topic Re: $10,000 in cc debt. THIS IS THE PLAN. in Credit Cards

$10,000 in cc debt, where to start? Planning for car loan.

jbishop1001 — Thu, 29 Oct 2015 07:49:31 GMT

Need some advice on utilization regarding paying down my credit card debt. After purchasing a home, I have put myself in the hole credit wise with buying new furniture, birthday's, etc... I will be receiving a large tax refund, but not large enough to pay off all of this debt. Added up, it's over $10,000. :-O I don't even know how this happened.

All maxed:

OpenSky - $200

Chase Freedom - $500

Capital One Platinum - $500

Capital One Playstation - $500

Capital One Quicksilver - $2,300

Not maxed, but using:

Amazon - $300/$400

Barclay Ring - $800/$1,000

Fingerhut - $236/$2,500

Walmart - $4,500/$5,000

Lowe's - $360/$12,000

I will be able to pay off approximately 60% of it, though. ($6,000) Where I need advice specifically is for which debt to tackle first. My research shows me that it's best to pay higher interest cards first. I get that, but with most of my cards being sub-prime (or downright terrible) their rates are pretty similar. (With the exception of Barclay at 8%) I have a few 0% interest promos running and those will end sometime after March so I feel like I should pay those before any interest hits. I'd really like to eliminate how many bills I have to pay too, though. As you can see, that's 10 for a month - not including my mortgage, electricity, water...

My goal is to at least get everything below 30% because I know I'm going to need an auto loan soon and I want to get the best rate/price possible. This is the tactic I have come up with, please make adjustments as needed!

- Pay off Open Sky (secured card) and close it! I'll get my deposit back, so it's basically like keeping the money. It's my oldest card (will be 2 years in April), but I'm tired of paying interest on my own money and such a small limit. I have a short credit history anyway, and have already gotten better cards. I'm fine with closing it. $200

- Pay off Fingerhut - because I'm simply tired of paying them. My 2nd oldest line, and a good limit so I'm keeping it. $236

- Get these @ 29% - All capital one cards, Freedom, Barclay, Amazon $3223

That leaves $2341 left for walmart which leaves $2159/$5000 to still be paid. Which is about 43% utl.

- I can then transfer some of the Walmart debt over to Barclay to take advantage of the 8% I doubt I'll be able to make this happen in time for it to be in sync with my reports the way I need it to.

(since I'll be above 30% anyway, should I just use $600 to pay off Cap 1 & Chase $500 limit cards and eliminate $75 of payments a month?)

Should I worry about the utilization so much or more about paying off cards to eliminate bills? I just want to make sure that when I need this loan, I can obtain it... and that maybe Barclay's will help out with an increase to transfer more balances.

Any advice is appreciated. (Except for to stop using credit... it's given me an advantage I've never had before. I'll never NOT pay my bills.) I'm sure once I pay these down my 620 TU score will rise above the 700's again. Can't wait.

(Any advice on which balance transfer cards I might get approved for after I eliminate this debt? I'm going to be carrying the rest of it for at least another year, so I need to get rid of that interest, fast!)

BTW - Income is $25,000

DTI is probably around 50% because of all these CC bills :-\

Re: $10,000 in cc debt, where to start? Planning for car loan.

Anonymous — Thu, 29 Oct 2015 08:36:23 GMT

Without knowing card specific APRs, I would:
1. pay off as many cards as possible initially.
2. consolidate the remaining balances onto the ring & one or two of the higher limit cards.
3. sock drawer as many cards as possible. don't even use them. I wouldn't close any immediately.

Your first goal should be reducing interest charges & fewer minimum payments, then focus on utilization.

Re: $10,000 in cc debt, where to start? Planning for car loan.

NRB525 — Thu, 29 Oct 2015 09:06:43 GMT

I would apply $1,800 toward Walmart, not pay off FingerCut, pay down (not pay off) Amazon and pay down ( not pay off) the Ring.

The $2,300 Quicksilver, once it is paid to zero, should be used as your daily essential spend card, and PIF every month.

After this pay down, try to get each of Amazon, Ring and Walmart to below 50% utilization. I see score jump / drop as several of my cards have moved below and above 50%, so that's a significant enough threshold you should target. 30% would be nice, but that Walmart card is not going to get there soon.

How much maintenance is necessary on your car to keep it going longer? You have a lot of debt here. If you can swing some critical maintenance items to keep that current car rolling, it pushes out your need for another loan, postpones that other monthly payment that you may not want right now. The longer you keep the car rolling, the more time you have to improve your score and get a lower auto loan rate.

You could also contact Capital One to see if they have any BT offers for the Quicksilver. After the Platinum, PS, and QS are paid off, you might be able to app for another Quicksilver if there is a 0% intro promo going on.

Re: $10,000 in cc debt, where to start? Planning for car loan.

pip3man — Thu, 29 Oct 2015 09:39:47 GMT

Two things caught my attention, you stated u have an income of $25000 so how did u wound up purchasing a home??

Re: $10,000 in cc debt, where to start? Planning for car loan.

SouthJamaica — Thu, 29 Oct 2015 10:51:48 GMT

In my opinion the key for you now is to reduce the utilization percentage of each account that's over utilized.

So, after ditching the Open Sky account, first get everything down below 80%. No maxed out cards at all.

Then 70%

Then 60%

And so on.

By far the best card you have is the Barclay Ring. Do NOT be tempted to overload it any more. Be nice to it. Barclays wants to see your utilization at 20 to 35% on that card.

Re: $10,000 in cc debt, where to start? Planning for car loan.

Anonymous — Thu, 29 Oct 2015 11:43:34 GMT

I disagree with the incremental approach. Your goal isn't immediate score repair, but interest reduction. One of the key parts of this is that any card you pay off entirely returns to having a grace period, which makes them functionally 0%, so long as you continue to pay them in full.

1) First, make sure you're making the minimum payment in every card.
2) Assuming that the APRs are equal, you want to pay off the highest dollars while paying off cards completely. This means that it is better to pay off one $2500 card than two $1000 cards, with the third thousand going to the big card, but paying off three $1000 cards and putting nothing to the $2500 card is even better.
3) before you balance transfer, think about how long it will take you to pay off the transfer. If it is only a month or two, the BT fee may be higher than the interest you would have paid.

Re: $10,000 in cc debt, where to start? Planning for car loan.

elim — Thu, 29 Oct 2015 12:12:26 GMT

Don't forget, You can knock it out faster if you up your income. Add a second job or better yet, start looking for one that pays more. This may be the situation that lands you a in a career making good $$$.

It's going to be a boring winter while you pay this down so hang out here and get it done!

best of luck :]

Re: $10,000 in cc debt, where to start? Planning for car loan.

takeshi74 — Thu, 29 Oct 2015 12:48:40 GMT

@jbishop1001 wrote:
I don't even know how this happened.

You need to start there. You can't get out of it if you don't know why you got into it and how to prevent it. Or you might get out of it only to find yourself right back where you started. Work on your budget and sticking to it.

@jbishop1001 wrote:
My research shows me that it's best to pay higher interest cards first.

Best always depends on context. Paying higher interest first is best for minmizing the interest you'd accrue which is certainly a concern but a bigger concern IMO is potential adverse action. With 6 maxed cards (90% on the 4500/5000 card is effectively maxed) you need to get revovling utilization down as quickly as possible. Once you get cards down under a certain threshold you can then look at tackling them based on interest.

@jbishop1001 wrote:
I have a few 0% interest promos running and those will end sometime after March so I feel like I should pay those before any interest hits.

If you're trying to minimize the interest you're paying that doesn't make sense. You're not incurring interest on 0% balances. You are incurring interest on balances subject to interest. Pay those first.

@jbishop1001 wrote:
My goal is to at least get everything below 30% because I know I'm going to need an auto loan soon and I want to get the best rate/price possible.

If you want the best possible rate you'll want to go well below 30%. 30% is a suggested max but it is far from ideal.

@jbishop1001 wrote:
- Pay off Fingerhut - because I'm simply tired of paying them. My 2nd oldest line, and a good limit so I'm keeping it. $236

Keep in mind that closed accounts typically continue to show up on reports and factor into AAoA for 10 years after closure.

@jbishop1001 wrote:
Should I worry about the utilization so much or more about paying off cards to eliminate bills?

Both revolving utilization and number of reporting balances matter. The former has a bigger scoring impact. However, from an interest standpoint and from the standpoint of feeling as if you're making progress it might make sense to pay off smaller high interest cards entirely. You have to evaluate these things for yourself as it's not just scoring impact that matters. At this stage, score is the least of your concerns. IMO budgeting, reducing revolving utilization and reducing debt are your top priorities. Those can shift over time as your siutation changes.

@jbishop1001 wrote:
I will be able to pay off approximately 60% of it, though. ($6,000)

Make a spreadsheet. Set it up to calculate current utilization (indiviudal and overall). Set up a column for potential payment amounts (with a total so you can stay within $6K) and set up another column to calculate utilization after the payment. Play with the numbers in the potential payment amount column.. Doing so with the info you provided it looks to me like $6K could eliminate the 5 cards you refer to as maxed and get your other maxed card at 90% and the card at 80% down to almost 50% each. That would also take your total revolving utilization down to 14%.

@jbishop1001 wrote:
Any advice on which balance transfer cards I might get approved for after I eliminate this debt? I'm going to be carrying the rest of it for at least another year, so I need to get rid of that interest, fast!

If you're carrying you haven't eliminated your debt. No idea on what you'd qualify for. Again, your priority at this point isn't scores or applying for new credit. Focus on the short term for now. You can worry about BT cards, auto loans, etc once you get your debt down to manageable levels and your credit profile improves.

Re: $10,000 in cc debt, where to start? Planning for car loan.

Anonymous — Thu, 29 Oct 2015 12:29:39 GMT

Dont get discouraged. lot of great advice here. like most others I would try to pay off what i can and consolidate as much as i can. i had $50,000 in credit card debt and i have almost 0 now. dont lose hope!

Re: $10,000 in cc debt, where to start? Planning for car loan.

Anonymous — Thu, 29 Oct 2015 12:35:04 GMT

You're getting conflicting advice because you've been vague about what you want to accomplish.

Car loan soon. What is soon? 6 weeks? 1.5 years? Different people have different ideas of that.

Is the car loan going to be a need or a want? Is it replacing another car loan? (meaning will this be an additional payment, or just a bump to an existing payment)

You're talking about a tax refund to pay off this debt. Are you talking 2015 Fed/State taxes? So not until late January 2016, 3 months away? Just checking. That's a long ways away and you're likely paying a lot of interest so looking for something around to sell or picking up another job for a few hours here and there might be a great idea in the interim at least to get rid of the low limit/maxed/high interest things ASAP. If you're planning on that size refund, you're having too much taken out. Can you change your withholding for the balance of the year so you don't have to wait for part of that?

10 payments a month beyond mortgage etc. I'm guessing the mortgage payment isn't a So Cal mortgage payment because there would be $0 left per month after mortgage for pretty much anything around here, if not negative$. You stated what your income is but not how it's been with these payments. Are you just treading water? Making all the minimums? Is it a struggle to make the minimums? This will determine what your #1 priority should be.

I see (at least) three competing priorities in your post: 1) maximize score for new car loan, 2) pay down high interest debt to save interest, 3) lower your monthly nut and get breathing room. Only you know what order you'd put those priorities in. Let us know, it'll help get better suggestions.

Also, if you stated scores and other credit info (baddies, etc.) I missed it. (Not getting out of this post at this point to go check). You asked for suggestions AFTER you pay off the $6k. Knowing more about your profile will help with that.

Last, on the 0% offers, let us know which they are. Some it's SUPER important to pay before the 0% ends because they retroactively charge all interest. Others, it'll just pop back up to your normal APR the month after the 0% expires. If YOU know which is which, let us know. If you don't, people here can probably at least make educated guesses for you to follow up on.

ETA: Two things that helped me when I was paying down my 29% interest CC debt were vertex42.com debt snowball spreadsheets and YNAB.

I'm a spreadsheet geek, so I liked the vertex42 sheets because I could go to the back sheet and tweak stuff. Others I've known have used whatisthecost.com (might be slightly off there) for online debt snowball planning. And YNAB (YouNeedABudget.com) is budget software that's awesome at encouraging you to: a) live within your means, b) assign your money based on your priorites.

Re: $10,000 in cc debt, where to start? Planning for car loan.

fury1995 — Thu, 29 Oct 2015 12:39:04 GMT

I agree with tackling the highest balances first. Then go after high APR cards and cards with annual fees.

You are not seeking credit right now, you are seeking relief...

I agree with closing your Open Sky and getting your deposit back. You can put this toward your other debts. This card will continue to age and not affect your AAoA and it's not really helping/damaging your utilization. Do not close anything without annual fees.

I sense you use your Walmart card to cover monthly household expenses (food, toiletries, clothing), correct?

If that's the case, that's where your oppourtunity to tighten the belt comes from. Change this, you will change everything.

Re: $10,000 in cc debt, where to start? Planning for car loan.

NRB525 — Thu, 29 Oct 2015 12:45:14 GMT

@Anonymous wrote:

2) Assuming that the APRs are equal, you want to pay off the highest dollars while paying off cards completely. This means that it is better to pay off one $2500 card than two $1000 cards, with the third thousand going to the big card, but paying off three $1000 cards and putting nothing to the $2500 card is even better.
.

OP already plans to pay off the highest APR first, that gets that out of the way.

The remainder of the cards can be expected to have roughly the same APR, Ring excluded.

The score bump will happen at 50% utilization on one card. In June, when all of my individual cards went below 50%, none remained over 50%, I got a big score run up. As some go above and then back below 50% recently, it's about a 7 point swing depending on crossing that 50%. So it does make a difference for score, less difference for APR cost, by keeping cards below 50% when 30% is not within reach.

Re: $10,000 in cc debt, where to start? Planning for car loan.

Creditdreamer — Thu, 29 Oct 2015 14:04:35 GMT

I agree with what PP said about getting on a written budget and using a spreadsheet or something.

Once you have a plan, you can decide how long in total you think it'll take to pay off the cards. If you're going to be able to pay them off fairly quickly, the interest is really not much money in the long term. The goal should be paying them off as quickly as possible, not moving a bunch of stuff around to get the lowest apr. I get that that makes sense financially, but the mindset is the biggest thing. I have followed the debt snowball method (Dave Ramsey). Basically you pay off the smallest balances first to get the ball rolling and avoid having to make so many payments every month. Example: you pay off one card that had a $30 minimum payment. Then because that card is paid off, you take that $30 and throw it toward the next lowest debt. In with all of these, get any extra money you can from any extra work you can find. The mindset of needing to get stuff paid off, rather than moving the balances around, will be the best thing possible.

So I would start paying off the cards as much as you can before your tax refund comes (I'm assuming April?).

1. OpenSky - $200

5. Chase Freedom - $500

6. Capital One Platinum - $500

7. Capital One Playstation - $500

9. Capital One Quicksilver - $2,300

Not maxed, but using:

3. Amazon - $300/$400

8. Barclay Ring - $800/$1,000

2. Fingerhut - $236/$2,500

10. Walmart - $4,500/$5,000

4. Lowe's - $360/$12,000

The big thing though is that if you pay these things off, you can't charge them up again. That is the point of getting on a written budget (or using a spreadsheet or budget program like YNAB). I have done it before where I "pay all my cards off" and then end up just charging them back up again because I didn't actually have the money to be paying them off, it should have gone to other things.

Something I have done to try to avoid interest that can work if you're disciplined enough is figure out how much you can put on credit cards (groceries etc) for the month. Then you pay off the amount on a cc that you would use for groceries. Then you use the CC for groceries for the rest of the month. Because you'd then be "paying the balance" or some of the balance at least of the cc, you'd then be able to lower your interest liability for that month. Example: I have a CC with $500 on it of a $1000 limit. I know I'm going to spend $400 on groceries for the month. So I take that $400 and pay the credit card down to $100 and then know that I only have $400 to spend on groceries. But then at least I'm avoiding the interest on that extra $400 because I paid it down temporarily.

But the most important part about all of this is to get on a written budget, especially with an income of only 25,000 and owning a house.

Re: $10,000 in cc debt, where to start? Planning for car loan.

happypill — Thu, 29 Oct 2015 16:14:20 GMT

Given your income and debt levels, your primary goal should be to pay down your balances. I hate to say it, but you're in a position where one unlucky event (medical expense, car repair, losing your income even for a month) could send into an unrecoverable tailspin so the last thing you should be thinking about is your scores and a car loan. Your util is so high right now, especially compared with your income that lenders might reasonably start taking AA and balance chasing, further exacerbating your situation.

If you have $6k available right now, you should completely pay off whatever low limit cards you can immediately. That will give you some breathing room because you'll have fewer payments to make each month. Then reduce the balances on your other cards below 50% to the extent possible. That will improve your profile and hopefully save you from AA. Then going forward, direct your payments to the cards with highest interest rates. Above all, stop spending and figure out what your budget is.

Re: $10,000 in cc debt, where to start? Planning for car loan.

Anonymous — Thu, 29 Oct 2015 16:25:37 GMT

Good advice. I'm echoing some others, but my thoughts:

1. Utilization is secondary to saving money. You save money by paying less in interest. This should be goal one. All other goals are secondary to you "saving" money by paying down interest.

2. Your auto loan "need" is secondary to paying down interest. Your auto loan will likely have a much lower rate than your credit card interest. Also you don't need to add debt anytime soon. If you must take out an auto loan shortly it should be for an affordable used car in your price range and low as possible while you are in this pickle.

3. Create a plan to avoid this in the future. You said you don't know how this happened, but you really do. Do NOT become a slave for your credit card people. Don't pay 750 for a 500 dollar couch because of interest. Stop giving companies extra money. You know this is an awful practice and you don't want this to continue to drag you down. Learn from the mistake and learn how to avoid it in the future.

We're all rooting for you in here my man, let's get out of this debt burden and use credit to our advantage, not make it cost us a ton of hard earned money!

Re: $10,000 in cc debt, where to start? Planning for car loan.

Anonymous — Thu, 29 Oct 2015 16:32:32 GMT

You can do it! The first step is knowing you need a (edited for spelling. arrgh) plan and the second step is making a plan. Then stick to the plan and you will chip away at the debt. Lots of good advice here.

When I filed for Chapter 13 I had a budget so tight I knew how much I could spend for everything. It saved my life. You need a budget you can follow. Perhaps a change in the way of thinking about your credit cards will help, too. Keep one for emergencies that you can't predict then pay pay pay. Good luck to you!

Re: $10,000 in cc debt, where to start? Planning for car loan.

Anonymous — Thu, 29 Oct 2015 16:51:22 GMT

Every single credit card no matter the balance has a $25 minimum payment. if you pay off 5 cards that is $125 in your monthly budget I would snowball the heck out of the easy ones, apply extra money at the retail cards, as those are the ones costing you.

Re: $10,000 in cc debt, where to start? Planning for car loan.

Anonymous — Thu, 29 Oct 2015 18:15:08 GMT

@Anonymous wrote:
Every single credit card no matter the balance has a $25 minimum payment. if you pay off 5 cards that is $125 in your monthly budget I would snowball the heck out of the easy ones, apply extra money at the retail cards, as those are the ones costing you.

that's not quite right. for Amex, it's 1% of balance + any interest accrued with a minimum of 35. almost all other cards are interest+x% of balance. i pay $119 every month for chase on a card with a $5000 balance, so minimum payments do vary greatly. (also I drive a dodge )

Re: $10,000 in cc debt, where to start? Planning for car loan.

fury1995 — Thu, 29 Oct 2015 18:21:06 GMT

@NRB525 wrote:
@Anonymous wrote:

2) Assuming that the APRs are equal, you want to pay off the highest dollars while paying off cards completely. This means that it is better to pay off one $2500 card than two $1000 cards, with the third thousand going to the big card, but paying off three $1000 cards and putting nothing to the $2500 card is even better.
.
OP already plans to pay off the highest APR first, that gets that out of the way.
The remainder of the cards can be expected to have roughly the same APR, Ring excluded.
The score bump will happen at 50% utilization on one card. In June, when all of my individual cards went below 50%, none remained over 50%, I got a big score run up. As some go above and then back below 50% recently, it's about a 7 point swing depending on crossing that 50%. So it does make a difference for score, less difference for APR cost, by keeping cards below 50% when 30% is not within reach.

The OP is seeking relief from their debt, not new credit.

I would agree with you if the goal was to apply for something like a house or car but in this situation increasing their scores have no bearing on what they are attempting to do.

Re: $10,000 in cc debt, where to start? Planning for car loan.

CMoore515 — Thu, 29 Oct 2015 18:55:12 GMT

If it were me, I'd pay off the smallest card first, just so you see some progress, regardless of intrest rate. Then snowball the rest of them once the first card is out of the way. As others have said, DO NOT charge anything else after you've paid them off. Just my opinion.