reformedfamilyman wrote:Ramsey encourages them to trick themselves into paying off debts.
Kohl's Department store has a program where no interest is charged (in most states) if at least 1/3 of the billed balance is paid each month (alternate min of $50 or full balance if less than 50). I've found that this makes it advantageous to payoff Kohl's first.
Also when any card gets to minimum finance charge territory which is usually around $100 it's best to PIF even if the nominal rate is lower.
I've learned the hard way that it's better not to charge what you can't afford in the first place.
This thread was started in 2007, resumed in 2008 and then resumed again in 2009, so I trust it's ok to resume it in 2010
"If one needs the psychological reinforcement of a "victory" from PIF the smallest debt amount first, even if the APR is low, well then that's their choice. But I think it's dishonest for Ramsey not to give one the choices and the consequences."
Sure. (I was reminded of his approach yesterday while browsing the personal finance section of a bookstore.)
Of course I couldn't place much faith in Suze Orman either when she said that "If you have an unpaid credit card balance not much saved up in emergency savings, I need you to listen up. My advice has changed. I want you to only pay the minimum due on your credit card balance, and instead, make it your top priority to build as much of an emergency cash fund as you can."
I didn't care then what she wanted me to do, and now that my credit card balances are down to a total of $3.46, I still don't. (Ok, I was never really in debt, just PIFed considerable balances.)
But let's say that people are given choices and consequences. Do they necessarily act upon them? That's where cognitive dissonance kicks in. And then of course sometimes stuff just simply doesn't make sense.
When looking at my first credit score report a year and a half ago (yes!), I did not understand what "The amount owed on your revolving accounts is too high" meant. Because I always PIFed, I associated having a balance with carrying a balance.
It took me a full year after that before it finally sunk in
My repayment program has taken me to a point where most of the interest rates are approximately equal. As a result I've decided to use a modified snowball and clean up the smaller accounts. I figure this will improve my score a little faster which hopefully will pay balance transfer dividends.
I have to agree that for some people, myself included, paying down smaller debts does help keep you motivated.