In this episode, your Cash Flow Consultant explains how to save a lot of money on interest charges using Dynamic Banking, with a Line of Credit.
More wealth, Less Debt… Fast!
Oregon Cash Flow Pro
Hi folks, welcome to Oregon Cash Flow Pro.
I am your cash flow consultant, James Barber, and I’m here to help you take control of your finances!
In today’s episode, we’re going to be talking about Dynamic Banking, specifically within a line of credit.
Now, the reason we like to use a line of credit – It’s the ideal vehicle. It’s a revolving credit account. It allows you to put money in and take it out, just like you would a regular checking account. Also, the interest is simple interest, it’s configured daily. Whatever your average daily balance is is what you’re going to get charged on.
So, the key is how do we keep that average daily balance as low as possible, while living our life like we normally would. Well, we do that by depositing your whole monthly income, all of your paycheck, into the line of credit and then paying your bills out of the line of credit.
This puts all of your money to work for you throughout the month and it lowers that average daily balance, minimizing interest charges!
You can see how this works, with the graph here below. You can see a paycheck going in at the beginning of the month, a mortgage payment mid-month, and then credit card expenses being paid off at the end of the month.
The reason we have the credit card in there, is because the use of a credit card allows us to keep this daily balance as low as possible, and we get to do that interest free. If you pay off your credit card at the end of each month, your bank isn’t going to charge you any interest. You just borrowed that money for the whole month for no cost.
Let’s look at the details. We’ve got a line of credit, 6.25% apr. We’ve got a beginning balance of $7,000. Monthly income of $5,000, that’s our paycheck here, and our monthly expenses add up to $4,000. That’s $1,000 a month cash flow, okay?
Now, if that money was just sitting in a checking account, like we would normally do it, and we throw that $1,000 at this account at the end of each month, our average daily balance would end up being between $6,000-$7,000 for the month.
That’s going to cost you between $35-$37 in interest. In this case, utilizing Dynamic Banking, we deposit the whole paycheck, our balance goes way down. It starts to go up when we make our mortgage payment and then it gets up here to $6,000 after we pay off our credit card.
But our average daily balance, check it out – $3,441.31. Our monthly interest charge is only $18.27. We saved almost $20 a month in interest charges not doing anything special. We just shifted the way we utilize our monthly income.
We put it into the line of credit, instead of a checking account, and then we use the line of credit to pay our bills back. We also use a credit card and hopefully you are using a rewards card. You want to maximize those benefits. That just makes this thing work even better.
But I hope you can see the potential in this and how powerful this can be.
You work hard for your money, it’s time to make your money work hard for you!
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