Credit Cards

[rlc7]

Hello! This is my first post but I've been reading the postings for hours over the past week & have gained a lot of great info. Here's my situation:

My wife & I have made some bad financial decisions in the past but are working very hard to pay down our debt & wanting to do it in the best way possible. We've heard from some like Suze Orman to pay down our credit cards w/ the highest interest rate first. Then I read an article from David Bach who had his own method. Here's our debt list:

Name/Credit Limit/Balance/Interest Rate

Target Visa/$1000/$940/21.74%
Target Redcard/$200/$0/23.74%
Nebraska Furniture Mart/$1600/$1500/18%
USAA Platinum MC/$500/$450/11.65%
JCPenney/$1100/$965/21%
Chase Visa/$1500/$0/29.99%
Capital One Platinum Visa/$1000/$948/22.8%
Capital One Platinum MC/$1000/$918/17.9%
RadioShack/$1100/$910/23.85%

We currently have just over $2000 to pay towards this debt. One thought was to pay off Nebraska Furniture Mart and JCPenney as they have the highest minimum payments therefore freeing up the most money (as we currently are only able to pay the min) towards further debt reduction. Another thought was to split the $2K evenly amoungst those w/ balances.

Any advice is greatly appreciated. Thank you!

[pattycake]

How about paying down the smallest balances first? That way, you'll have a sense of accomplishment that you did so (your smallest is $450 - get that paid off, then sock drawer the card!).

Take the remainder and pay down as close as you can to some of the others, preferably the Target Visa and the CapOne that have the highest interest rates.

There are all sorts of recommendations, but do whatever you think is going to get you in the groove of bringing your debt down.

Best of luck to you - the others will weigh in!

[Sylviatob]

Hi rlc, and welcome to the forum.

Ouch! The interest you are paying out monthly must be really hurting you! I know it would be for me.

You are maxed out on 7 of your 9 cc's and that unto itself is hurting you.
You will get several opinions as to the best course of action.

My suggestion, is to stop using all of your cc's, cold turkey. Stop using them 100% while paying down on them. You will have to go to the bank more often, to be sure, but you have to get a handle on the interest you are paying.

One way is to allocate that $2,000. Your total debt = $6,631. What % does each cc balance represent of that amount? Then apply that % to the $2.000 you have to spend:
Target Visa $940................pay $284
Nebraska Furniture Mart $1500...pay $452
USAA Platinum MC$450............pay $100
JCPenney $965...................pay $292
Capital One Platinum Visa $948..pay $286
Capital One Platinum MC 918.....pay $276
RadioShack $910.................pay $374

That is but one way. I'm sure others will disagree, but that's ok. There's more than one way to skin a cat. (old texas saying).

[netpanther]

---

pattycake wrote:
How about paying down the smallest balances first? That way, you'll have a sense of accomplishment that you did so (your smallest is $450 - get that paid off, then sock drawer the card!).

Take the remainder and pay down as close as you can to some of the others, preferably the Target Visa and the CapOne that have the highest interest rates.

There are all sorts of recommendations, but do whatever you think is going to get you in the groove of bringing your debt down.

Best of luck to you - the others will weigh in!

---

Suze Orman says always pay the highest and if anyone recommends anything else they are crazy. however, I agree w/ Pattycake- you can do whichever you want- but for some people, using the snowball method- paying off the smallest and then the next, and the next helps alot.

I used the snowball method years ago and when I paid off that first bill I really got momentum. Again, financially it makes the most sense to pay off highest int. rate- but psychologically a lot of people have used the snowball method.

I say whatever works well and gets you moving to eradicating your debt is what is best for you.

[netpanther]

PS- the one thing to remember is that once you pay one off you take what money you were paying on that one and apply it to the next.

DO NOT try to fool yourself into thinking you have more cash!! You don't. You will finally have cash when you pay them all off.

[Ausfarm]

I'm w/ Suze Orman.  Pay down the higher interest cc first.  However, I would call each cc company and ask for them to reduce my interest rate.  After calling all of them, I would determine who you're paying the highest interest rate to and throw any additional $ at them.  Also, as a previous poster said:  stop using your credit cards.  You've got to seriously commit to that.  Otherwise, you're efforts will be futile. 

Once you pay a cc off, they may also be willing to offer you something like 0% BT or (even better) a fixed rate BT (say, 3.4% for the life of the balance).  Then you're getting somewhere.  An offer like that is obviously not going to happen w/ dept or furniture store accounts. 

If Chase Visa is unwilling to lower their interest rate, pay them off first --29.99% is too high.  Alternatiively, you may want to pay that off and then ask if they have any BT offers to address some of the other debt.  If they do, transfer the next highest cc balance to that card and go to the next highest.  Remain aware of the interest you are paying and the BT they give you.  NEVER BE LATE on a BT deal otherwise you lose it. 

[SmartCookie]

I'm in with Suze, but there is something important to be said about paying off small accounts first for people that are stressed out and quite overwhelmed.

I'd start with calling every store card up and asking for an APR reduction.  Then call ever major cc up and ask for the same, plus a CLI if there will be no hard INQ and then asking about what BT offers they have for you.  In your situation I'd only take no-fee BTs.  Search around for the Cap1 back door number.  Check BT offers on Chase online... they probably have a fee free one for under 10%APR for you. 

So that aside, with 2k I would be apt to

PIF Radio Shack and Cap1 Plat Visa

pay the remaining $142 to Target Visa leaving a new balance of $798.  Put any 'extra' money you can on this balance till paid off while paying the min and working in order on JCP, Nebraska, Cap1 MC and USAA.

[netpanther]

Dang SmartCookie- your scores are really getting high!! Kewlness and congrats on all your hard work.

[granny031350]

ok, not to disagree here but Dave Ramsey also offers some good advice which I have followed and it is working for me.  But I paid off my smallest balance first, in full.  Wow, what a great feeling, 1 down and 3 to go etc mentality. 

[rubaty]

Suze is right but I say do what will make you feel good about your situation!  When I decided to try and get on the right path, I started with 2 lower balances and then moved on to the 1 with the highest APR.