Playing the credit card game!

Our home loan is fixed at 7.45%, which will become unfixed in about 14 months time. Previously, whenever we have a bit of extra cash on our hands that we won’t spend for a while we pop it into our home loan instead of leaving it in our normal everyday account which doesn’t gain any interest there. I consider 7.45% interest saved as 7.45% interest earned. The problem is now I’m seeing that we have debt, about $25,000 worth of debt on credit cards that charge interest of 12% upwards. So our extra money isn’t working for us anymore, it would be better off paying off those cards.

By this theory, it’s also better that we put all our wedding money “savings” onto the cards and then use the cards to make wedding purchases. At the end of this year we’ll have spent as much as we paid on the cards but we’ll be saving on interest during the year. I realised this when we had our engagement party a few months ago, we knew it would cost us about $3500 and we were going to pay over the phone on credit card because we couldn’t be bothered organising a cheque to pay on the night and it wasn’t safe to be holding that much cash.

So I transferred $3500 of redraw money (i.e. savings) onto a credit card that owed about that much, bringing the balance to almost zero. We then paid over the phone, and brought that balance back to 3500 and I noticed the following month I didn’t pay any interest on the card because of the 55 days interest free! I had essentially saved myself the $40 or so interest for the month… plus that card has a 0.5% cash back on purchases, capped at $10, so I scored an additional $10 cash back… all because I transferred my savings to my debt before paying for something I was going to pay anyway!

This month I was planning on putting $1500 into savings for the wedding, but I’ve slapped it onto our Credit Card #2 which had a big chunk of balance transfer on it that is now being treated as cash advance and therefore we are paying 17% interest instead of 13%... so I’ve now saved quite a bit of interest for the next month or so until we pay another chunk off our reception….

Works for me!!! We just have to be diligent that we only spend what we have already paid onto the card, but I know this will work because I am just so damned determined!