Compromise can Reduce Financial Conflict

Today’s postings is on the theme of compromise.

As many of you know, our long term goal is to pay off our second mortgage. To help make this happen, we’ve been brainstorming ways of accelerating the payoff. Since the second mortgage is in the form of a home equity line of payment, we are currently paying a variable 8.84% on a balance of approximately $18,852.45. This means were paying $1,710 per year to the bank.

A strategy we’ve been considering is credit card arbitrage. Yes – that’s when you open a new credit card account with a low interest rate and transfer some your high interest debt to the new card.

When Miel proposed this, I nearly had a heart attack. As many of you know, I’ve been a critic of credit cards and have railed against them in the past (1)(2). However Miel hasn’t agreed and we’ve hashed it out here on our blog. I lost the debate.

So we decided a compromise to the credit card arbitrage issue. First, we agreed locate a zero interest balance transfer card, we’d both review the terms. Second, we also agreed to transfer approximately half of the debt from the 2nd mortgage to our new card. This way, we’ll have limited exposure if the credit company does try something funny. We are still talking, but I think we’ve reached a solution in principle.

The advantages of this would be to save about $850 in interest and break up the debt so we can gain a psychological boost by paying each account off. – Also, this will reduce the long term hassle factor as we’ll be able to dump Washington Mutual more quickly.

To wrap this up, I think its important that when a conflict arises solutions be reached which are comfortable for both parties. For example, if Miel had pushed the issue and I agreed just to make her happy, I’d be less motivated to participate and our payoff would be sabotaged. As it stands, I’m happy with this plan and feel motivated to take ownership of the process.

Thanks,

James