extra payments are likely in this situation.
Please comment below if you have any questions.