DWM Q&A

[Pre-med candidate about to start med school wrote]

Hi, DWM.
I have been reading your strategies and things you posted on your blog, which I find very informative.

I start medical school this year and I am trying to follow your strategy. I am actually in a very fortunate situation, where I got full-tuition scholarship to an US MD school and I will just have to cover for living expenses, which I will use credit cards to save off of my interest. And I have a few questions that I hope you could help provide some insights based on your experience.

1. I will have about $7k in cash and about $4k debt (9k total credit limit) on my 0% APR card before school starts. And my question is, how did you pay for rent or tuition with credit cards? Don’t you need cash to pay for rent or tuition? Don’t you have to do cash advance, which has higher interest rate? I do know that credit card companies sometimes send out empty checks, where you can use to pay for anything, but I think those are cash advances, no?

2. Currently, I cannot find a way to pay my rent with credit card unless I get cash advance, so I am trying to keep my cash just for rent and spending everything else on my credit card.

3. If I do find a way to pay rent with credit cards, do you think it’s wiser to put $5.5k out of $7k into Roth?

4. I also need to buy a car and my parents will actually help me with $3.5k. I am trying to buy a used car that’s worth about $7-8k. Is there any best way out there to finance my car payment? I am thinking of getting a car from an owner directly through craigslist, which often require cash transaction. And I am not sure if there is any best way out there with cheaper auto loan than current 6.8% med school loan.

Thank you very much and any insight is appreciated! Hope you had a great Memorial weekend.

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congrats! you are off to a great start. it’s awesome to get full tuition scholarship, you must be an outstanding candidate.

answers to your questions,

1. use balance transfer checks. (start with chase slate, the only card i know of that charges 0% transaction fee and 0% interest for 15 months) so this means you get to write yourself a check for the amount of your credit limit and pay anything you want and borrow this money for free for 15 months… that’s what i did to pay part of my student loans last year when i first got out of med school. but double check the guidelines now, make sure it has not changed… then in 15 months, you can balance transfer this amount to another credit card (at this point, you will likely pay 3% of transaction fee on 0% interest rate for 12-18 months, which equates to 2-3% effective interest annually) still beats student loans. any amount of the slate card that you can’t pay off with another balance transfer/ cash/ side job, you can then request student loan to pay off. key is minimize and delay requesting student loan. student loan as last resort.

pay rent with credit card by writing yourself a balance transfer check with chase slate. when i did it to get the 0% fee 0% interest balance transfer, you needed to write and deposit/use the check within 90 days of account opening. make sure you always pay attention to the fine lines before you sign. make sure you know exactly how much each transaction with credit card companies cost you, and how soon you need to pay off the balance to avoid the ultimately exorbitant interest cc companies charge you to make a profit. consider the 0% or 2-3% effective interest rate a bait/teaser that cc companies use to charge you 12-30% after the teaser period is up (usually 6 months -21 months).

yes, if i could do it over again, i would definitely MAX out ROTH every year I have income greater than ROTH limit. which was every year of med school for me because i was working lots and lots of work study hours. I highly recommend outstanding med school candidates like yourself to hold a side job during medical school, preferably a work study position. work at the library and get paid while you study.

4. try to buy car from a family member, so you know what to expect in terms of maintenance cost, etc. i would go for buying a 3-4k car rather than twice that. then again, i’m very cheap, cuz i had to save my money to support my kid and to pay 50k tuition each year…

Lastly, I’m really happy for you. you are in a position to be graduating from medical school with a POSITIVE rather than negative net worth with the combination of full tuition scholarship, some parental help, delaying student loan interest, being frugal and smart with your money, a work study job, and last but not least, taking advantage of the time value of money.

Keep me posted on how you do.