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My wife is in the process of doing the same thing. Here's what we did/are doing.
We're on a budget. We budget everything. We know where every single penny is going. We do this every check. No dining out, we cut back on the amount we spend at the grocery store. After everything is paid for (inluding minimums for her other cards), we see what's left and that amount goes right into the lowest owed credit card.
So if $45 or $280 is left over, that goes right into the lowest owed card. Just like Dave Ramsey says, you want to take out the smaller cards first to get a couple of wins under your belt. The look on my wifes face after her first card was paid off was priceless. It takes discipline to do it though.
As you pay them off your utilization will automatically go down.
[Edit] I also forgot to add that she doesn't use her cards for anything while she's doing this. I don't care how much of a % Khols has off. Not doing it.
OP, after hubby and I bought our car, I went to undebt(dot)it and did a debt snowball vs. debt avalanche comparison to figure out the quickest and easiest way for us to save money in the long run. You enter what your monthly budget is, all your CC balances, their interest rates, and each payment you make. The site will then suggest how much you should pay each month, on which card, and projected payoff date depending on which method you've chosen (snowball/avalance).
It's been a great tool for us and it could possibly be helpful in your situation.
Found this on NerdWallet... https://www.nerdwallet.com/blog/finance/how-is-credit-utilization-ratio-calculated/
Per-card vs. overall credit utilization — which is more important?
As the details above show, your credit utilization ratio matters a lot. But what many people don’t know is that the FICO scoring model actually looks at this number in two ways:
Per-card utilization (sometimes called line-item utilization) – This is your credit utilization on each card. To calculate it, you simply divide what you owe on each individual card by its individual credit limit. For instance, if you’re carrying a $2,000 balance on Card A and it has a $5,000 limit, your credit utilization on this card would be 40%. If you have more than one card, you’d do the same math for each of them.
Overall utilization (sometimes called aggregate utilization) – This is your total credit utilization across all of your cards. To calculate it, you’d add up what you owe on all of your plastic, and divide it by the total available credit you have on all of your cards. For instance, let’s say you have 3 cards:
Card A has a $2,000 balance with a $5,000 limit
Card B has a $500 balance with a $1,500 limit
Card C has a $1,000 balance with a $3,000 limit
The total amount you owe across all 3 cards is $3,500 ($2,000+$500+$1,000). Your total credit limit across all 3 cards is $9,500 ($5,000+$1,500+$3,000). This means your aggregate credit utilization is 36.8% ($3,500/$9,500).
So which is more important, your per-card utilization or your overall utilization? Trick question: Both are important. According to Anthony Sprauve, senior consumer credit specialist at FICO:
“The FICO Score looks at both per card utilization – balance vs. available credit – and total revolving credit utilization. So you can get dinged if you have one card near its limit even if your total utilization across cards is low. We recommend people use less than 30 percent of their available credit on any single card and overall.”
This is an important point, because some people try to counteract the negative effects of a maxed-out credit card by opening a new card and keeping its balance at $0. While this will improve their overall credit utilization ratio, a dip in credit score should still be expected because of the high utilization on one card.
@Chris679 wrote:
ScoreSizzle your utilization does not automatically go down that is why OP created this post to begin with. It sounds like the snowball method is working for you that is great just know there is a better cheaper way to do it.
What's a better and cheaper way? If you got one please let me know.
@Chris679 wrote:
Pay off your cards in order of highest interest rate first. Make the min payment on everything and apply the same principals as the snowball method but worry about saving money on interest rather than winning moral victories by paying off small balances.
You're right. I was looking at it from a "debt" angle rather than a credit... knowing that once they're all paid off with less than 10% being used on all cards it would drop.
@Chris679 wrote:
Pay off your cards in order of highest interest rate first. Make the min payment on everything and apply the same principals as the snowball method but worry about saving money on interest rather than winning moral victories by paying off small balances.
The moral victory part apparently is important for some types of people. And I would think these are those less financially savvy which is the target audience of Ramsay and co.
The point is focussing on number of cards paid off is really the wrong measure, all you should be concerned with is total debt (and associated interest cost). Yes, paying one less bill a month may make you feel good but if, because of that, you now owe more on the higher interest balances, you haven't really won. Or, to be more blunt, when they come to foreclose on your house, the fact you have paid off 4 low balance cards wont help.