To Her Credit

When the no-interest, same-as-cash deal clock runs out

To Her Credit columnist Sally Herigstad

Sally Herigstad is a certified public accountant and the author of “Help! I Can’t Pay My Bills: Surviving a Financial Crisis” (St. Martin’s Press, 2006). She writes “To Her Credit,” a weekly reader Q&A column about issues involving women, credit and debt, for, and also wrote for MSN Money, and, and has guested on Martha Stewart Radio and other programs.

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Question for the expert

Dear To Her Credit,
I bought my son a new drum set he needed for his band, which is his livelihood. Now I have a balance of $5,500 on a card that has been “12 months same as cash” — and the 12 months are almost up.

I believed that settlement from my divorce would have occurred by now. It has not. What can I do? Make another transfer? — Maryanne

Answer for the expert

Dear Maryanne,
It’s imperative that you pay the balance off immediately. Many 12-months-same-as-cash deals sound wonderful when you sign up for them, but they turn into nightmares if you miss the 12-month payoff date. Some same-as-cash deals have interest rates that jump to 30 percent or higher. Others apply interest retroactively to the date you bought the drums!

That’s why I recommend avoiding same-as-cash deals unless you have the money in the bank to pay them off — and in that case, it’s hardly worth the trouble. You have several options for paying off or transferring this debt:

    1. Ask your son to pay for it. He’s an adult. If he’s been making money for a year with these drums, he should be able to pay all or most of the bill. Let him take out a loan or a cash advance himself if he needs to. I’m sure he wouldn’t want his recently divorced mother to be saddled with a bill she can’t pay. If his business is sporadic, which it can be for even the most up-and-coming bands, he may need to supplement his income temporarily. Perhaps he can take a part-time or seasonal day job until the drums are paid off. Or he might try giving drum lessons.
    2. Ask your son’s father to help. He should be just as interested in helping as you are. If you, your son’s father and your son split the bill, you would only have to pay $1,833 apiece.
    3. Sell something. With eBay, Craigslist and other online sites, you can scare up some cash within days. Get your son involved — musicians are notorious for having instruments lying around they don’t use anymore. Perhaps you or your son’s father have collectibles, tools or other items that can be turned into cash. Every little bit helps.
    4. Ask your lawyerif you can get some cash from your husband before your divorce is finalized. It is not unusual for a spouse to receive spousal support and other payments during the divorce process.
    5. Transfer the balance to a lower-interest card. This is my last choice because:
        • Finding no- or low-interest cards for balance transfers is not as easy as it once was. You should still be able to find one if you have an excellent credit history, however.
        • Most balance transfer cards charge at least moderate interest rates after the first six months. As you’ve experienced, six months goes fast!
        • If you make the smallest mistake — for instance, if you send your payment just a few days late — your interest rate can go up 50 percent to 100 percent.
        • Balance transfer cards often charge a fee on the amount transferred — typically 3 percent to 5 percent. On $5,500, that adds another $165 to $275 to your balance immediately.

          If you can’t pay off the balance some other way, transferring to another card is probably better than leaving it on the same-as-cash deal. (If the same-as-cash card’s interest rate jumps to 36 percent, which some do, you could pay $165 a month just in interest.)

          Take care of your credit!

          See related:5 new rules in the credit card balance transfer game, 9 things you should know about balance transfers, When balance transfers make sense, Credit card balance transfers: The landscape is changing, Deferred interest, same as cash: Play the game right or lose

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