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Contributor
smoothjk
Posts: 140
Registered: ‎06-17-2008
0

Any tips for paying down credit card balances?

Other than the obvious stuff, like "don't waste money, use it to pay your credit cards" ...

My question is more about ... method?

Like, should I try to pay down balances as soon as the next statement (with a due date) appears? Would this help avoid at least some interest from accruing? Should I try paying when it still says "$0 current payment due"?

How much faster does the balance go down if I do, say, twice the minimum? How long would it take to pay down if I was paying minimums or barely above?

Is it good to pay a big chunk once per month? When? Or is it somehow better to pay two smaller payments every two weeks or so?

/end

I realize there might not be any easy answers to these questions, but I just thought I'd take a shot. Sometimes, surprising info appears on these boards. :smileywink:
FICO (06/17/08): TU 691 - EQ 642 - EX 638 - Util 64%
FICO (07/23/08): TU 698 - EQ 653 - EX 644 - Util 50%
FICO (02/04/09): TU 694 - EQ 668 - EX 654 - Util 43%
FICO (05/18/09): TU 687 - EQ 675 - EX n/a - Util 39%
FICO (03/09/10): TU 666 - EQ: 691 - EX 644 - Util 54%
IDGuard (2/8/12): TU 690 - EQ: 710 - EX 710 - Util 72%
FICO (03/13/12): EQ: 696 (87% revolving to limits)
Valued Contributor
thrasher865
Posts: 1,157
Registered: ‎05-21-2008
0

Re: Any tips for paying down credit card balances?

There is no answer to most of those questions.  If you're not concerned about scores or if your balances are so high theres no hope for your scores, just pay once after the statement date.  If you are concerned for your scores short term, pay as much as you can right before your statement date, then pay the minimum payment after the statement cuts.
 
Obviously, pay off the higher rate cards first, with payments just above the minimum payment going to the other cards in the meantime.

Starting Score: EQ: 665 - TU: 687
Current Score: EQ: 749 - TU: ---
Goal Score: EQ: 760 - TU: 760


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Senior Contributor
FretlessMayhem
Posts: 3,279
Registered: ‎08-03-2007
0

Re: Any tips for paying down credit card balances?

If you carry a balance on a card from a previous statement, there is no grace period so interest does accrue. I believe most CCCs computer interest based on the average daily balance of your CC.

It's hard to recommend anything specific without seeing your cards, limits, and balances besides the standard "pay more than the minimum" adage.

I say it's better to allocate more payment to CCs with higher interest rates first and pay those off in order to save yourself money. But that's about as much as I can say without knowing more information.
Here we go again...
Established Contributor
woopah
Posts: 721
Registered: ‎03-15-2008
0

Re: Any tips for paying down credit card balances?



smoothjk wrote:
Other than the obvious stuff, like "don't waste money, use it to pay your credit cards" ...

My question is more about ... method?

Like, should I try to pay down balances as soon as the next statement (with a due date) appears? Would this help avoid at least some interest from accruing? Should I try paying when it still says "$0 current payment due"?

How much faster does the balance go down if I do, say, twice the minimum? How long would it take to pay down if I was paying minimums or barely above?

Is it good to pay a big chunk once per month? When? Or is it somehow better to pay two smaller payments every two weeks or so?

/end

I realize there might not be any easy answers to these questions, but I just thought I'd take a shot. Sometimes, surprising info appears on these boards. :smileywink:




I don't think there's really one right answer to that question. I think it depends on what you prefer to do and what works for you. So, here's what I do:

In September 2007 I had $28,300.86 in credit card debt. I created a budget which was based on my paydays and included all my monthly bills, putting aside money for those bills that are not monthly, like car/life insurance, license plates, etc, as well as money for groceries, gas, and misc. I also put aside money every paycheck for my house fund savings account. In 2007 it was $10 a paycheck, in 2008 it's $25, and next year it will be $37.50. Not a lot, but something.

I obtained a second checking account so that I could keep the funds for my bills and spending (groceries, gas & misc) separate. I get direct deposit so the correct amount of money goes into each checking account and the house fund savings account without me having to think about it. Then automatically the correct amount for my not monthly bills transfer into a different savings account. The money in my bills account, goes towards bills and nothing else.

Every payday I sit down and pay all of my bills and then pay the extra on whichever credit card I've chosen to pay off at that time. I've been paying my credit cards off in interest order. Those with the highest interest I pay off first, and then if I have two cards with the same low intro interest rate I pay off whichever one is going to end first. And I do that every time I get paid.

So for example, if the bill on my Citi card, the one I'm currently paying off is due 8/12, and I get paid on 7/25, I don't wait until 8/10 to pay on it, I pay right away. That way I'm constantly working the debt down, and I don't allow the money to sit in my account, tempting me to spend it on other stuff. Additionally the money in my spending account I'm a little more flexible with. Just because the money is set aside for gas, doesn't mean I might not spend it on groceries if I need groceries and there's an excess of money set aside for gas.

Those card that are paid off I still use from time to time to keep them active, but I always PIF every month. I may not do it prior to the statement cutting, and while I want my FICO score to improve, for me paying off my debt is more important than some extra points on my FICO because "X" number of cards didn't report balances.

But I have a Chase Platinum Visa that is 0% interest on purchases until 2/2009 so I have continued to spend on that card when I need to, so even though I've made progress, that card has gone up in debt since I got it. But it will be paid off prior to interest being charged on it.

In December 2007 I also got a second job, but that's because I felt a desire to do everything I could to take control of my debt.

And I currently have $13,723.73 in credit card debt, that will be gone as of 2/6/09.

That works for me, it may not work for everyone. Some people say pay your cards off in the order of which has the smallest balance, that way you get a little "high" from getting the cards paid off, and you can get them paid off faster because they have less of a balance. But if your smallest balance cards also have your lowest interest rates, you'll be paying more in interest and it will take longer for you to get everything paid off.

The important thing is to find a method that works for you in getting your CC debt taken care of. If it's paying every week, every two weeks, right when the statement cuts, or right before the statement cuts, it's what works for you that matters.
4/16/09: TU: 775, EQ: 805
2/11/09: TU: 773, EQ: 790, EX:790
11/16/08: TU: 773, EQ: 785, EX: 780
Goals for 2009: 0 Credit Card Debt & 0% Util (achieved 2/6/09), Mortgage! (achieved 11/2/09), getting closer to 800 scores (I crossed this earlier this year, but I'm sure I'm not there anymore!)
Regular Contributor
mrlimo
Posts: 153
Registered: ‎12-04-2007
0

Re: Any tips for paying down credit card balances?

Depends how your viewing your payments Fiscally or Ficoly? I was running into this very problem my self. I always PIF every month on all my cards, I use primarially 2 cards and then rotate a 3rd card with small charge to keep it active. Here is where it depends on how your viewing your questions. IF I pay my account in full BEFORE the end of the closing of the billing cycle FICO wise I show lower utility and get a fico boost from it. However Fiscally I am not taking advantage of the 30 day grace period that I can use credit cards money without accuring any interest. Normally I take advantage fiscally of using the money I need to pay off the card and leave it in a money market that time drawing 3% + 1% rewards then pulling that money out to my checking to PIF. Right now I was trying to see if I could get all 3 of my scores in the 800 range.
Contributor
smoothjk
Posts: 140
Registered: ‎06-17-2008
0

Re: Any tips for paying down credit card balances?

Thanks for the informative responses so far, despite my lack of transparency. "Woopah," are you a "Friends" fan by any chance? :smileywink:

Here's more info:

I have basically two open credit cards and a few closed accounts (before I came to this forum, I thought closing was a good thing because "Hey, with less temptation, that's gotta make me a better credit risk, right?").

One of them is a BofA that has shot up to 24.99% APR (from 14.99%, I think) after a couple of lates in 2006. It has about $10K with a total limit of $13.6. Minimum payment of $239 -- part of the balance is still in a promotional 1.9% APR, bringing my effective APR to about 17% for now.

The other is a Capital One, 14.99% APR, and carries $2.7K out of $6.5K total. Minimums are $57 a month.

Summary:
BofA - 24.99% APR, ~17% until Jan. 2009, $10K/$13.6 balance, $239 minimum.
Capital One - 14.99% APR, $2.7K/$6.5K balance, $57 minimum.

For a few months, I've been paying about $300 to the BofA per month, and $100 to the Capital One. I'm soon going to switch that to about $400-500 a month to the BofA, and keep the Capital One at about $100 per month.

Hope this info helps for some more specific advice! Thanks.
FICO (06/17/08): TU 691 - EQ 642 - EX 638 - Util 64%
FICO (07/23/08): TU 698 - EQ 653 - EX 644 - Util 50%
FICO (02/04/09): TU 694 - EQ 668 - EX 654 - Util 43%
FICO (05/18/09): TU 687 - EQ 675 - EX n/a - Util 39%
FICO (03/09/10): TU 666 - EQ: 691 - EX 644 - Util 54%
IDGuard (2/8/12): TU 690 - EQ: 710 - EX 710 - Util 72%
FICO (03/13/12): EQ: 696 (87% revolving to limits)
Contributor
smoothjk
Posts: 140
Registered: ‎06-17-2008
0

Re: Any tips for paying down credit card balances?

It's probably pretty obvious to say this, but there's really no way of PIF for these cards. =) In about a month, with a pay raise, I will be able to devote about $500-600 to my BofA every month. But of course, I'm going to rethink my strategy based on what you guys say.
FICO (06/17/08): TU 691 - EQ 642 - EX 638 - Util 64%
FICO (07/23/08): TU 698 - EQ 653 - EX 644 - Util 50%
FICO (02/04/09): TU 694 - EQ 668 - EX 654 - Util 43%
FICO (05/18/09): TU 687 - EQ 675 - EX n/a - Util 39%
FICO (03/09/10): TU 666 - EQ: 691 - EX 644 - Util 54%
IDGuard (2/8/12): TU 690 - EQ: 710 - EX 710 - Util 72%
FICO (03/13/12): EQ: 696 (87% revolving to limits)
Established Contributor
woopah
Posts: 721
Registered: ‎03-15-2008
0

Re: Any tips for paying down credit card balances?



smoothjk wrote:
Thanks for the informative responses so far, despite my lack of transparency. "Woopah," are you a "Friends" fan by any chance? :smileywink:

Here's more info:

I have basically two open credit cards and a few closed accounts (before I came to this forum, I thought closing was a good thing because "Hey, with less temptation, that's gotta make me a better credit risk, right?").

One of them is a BofA that has shot up to 24.99% APR (from 14.99%, I think) after a couple of lates in 2006. It has about $10K with a total limit of $13.6. Minimum payment of $239 -- part of the balance is still in a promotional 1.9% APR, bringing my effective APR to about 17% for now.

The other is a Capital One, 14.99% APR, and carries $2.7K out of $6.5K total. Minimums are $57 a month.

Summary:
BofA - 24.99% APR, ~17% until Jan. 2009, $10K/$13.6 balance, $239 minimum.
Capital One - 14.99% APR, $2.7K/$6.5K balance, $57 minimum.

For a few months, I've been paying about $300 to the BofA per month, and $100 to the Capital One. I'm soon going to switch that to about $400-500 a month to the BofA, and keep the Capital One at about $100 per month.

Hope this info helps for some more specific advice! Thanks.




How much of that 10K is promotional and how much isn't? Because you're probably paying down on the low interest balance instead of the high interest balance.

Additionally, I would try calling them to see if you can get the APR down. If your payment history was going in 2007 and 2008. I don't think it could hurt to remind them of that since your lates were nearly if not completely 2 years ago now. Regardless, I'd pay down on that 10K before Cap1 only because of the higher interest rate.

I like "Friends" but wouldn't call myself a fan. I would watch it if it was on, but still haven't seen every episode.
4/16/09: TU: 775, EQ: 805
2/11/09: TU: 773, EQ: 790, EX:790
11/16/08: TU: 773, EQ: 785, EX: 780
Goals for 2009: 0 Credit Card Debt & 0% Util (achieved 2/6/09), Mortgage! (achieved 11/2/09), getting closer to 800 scores (I crossed this earlier this year, but I'm sure I'm not there anymore!)
Contributor
smoothjk
Posts: 140
Registered: ‎06-17-2008
0

Re: Any tips for paying down credit card balances?

I've actually written them a GW letter already, asking that they remove those baddies. We'll see how that goes. If unsuccessful after a couple tries, I'll probably just ask about the APR reduction. Those two late payments out of 8 years of on-time payments shouldn't be penalized so harshly, IMHO. About 3.3K of the balance is the promotional 1.9% APR, while $6.7K of it is the 24.99%.

I only thought you were a Friends fan because of your username, "Woopah." That's the sound Chandler makes when imitating a whip sound haha.
FICO (06/17/08): TU 691 - EQ 642 - EX 638 - Util 64%
FICO (07/23/08): TU 698 - EQ 653 - EX 644 - Util 50%
FICO (02/04/09): TU 694 - EQ 668 - EX 654 - Util 43%
FICO (05/18/09): TU 687 - EQ 675 - EX n/a - Util 39%
FICO (03/09/10): TU 666 - EQ: 691 - EX 644 - Util 54%
IDGuard (2/8/12): TU 690 - EQ: 710 - EX 710 - Util 72%
FICO (03/13/12): EQ: 696 (87% revolving to limits)
Regular Contributor
mrlimo
Posts: 153
Registered: ‎12-04-2007
0

Re: Any tips for paying down credit card balances?



smoothjk wrote:
Thanks for the informative responses so far, despite my lack of transparency. "Woopah," are you a "Friends" fan by any chance? :smileywink:

Here's more info:

I have basically two open credit cards and a few closed accounts (before I came to this forum, I thought closing was a good thing because "Hey, with less temptation, that's gotta make me a better credit risk, right?").

One of them is a BofA that has shot up to 24.99% APR (from 14.99%, I think) after a couple of lates in 2006. It has about $10K with a total limit of $13.6. Minimum payment of $239 -- part of the balance is still in a promotional 1.9% APR, bringing my effective APR to about 17% for now.

The other is a Capital One, 14.99% APR, and carries $2.7K out of $6.5K total. Minimums are $57 a month.

Summary:
BofA - 24.99% APR, ~17% until Jan. 2009, $10K/$13.6 balance, $239 minimum.
Capital One - 14.99% APR, $2.7K/$6.5K balance, $57 minimum.

For a few months, I've been paying about $300 to the BofA per month, and $100 to the Capital One. I'm soon going to switch that to about $400-500 a month to the BofA, and keep the Capital One at about $100 per month.

Hope this info helps for some more specific advice! Thanks.

 
If I were faced with this senerio. I would pay $57.00 per month on the Capital One and pay $443 - $543 towards the BOA. After the BOA is paid off continue paying the $500 - $600 towards remaining ballance on the Cap1. If you keep spending to a minimum in the payoff time period you should be able to have it knocked out completely in about 24 months. I would deinitely work on the BOA first since it is right now till January 2% higher then your cap1, after january it shoots up to 10% higher. Good part of it all is your hovering right around the 700 mark on all 3 CRAs. When you get your Util down to under 9% you will see a big score increase. as your score goes up You may see offers coming in for 0% financing BT offers for say 6 month. Read the fine print and if it cost you less transfer fees then it does interest. It may pay to bounce the debt around.

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