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## I REALLY Need Your Help!

Legendary Contributor

## Re: I REALLY Need Your Help!

The hypothetical Macys has a debt of \$12K, and an APR of approx 24%/12 =  2% a month.  So the interest alone on the Macys debt would be, next month, about \$240.

That is out of pocket loss of \$240, and with a monthly min payment of \$400, would bring your new principal balance down to \$12,000 - 160 = \$11,840.

So next month interest would be 2% of that, or approx. \$237.  And so on, and so on, monthly. Principal reduction is slight.  It could easily take years upon years to pay this debt.

Then the hypothetical Chase card, with a balance of \$2,000, and a monthly APR of 10%/12 = .8% . Monthly interest on that account would only be around \$16.  If you paid the balance to \$0, you would then get only an interest savings of \$16 next month.

Ok,  under your strategy,you would have made only min payment on the Macys, keeping its balance at \$11,840, and put all of the \$2,000 into paying Chase in full. then you save \$16 on next month's interest with Chase, and still have a balance on Macys that will cost you \$237 just in interest the next month.

Under my financial screnario, lets presume, as an alternative to your approach, that only min payment was made the lesser Chase card, and the \$2,000 was put instead into the Macy's card.  That is an reduction of the Macys debt by an additional \$1600 that would reduce the next months interest to 2% of 10,240, or only \$202.

I would rather have interest of \$202 vs \$237 the next month.  That mathemactical difference continues each month when resources are diverted into lower balance accunts.

That is real money.

And, I must redundantly reiterate, that ignoring higher balance accounts, if their % util is high, runs the additional risk of a CLI decrease by the creditor.

Message 21 of 32
Regular Contributor

## Re: I REALLY Need Your Help!

Thank you everyone for your replies.  I really appreciate it and will take your advise.

Message 22 of 32
Moderator Emerita

## Re: I REALLY Need Your Help!

Just to stir up a little trouble, I like to combine the approaches.

When you have a bunch of cards with balances, I say pay off the three with the lowest balances first. Then switch to highest-APR card, then next highest, and so forth.

Yes, it's not perfect logic, and yes, there will be a few extra bucks in interest. But unless there has been some amazing one-time financial disaster, like a combination of job loss and vehicle meltdown, most people run up high balances on all their cards because they've been spending emotionally and without self-discipline. (Sorry, OP, I'm not trying to bang on you here; this is just a general observation.) Folks in this situation aren't generally able to switch immediately to the rational, cold-blooded high-APR first. They need an emotional jump-start to help keep the motivation going.

Paying off three small-balance cards immediately means that there will be one extra month's worth of interest on the high-APR card. Whoopee. With a 24% APR (chosen for simplicity's sake), that basically means an extra 2% of that card's balance in interest expense for that month's delay. (And that expense is lessened by whatever is saved on the lower APR accounts --don't forget, that's some interest that's being saved.) If paying that one month's interest while getting the ball rolling increases the long-term chances of the consumer sticking with the program, I don't think that's so dumb. Get some energy going, and then attack the high-interest accounts.

We're human beings here, and what works and/or makes sense for some isn't necessarily appropriate for others. The main thing is for people in this situation to be able to switch from feeling overwhelmed and helpless to feeling like they have some control of personal finances.

* Credit is a wonderful servant, but a terrible master. * Who's the boss --you or your credit?
FICO's: EQ 781 - TU 793 - EX 779 (from PSECU) - Done credit hunting; having fun with credit gardening. - EQ 590 on 5/14/2007
Message 23 of 32
Moderator Emeritus

## Re: I REALLY Need Your Help!

I've also used a hybrid technique as HTSU talked about. I get several smaller balances paid off to get that psychological and emotional boost of seeing real results and then switch over to the highest APR's.

In the end it's what works best for you.

From a BK years ago to:
EX - 9/09 pulled by lender 802
EQ - 7/06-663, 3/10-800
TU - 8/10-772
You can do the same thing with hard work

Message 24 of 32
Valued Contributor

## Re: I REALLY Need Your Help!

haulingthescoreup wrote:

We're human beings here, and what works and/or makes sense for some isn't necessarily appropriate for others. The main thing is for people in this situation to be able to switch from feeling overwhelmed and helpless to feeling like they have some control of personal finances.

Let's say that we agree on that.

But what does it really mean? Some suggest to pay off the cards with minor balances, so they are out of the way and you can focus on a small number of accounts, which have higher balances and perhaps a higher APR as well.

Others may suggest to map it all out on a piece of paper. Virtual paper will work too. Clarity translates into control. Do not do the first thing in reality until you have done the last thing on paper.

Put differently. You want some chocolate really soon and you feel you need two pieces of it. So someone says, well you can have one piece now or two in five minutes. What do you choose?

Putting it all down on paper can be done quickly and with the right encouragement can form the needed instant gratification. The clarity and control that's needed. If you get a sense of that the outline on paper will work in reality, you are already there before even having put actual action in motion.

A bunch of cards with all their monthly balances, credit limits, high balances, APR, used for util etc etc can be mapped out on a single piece of paper, with room for totals and more. Massage the layout until it feels right for you. The familiarity with your numbers increases as you massage them.

Once you know the numbers well, they cannot make you feel unsettled as they did when they were unknown. Even the worst numbers feel a bit better once they're known. So it comes down to which kind of emotional boost you need to get past that point.

I'd go for a hot cup of cocoa or two. Anything that's not part of the financial process itself. For every sip you take, put a number on that paper. How does the second number relate to the first? Add a third number and have one more sip of the cocoa. And so forth. Soon the plan itself forms the drive to continue.

It did for me. I felt ignited about RobertEG talking about the warm and fuzzy feeling and didn't even refer to it specifically, but wrote this instead. Sort of like the cup of hot cocoa that jumpstarts you.

Message 25 of 32
Highlighted
Frequent Contributor

## Re: I REALLY Need Your Help!

marinevietvet wrote:

I've also used a hybrid technique as HTSU talked about. I get several smaller balances paid off to get that psychological and emotional boost of seeing real results and then switch over to the highest APR's.

In the end it's what works best for you.

From a BK years ago to:
EX - 9/09 pulled by lender 802
EQ - 7/06-663, 3/10-800
TU - 8/10-772
You can do the same thing with hard work

I like this approach too.  You get a sense of accomplishment by paying off the smaller balances.

TU - 737 - 02/21/09, 769 - 02/06/10, 795 - 09/08/10
EQ - 758 - 02/21/09, 783 - 02/06/10, 805 - 09/08/10
EX (PLUS) - 781 03/23/09, 787 - 02/06/10, 783 - 08/09/10
Message 26 of 32
Senior Contributor

## Re: I REALLY Need Your Help!

marinevietvet wrote:

I've also used a hybrid technique as HTSU talked about. I get several smaller balances paid off to get that psychological and emotional boost of seeing real results and then switch over to the highest APR's.

In the end it's what works best for you.

this is what we do.  i get the small balances out of the way so i can forget about them, & because they are usually store cards with high APRs, so it's a double boost.  then i focus on our absolute highest APR, which happens to have our highest balance, & just kick the crap out of it to keep the interest down.

Latest scores: Walmart TU: 769. MyFICO TU: 769. DCU EQ: 755. MyFICO EQ: 780. PSECU EX: 756. MyFICO EX: 780.
Message 27 of 32
Moderator Emerita

## Re: I REALLY Need Your Help!

laz98 wrote:

...then i focus on our absolute highest APR, which happens to have our highest balance, & just kick the crap out of it to keep the interest down.

OK, that one made Diet Coke come out my nose. Owwww!

Best description I've ever read of the mentality needed to regain control over one's credit.

* Credit is a wonderful servant, but a terrible master. * Who's the boss --you or your credit?
FICO's: EQ 781 - TU 793 - EX 779 (from PSECU) - Done credit hunting; having fun with credit gardening. - EQ 590 on 5/14/2007
Message 28 of 32
Regular Contributor

## Re: I REALLY Need Your Help!

I second the recommendation of the what's the cost calculator.  Some calculators (found through googling 'credit card calculator') even tell you how much you'd roughly save by either paying off lowest balances vs. highest interest first!

I personally created a spreadsheet listing my accounts by highest interest rate, in one column put approx how much interest is being charged, and had cels that showed total interest paid that month, and total principal (ple?) paid.  That way I can see by snapshot approximately how much is being paid off a month, and feel the gratification of seeing that "total debt" being paid down.  You can even have your start total next to "total debt" to see how far you've come along.

Good Luck!  I still have 2 years ahead of me, but I can't wait to be debt free.

Starting Score: 557 (2005)
Current Score: 803
Goal Score: 805

Take the FICO Fitness Challenge
Message 29 of 32
Established Contributor

## Re: I REALLY Need Your Help!

I think the approach of paying the lowest balance cards first is the best approach for the OP.  If we all take a look at the OP, they wanted to just pay 1 monthly amount, so as many have said, it is an emotional connection to feel in control by having to pay only 1 payment verses having to juggle the many payments.  Yes there would be interest saved over the long run with paying the highest card first, but in this case, I think the emotional satisfaction is more appropriate based on what the OP has told us.

Starting Score: Eq: 662 Tu: 532 (03/02/2011) CH7BK 01/12/2009 Discharge
Current Score: Eq: 712 (02/03/2017) Tu: 717 (04/03/2013)
Goal Score: Eq: 760 Tu: 760

Wallet: PenFed Power Cash 25k | AMEX Blue Cash (AU) 49.5k | Cap One QSMC 26.5k | AMEX Platinum NPSL | LFCU Visa 10k
Message 30 of 32