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Senior Contributor
Noah_Bodie
Posts: 4,635
Registered: ‎03-11-2007
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Re: CC Payoff Tactics



reformedfamilyman wrote:
Ramsey encourages them to trick themselves into paying off debts.

I think that's part of it, but there also seems to be a "you were put on this Earth to suffer" theology in Ramsey's advice.
 
People aren't stupid, but it's natural to feel stupid when one discovers, "You mean if I'd done X instead of Y it would have been less expensive?"
 
Milk is $3.29 at Store X, then you discover it's $2.79 at Store Y. Guess where you're going to start buying your milk? This is no difference.
 
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.
 
Anyone who's hanging around this or other credit forums, is obviously a whole lot more motivated than the average bear. As such, I for one don't believe that KISS principles need to be applied here. The denizens of credit forums are smart and savvy, and some are known to employ guile.
 
Senior Contributor
Noah_Bodie
Posts: 4,635
Registered: ‎03-11-2007
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Regular Contributor
Macroman
Posts: 129
Registered: ‎05-17-2008
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Re: CC Payoff Tactics

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. 

Valued Member
Sayre
Posts: 49
Registered: ‎05-04-2009
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Re: CC Payoff Tactics

If I have two cc's and one is at 22.90% with a balance of 850 and the second one is at 17.49% with a balance of 4200, wouldn't it make more sense to start with the 17.49% first since you are paying on a higher balance?

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Regular Contributor
Macroman
Posts: 129
Registered: ‎05-17-2008
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Re: CC Payoff Tactics

Financially there  is no way paying down the low interest card makes sense. Each $100 of balance on th22.5% card costs 22.50 per year without compounding while thr 17.5% card is 17.50. Accelerate payments on the high interest card until it's paid off unless you have a very good reason to do otherwise.
Valued Contributor
my-own-fico
Posts: 1,237
Registered: ‎01-05-2010
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Re: CC Payoff Tactics

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 :smileywink:

Noah_Bodie wrote:

"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 :smileyvery-happy:

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Regular Contributor
Macroman
Posts: 129
Registered: ‎05-17-2008
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Re: CC Payoff Tactics

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.

Valued Member
ronniejr
Posts: 38
Registered: ‎02-24-2011
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Re: CC Payoff Tactics

"hate leads to suffering".  Love the Yoda quote :smileyhappy:

Regular Contributor
culture
Posts: 200
Registered: ‎02-27-2013
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Re: CC Payoff Tactics

subbed  ...

 

 

thanks for this info.. 

Regular Contributor
KeithW
Posts: 201
Registered: ‎02-22-2012
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Re: CC Payoff Tactics

I have to agree that for some people, myself included, paying down smaller debts does help keep you motivated.

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