One debt at a time

As promised, here is a bit more background on that Bank of America debt and my plans for it.

I had LASIK three months ago, prior to my fiscal awareness awakening; thus, the cost went onto a credit card (I know, I know). I put it on my Capital One Venture card, as I had just opened the account (to accumulate reward points for my trip to Ireland) and I would earn 10,000 bonus miles if I charged $1,000 in the first three months. Thus, my $1,900 LASIK surgery accomplished the task and earned me $100 worth of travel costs reimbursed.

But, I didn't want to carry over the balance, and I couldn't find a way to scrounge up the money within the month. So I called up my oldest credit card, which I keep open because it holds my longest line of credit (10 years), and a long history with one lender is beneficial for my credit score. The card had carried a zero balance for years, and in their haste to secure my debt, BoA offered me 0% interest for 12 months.

However, all is not as rosy as it seems; the balance transfer came with a 4% transfer fee, meaning BoA would get an additional $76 dollars from me. A few years ago, balance transfers with no interest for a year also came without transfer fees. Hence, college students and other chronic debtors could choose to transfer balances each year without ever paying a dime in interest or fees (I knew a few who capitalized on this practice). Sadly (or not?), those days are gone, and most credit cards levy a 3-5% fee for balance transfers. So, while I wasn't happy about the 4%, it was the best option for me at the time.

Knowing what I know now, I would have saved for the surgery BEFORE having it done, rather than borrowing and paying it back. I had my reasons for rushing the procedure, but that doesn't mean it made any fiscal sense.

My BoA card charges me minimum payments of $19 a month. My 0% APR runs out on June 8, 2011. By that time, with the minimum payments, my balance will have done from $1,976 to $1,748. So, why am I not making more than the minimum monthly payments?

Because I have opened a SmartyPig sub-account dedicated to this debt. Why not earn interest while I build the $1,748, rather than just funneling it into my credit card? With today's interest rates, this doesn't amount to heaps of cash, but I still prefer earning 2.15% in my SmartyPig account to the nada, zip, zero, zilch I would earn sending it straight to BoA.

What do you think? Not about the initial line of credit; obviously this was a mistake. But with regard to the savings account, is this a dangerous practice, in which I become too divorced from the debt and risk not saving all that I owe by the time the interest kicks in? By the way, the default interest will be 14.99%—OUCH! I have no plans to swim around in that for long. But, if I come in $200 short and have to carry the balance, with interest, for a month, does this amount to a cardinal sin in the eyes of the financial gods?

P.S. Regarding Blogger formatting, why does a carriage return sometimes create single-line spacing but double-line spacing at other times? This is driving me bonkers.