Using income tax to pay down CC debt?

[SunriseEarth]

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@Leadberry wrote:
If possible, can you take out a student loan to pay off your cards? A Stafford loan would be deferred until after graduation and the government would pay the interest if it's subsidized. IMO, it's your best option.

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+1.  I agree that this would be the best loan option.

[efranklin23]

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@Chris679 wrote:
Personally I would not worry about savings, utilization, credit scores or any AA from creditors if I was paying 25% interest on any card. Your focus should be paying as little interest as possible by paying the minimum on all cards and every penny left over to the highest interest rates.

Lending club or other types of consolidation loans are a great idea and assuming you are current on everything you can do better than the rates you are currently paying.

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Based on his profile, that wouldn't help too well considering he has maxed out cards in his portfolio. It's a good chance he won't be approved because of this. And if he was approved, his interest rate would be very high (maybe over 25%) making him in a worse situation than before.

[WallyxD]

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@notfancy wrote:

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@WallyxD wrote:

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@notfancy wrote:

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@WallyxD wrote:

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@efranklin23 wrote:

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@WallyxD wrote:

Hey guys, I'm currently in the process of filing my taxes, and so far I'll be getting around 1.5k back.  I have about 4.5k in credit card debt (helping people out and going crazy when the cards were first opened), and my savings account is also depleted.  I figured it'd be a no brainer to use all of my income tax to pay down my debt, but I have absolutely no type of cushion due to me having pretty much nothing in my savings account, which has been making me uncomfortable.  What would you guys suggest I do?  If need be, I can provide my CC balances and interest rates so that you guys can give suggestions as to what exactly to pay off.  Also, how do you guys feel about me taking out a personal loan as a way to consolidate my remaining debt?

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You need to provide more info like the Util for each card. But to get started, I would start by saying you need to have some money in your savings account. We can't help until we have more info. At this moment, I would avoid type of loan until you paid your debt down to a comfortable level (under 10%)

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Here are my balances (odd interest rates, I know):

AE Visa: $1780/2300 23.99% 77% UTL

AE Store Card: $23/700 24.99%  3% UTL

Chase Amazon: $470/500 22.24%  94% UTL

Citi: $1335/1500 13.74%  89% UTL

CapOne: $630/1200 19.80% 53% UTL

Walmart: $360/1350 22.90% 27% UTL

Paypal SC: $180/300 26.99% 60% UTL

TOTAL: 4778/7850 61% UTL

And I only considered taking out a loan so that I'll only have one payment per month to make instead of making 7 individual payments per month, I thought it was a good idea lol.

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I would at least pay off the small charge on the AE card, and try to get all of your balances under 60% UTL.

A lender looking at your report seeing 80-90% UTL will consider those accounts maxed and you as a credit risk, which could possibly lead to adverse actions, such as account closure (rare), credit limit decreases, higher APRs, denial of credit, etc. With having a balance on every card you have, and many of them close to their limits, you  will probably get denied if you apply for a loan, even if it is to consolidate your debt.

Spend the $203 to pay off the AE and Paypal accounts.  You could potentially pay off your Paypal, Chase,  Walmart and Cap 1 accounts, but that would still leave you near maxed out on your AE visa and Citi... so either way that isn't going to help you out a ton, which is why I suggested at least getting your balances down to at least 60% or lower.

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notfancy and efranklin23, is 60% utilization a threshold when it comes to scores?

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It's enough that you won't be considered "maxed out" and as much of a risk to your lenders. Every 10% you can lower your debt, you should receive a score bump as well.  I'm sure someone with more expertise can add to this and give you a more detailed explanation.

I saw your second post about your expenses, and I'm glad that they are not too out of hand for you.

If you can pay off your Cap One account, try to get it converted to Quicksilver. I don't know what, if any, rewards you have on your other cards, but if you're going to make purchases on them, it would be nice if you could get something back for it. Also, this way- once your debt is lower you can buy your groceries and train tickets on a card that gives you cash back and then if you immediately pay those purchases off (using your CC like a debit card: spend them immediate pay off even if it means you pay one bill several times in one month) you could get about $4 back every month. It isn't much but it's better than spending the $200 on groceries and 60 on train tickets and getting nothing back at all AND possibly paying interest. There are other cards that are better reward wise for groceries and travel tickets but I don't know if you have one of those yet. Make your credit and your money work for you!

Sign up on Quizzle, Credit Karma, Credit Seseme, credit.com... the scores are junk but at least it would give you sort of a guideline, and you can see things like your balances, total UTL, age of accounts, etc... all the things that can help you with credit decisions and understanding in the future!

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Okay, I thought I had read that the thresholds were 10%, 30%, 50%, 80%, and 90%.  But for the time being, I'll focus on paying each one down to 60%.  I actually upgraded to the Quicksilver about a month ago, just forgot to update my signature.

[WallyxD]

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@efranklin23 wrote:

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@Chris679 wrote:
Personally I would not worry about savings, utilization, credit scores or any AA from creditors if I was paying 25% interest on any card. Your focus should be paying as little interest as possible by paying the minimum on all cards and every penny left over to the highest interest rates.

Lending club or other types of consolidation loans are a great idea and assuming you are current on everything you can do better than the rates you are currently paying.

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Based on his profile, that wouldn't help too well considering he has maxed out cards in his portfolio. It's a good chance he won't be approved because of this. And if he was approved, his interest rate would be very high (maybe over 25%) making him in a worse situation than before.

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I definitely wouldn't get approved on Lending Club or Prosper, for consolidation I was referring to a personal loan at my credit union.  If approved, I'm sure my interest rate would be lower than the average rate on my accounts.

[WallyxD]

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@SunriseEarth wrote:

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@Leadberry wrote:
If possible, can you take out a student loan to pay off your cards? A Stafford loan would be deferred until after graduation and the government would pay the interest if it's subsidized. IMO, it's your best option.

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+1.  I agree that this would be the best loan option.

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Every year, my loans/grants fall short of tuition.  So I always have my mom apply for the parent plus loan, so that I get additional loans.  I do get small refunds ($500 or so) that I use to pay off my cards.  I didn't think someone could request a specific amount to take out in Stafford loans, though.

[alyssamarie]

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@SunriseEarth wrote:

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@Leadberry wrote:
If possible, can you take out a student loan to pay off your cards? A Stafford loan would be deferred until after graduation and the government would pay the interest if it's subsidized. IMO, it's your best option.

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+1.  I agree that this would be the best loan option.

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I agree with this as well. Even with an unsubsidized loan, the interest rate is much lower than what you're paying on your credit cards! A good portion of my living expenses are currently covered by grants & student loans, and when I got my financial aid refund back this term I paid off every single credit card I had except one that has 0% interest right now that I'm making payments on. 

I also recommend trying mint.com to help you budget, it's free and it's helped me out a lot.

[alyssamarie]

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@WallyxD wrote:

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@SunriseEarth wrote:

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@Leadberry wrote:
If possible, can you take out a student loan to pay off your cards? A Stafford loan would be deferred until after graduation and the government would pay the interest if it's subsidized. IMO, it's your best option.

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+1.  I agree that this would be the best loan option.

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Every year, my loans/grants fall short of tuition.  So I always have my mom apply for the parent plus loan, so that I get additional loans.  I do get small refunds ($500 or so) that I use to pay off my cards.  I didn't think someone could request a specific amount to take out in Stafford loans, though.

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Disregard my last reply then! If I were you, I would still use my entire refund to payoff cards. The less interest you have to pay, the better!

[Networth]

I would take the money pay it towards your highest intrest card first. I have been a broke college student who maxed out two cards years ago I know its a ****** feeling. Just keep chugging through school and you will have some real income(hoping you have a useful degree) once you finish. Don't worry about sudent loan debt its the best debt you can have. You must have some job that your getting the tax return fund on. I would take any extra you make from that job and put it towards the cards. Forget about a savings till you have no CC debt, you can worry about savings, investments, emergeny funds once your out of school. Last but not least don't use the cards anymore put them on ice.

[notfancy]

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@WallyxD wrote:

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@SunriseEarth wrote:

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@Leadberry wrote:
If possible, can you take out a student loan to pay off your cards? A Stafford loan would be deferred until after graduation and the government would pay the interest if it's subsidized. IMO, it's your best option.

---

+1.  I agree that this would be the best loan option.

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Every year, my loans/grants fall short of tuition.  So I always have my mom apply for the parent plus loan, so that I get additional loans.  I do get small refunds ($500 or so) that I use to pay off my cards.  I didn't think someone could request a specific amount to take out in Stafford loans, though.

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There are max amounts. Inquire at your school's financial aid office.

[alyssamarie]

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@notfancy wrote:

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@WallyxD wrote:

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@SunriseEarth wrote:

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@Leadberry wrote:
If possible, can you take out a student loan to pay off your cards? A Stafford loan would be deferred until after graduation and the government would pay the interest if it's subsidized. IMO, it's your best option.

---

+1.  I agree that this would be the best loan option.

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Every year, my loans/grants fall short of tuition.  So I always have my mom apply for the parent plus loan, so that I get additional loans.  I do get small refunds ($500 or so) that I use to pay off my cards.  I didn't think someone could request a specific amount to take out in Stafford loans, though.

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There are max amounts. Inquire at your school's financial aid office.

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You should be able to find it out online as well. Just google "stafford loan limits" or something similar and you should find it. Talking to your financial aid office is always a good idea for more specific information as well!