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Kimk
Posts: 3
Registered: ‎06-21-2012
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Need suggestions on what to do and where to go from here?

Hi, I would like your input on what I should do. 

I have eight credit cards - all maxed out - the total balance on them is approximately $20,000.  This comes from years of irresponsibility by me.  I see something, want it, and buy it.  Years of that has finally caught up with me and I'm starting to see the impact of my irresponsibility.  I earn approximately $31000 year.  After taxes, health insurance, a 6% contribution to my IRA and AFLAC premiums are deducted every other week, I bring home a whopping $732 bi-weekly.

 

I am current on all of my obligations, but making the minimum monthly payments.  At this rate, I'll be 98 before they're ever paid off.  I do not use the cards for purchases any more - cash or debit card only.  Other than my credit card debt, the only other bills I owe are my Verizon wireless, which runs about $230 month (for 4 lines - my mother, stepmother and husband are all on this plan also), and a $50.42 monthly student loan payment that I believe the balance on is around $2500.  My husband pays the mortgage, utilities, gas for vehicles, insurance, etc.  My husband is very responsible with money.  He has had to bail me out of credit card debt previously when I got into this same trouble.  Yet, here I am again.  I just don't feel like I can go to him with this problem - it's too embarassing.  We have separate checking accounts - I'm listed on his, but he's not on mine.

 

I have about $4000 in the bank thatI am going to pay on something right away.  The way I see it, I have a couple of options.  I've contacted "Credability" and they've worked out a Debt management plan for me.  I haven't jumped on that board yet - but am thinking about it.  Is that a reasonable plan or should I just try to work it out on my own by calling my creditors?

 

Any help you can give would be appreciated. 

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hdrider07
Posts: 207
Registered: ‎03-21-2012
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Re: Need suggestions on what to do and where to go from here?

Hello.  Since you are current on your cards now I would stay away from a debt management program and tackle it yourself.  Not knowing the balances on the credit cards I can't give my full advice but what I would look at it taking the money in the bank and if you can pay 1 card off then do it, take the min payment you were making on that and apply it to another card so that you can make a dent in it and just keep working it that way.  Also for the cell phone I was in the same situation with paying around 200 a month, I got rid of my data plan and talked to my dad and he got himself on his own account.  Thats an option for your mom and stepmom, then you could take that savings and apply it to that same card you are paying extra on to hopefully pay it off soon and then work on the next one by taking the same approach.

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Kimk
Posts: 3
Registered: ‎06-21-2012
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Re: Need suggestions on what to do and where to go from here?

This is the list of what I owe

AMEX - $415 balance - interest rate 17.2%

Discover - $3778 balance - interest rate 17.2%

Citibank - $3626 balance - interest rate 10.7%

HSBC Card - $1509 balance - interest rate 18.2%

Target VISA - $4317 balance - 22.4% interest

Chase VISA - $4443 balance - 15.2% interest

Amazon VISA card - $1227 balance - - 26% interest

JCPenney - $1972 balance @ 30% interest

 

With the $4000, should I pay off the AMEX, HSBC, Amazon and pay $850 towards the JCPenney and get those three out of the way, or is it better to start with the highest interest rated on which would be JCP?  I could pay $1972 to JCP, $1227 to Amazon and have $801 left to pay towards Target Visa.

 

If I contact these remaining creditors on my own, what is the likelihood that they would be willing to reduce their interest rate at my request?  What do I say to them for them to be willing to work with me?  I want to pay my bills...BK is not an option...I just know it will take alot of hard work and dedication and years.  It took me years to get into this mess - it will take me years to get out of it I know.

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llecs
Posts: 32,880
Registered: ‎08-04-2007
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Re: Need suggestions on what to do and where to go from here?

[ Edited ]

I also vote to skip the DMP. $20k is manageable. I'd also cut up the CCs. I wouldn't close them, but I'd cut them up and shelve the remains. I'm also a proponent of the debt snowball method. I'd pay the lowest balances first. Psychologically, you won't have to worry about the extra bills and payments. Per FICO, your score would improve faster vs. paying them down.

 

ETA...I'd also open up to DH. Hiding situations in a marriage won't help the marriage. And combine your finances. IMO, it's OK to have seperate checking (DW and I do), but any money I earn is hers, and hers mine. I'll use her account to help fund the kids school, events, fun money, etc.

 

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hdrider07
Posts: 207
Registered: ‎03-21-2012
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Re: Need suggestions on what to do and where to go from here?

If it were me I would tackle the highest interest rate cards first, so like you said the Amazon and JC Penney.  Then take those payments you were making and apply them to the Target one.  You could pay 800 towards Target if you wanted too but again if it were me I would keep the 800 for an emergency, but your situation may be different.

 

I dont know what luck you will have with contacting the creditors for a lower interest rate, IME they want a great payment history with them on a card that is not maxed out.  You can try because it cant hurt.  Just call them and leverage your length of time with them and your payment history when you ask for a lower interest rate.

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Unoriginalnj
Posts: 116
Registered: ‎11-13-2011
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Re: Need suggestions on what to do and where to go from here?

On my cell so pardon short response. Pay off cards you mentioned in your second paragraph then apply debt snow ball method mentioned earlier. That's what I would do.
Valued Contributor
Duncanrr
Posts: 2,841
Registered: ‎06-08-2012
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Re: Need suggestions on what to do and where to go from here?


Kimk wrote:

This is the list of what I owe

AMEX - $415 balance - interest rate 17.2%

Discover - $3778 balance - interest rate 17.2%

Citibank - $3626 balance - interest rate 10.7%

HSBC Card - $1509 balance - interest rate 18.2%

Target VISA - $4317 balance - 22.4% interest

Chase VISA - $4443 balance - 15.2% interest

Amazon VISA card - $1227 balance - - 26% interest

JCPenney - $1972 balance @ 30% interest

 


I would use debt snowball (yes...I dont agree with John Ramsey's extreme views on credit but its a good method).  I did this years ago and have absolutely zero credit card debt.  Dont have any cards any more - stupid Ramsey, cutting them up and closing them was not good idea.

 

Here is how it works: Pay off your lowest ones first.  Use the 4k for this purpose.  The thing is that you pay xxx for each min monthly payment each month and if you tackle the higest one first you still have all those other min payments to pay.  By hitting lowest first you reduce the number of min payments you have to pay.  You then roll the min payments that you were paying on those cards into the next lowest while still paying the min payments on the higher ones.  This would build up speed and by time you are tackling the highest one you are making  a fairly large payment each month.

 

One thing to consider, you are investing 6% into your contribution accounts.  Due to high interest on these cards it may be better to suspend these contributions and focus the extra 2k per year into debt repayment.  This will depend on your age and how your employer matches contributions and your tax profile.



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Kimk
Posts: 3
Registered: ‎06-21-2012
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Re: Need suggestions on what to do and where to go from here?

Thank you all for your input so far. 

 

I have given thought to decreasing the amount of my IRA contribution - at least from 6% down to 3%.  Our company matches the first 3% that we put in, so IMO, that's like "free money" and it doesn't make sense to not put in at least 3%.  That would give me an additional $70 per month or so to pay towards my debt while still earning that "free money".

 

The other thing I was going to do was open another checking account.  Each time I get paid, I'm going to transfer probably $250 to this new checking account.  That money will be "my" money to buy groceries with or get my haircuts, etc.  The money left in the original checking account will be for bills only - never to be touched for anything else.  That should leave me approx. $964 for Verizon and other credit card pmts. each month.  I'll just know what whatever "extra" money is in there is going towards whatever one particular debt I'm focusing on at that time. 

 

 I know I'm not alone in these problems, but it sure is humbling to know that I've gotten to this point.

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FrugalRican
Posts: 2,876
Registered: ‎02-02-2012
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Re: Need suggestions on what to do and where to go from here?

The situation is very scary, but also very manageable.

If I were you, I'd print out statements for each month and see what you are paying in interest over time.

 

Once you're done, go look and add all that interest over time that you paid because of impulse shopping and realize, this is money you gave away to companies that could have been better served for you and your family.

 

My fear is that you are doing this now, and will eventually fall back into it now. Your CC debt is 66%+ of your income.

Cut up your cards, but don't close them. You don't need to have this happen again. You are taking the correct steps to be responsible.

This WILL require you being strict to a budget and not going out and spending on a whim. And it WILL require you to be PATIENT. 20K won't disappear overnight or over the course of a month, so don't ever feel like it's not making any progress. Take your time, you will get there. Many good suggestions have been made here, but the best suggestion and lesson you could take from this is that the third time is NOT the charm.

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Unoriginalnj
Posts: 116
Registered: ‎11-13-2011
0

Re: Need suggestions on what to do and where to go from here?

You'll be overwhelmed with responses on here. My advice is listen to duncanrr and follow his advice. I agree with opening up another checking account if you feel that will help you curb spending. While you're at it, do it at a local credit union if possible - it will get you better rates on future loans than a typical bank (new car, house, etc).

Now stop reading and start doing :smileywink:

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