topic Re: Paying Off CC Debt in Credit Cards

Paying Off CC Debt

Anonymous — Mon, 19 Jun 2017 13:27:23 GMT

So I did it! I ran myself into a hugh credit hole, my fault, I take full responsibility. Now with that out of the way, I am looking for a little (or a lot) of advise on the best and or fastest way to dig myself out.

I am going to list the CC debt I have, some cards listed are under my wife's name, a few under my son's name (he is a college student and I pay his bills as long as he stays on the deans list! Only one year left)

Amazon (M) $2300/2500

AMEX (W) $2783/3000

AMEX PLATINUM (W) $2000/5000 (PIF each month)

AMEX (M) $800/1000

Barclay M/C (W) $1680/1900

Berkshire Bank Visa (M) $340/600

Best Buy (M) $4377/5000

Capitol One Venture (W) $7473/8000

Capitol One Venture (W) $6797/7500

Capitol One Quick Silver (M) $1535/1800

Capitol One Quick Silver (M) $3069/3300

Care Credit (W) $1266/2000

Chase Freedom (S) $400/4500

Citi Double Cash (M) $0/500

Citi Double Cash (S) $0/2500

Discover (M) $1835/2000

Discover (W) $5907/6300

Discover (S) $0/2000

Empower FCU M/C (Joint M&W) $2790/3000

Home Depot (M) $3068/3400

Kohl's (M) $555/700

Lowes (W) $6394/6400

Raymour & Flannigan (W) $3128/8000

Target (M) $799/900

Total CC Debt : $59,296/81,800

I also have a few loans:

2014 Malibu (S) $6544/18894 ($364.00 month)

2015 Silverado (M) $34499/42408 ($600.00 month)

Personal Loan $5300/11158 ($280.00 month)

Mortgage $62997/69600 ($863.00 incl taxes / month)

So, I am planning on using the snowball method unless someone has a better/faster way without debt renegotiation. I am not one to run from anything let alone my debt. Just wanted to see if there were any other options that might better suit my situation.

Monthly income averages $7k - 10k (self employed)

Re: Paying Off CC Debt

medicgrrl — Mon, 19 Jun 2017 13:40:25 GMT

Before you start the snowball method, I would work towards getting the high utilization cards down below 89%, especially those that are about to go over the CL (Lowe's) Once you get those down, snowball away!

Re: Paying Off CC Debt

Anonymous — Mon, 19 Jun 2017 13:50:20 GMT

You have CC debt thats only $10k smaller than your mortgage balance and $160-170k in total debt with a $7-10k monthly income? Thats a big shovel and a medium pile so you could cash flow it easily assuming your lifestyle isnt eatting up your income. Try paying everyrting below 90% before snowballing to make sure an interest fee doesnt break the limit. Another option is an attempt to use any equity you have stored in your house to roll all of the debt into a lower interest rate and one payment, but if you have the ability to get agressive and throw $3-5k a month at the debt then cash flowing it may be simpler.

Re: Paying Off CC Debt

Anonymous — Tue, 20 Jun 2017 18:24:12 GMT

Thank you for the response. Lowes is 0% for 18 months, sorry should have mentioned that. I just built a new house (No Mortgage on this one) and costs got a bit out of control. I can go ahead and get these all below 89% today.

One other question for you. If you were in my situation and had the choice, would you payoff the malibu (3.24%) and the personal loan (11%) and use the $644.00 monthly for card payments or dump the $12k directly to the credit cards (8% - 29%)?

Thanks again.

Re: Paying Off CC Debt

Anonymous — Tue, 20 Jun 2017 18:36:49 GMT

I'm not a fan of the snowball method. I'm a fan of the "save myself as much money as possible" method.

Make a spreadsheet including APRs and minimum payments and figure out what saves you the most money in the long run.

Be aware that you want to pay down cards BELOW 89% -- including new interest posted. So pay it to 88.9% PLUS also pay whatever new interest will post next statement so you keep it below 88.9% always.

Then attack high APR first and minimums on everything else. If loans aren't highest APR, don't pay more than the minimum and crush out the highest APRs and keep them at $0 after.

More than anything else, you need to also go into poverty mode with new spending. Put your cable TV subscription into vacation mode and toss any savings there to debt. Dump any eating out (restaurants, drive thru, etc) until you are no longer paying interest on revolving debt. Ramen + sardines diet.

Re: Paying Off CC Debt

Anonymous — Tue, 20 Jun 2017 18:45:37 GMT

@Anonymous wrote:
So I did it! I ran myself into a hugh credit hole, my fault, I take full responsibility. Now with that out of the way, I am looking for a little (or a lot) of advise on the best and or fastest way to dig myself out.

I am going to list the CC debt I have, some cards listed are under my wife's name, a few under my son's name (he is a college student and I pay his bills as long as he stays on the deans list! Only one year left)

Amazon (M) $2300/2500
AMEX (W) $2783/3000
AMEX PLATINUM (W) $2000/5000 (PIF each month)
AMEX (M) $800/1000
Barclay M/C (W) $1680/1900
Berkshire Bank Visa (M) $340/600
Best Buy (M) $4377/5000
Capitol One Venture (W) $7473/8000
Capitol One Venture (W) $6797/7500
Capitol One Quick Silver (M) $1535/1800
Capitol One Quick Silver (M) $3069/3300
Care Credit (W) $1266/2000
Chase Freedom (S) $400/4500
Citi Double Cash (M) $0/500
Citi Double Cash (S) $0/2500
Discover (M) $1835/2000
Discover (W) $5907/6300
Discover (S) $0/2000
Empower FCU M/C (Joint M&W) $2790/3000
Home Depot (M) $3068/3400
Kohl's (M) $555/700
Lowes (W) $6394/6400
Raymour & Flannigan (W) $3128/8000
Target (M) $799/900

Total CC Debt : $59,296/81,800

I also have a few loans:

2014 Malibu (S) $6544/18894 ($364.00 month)
2015 Silverado (M) $34499/42408 ($600.00 month)
Personal Loan $5300/11158 ($280.00 month)
Mortgage $62997/69600 ($863.00 incl taxes / month)

So, I am planning on using the snowball method unless someone has a better/faster way without debt renegotiation. I am not one to run from anything let alone my debt. Just wanted to see if there were any other options that might better suit my situation.

Monthly income averages $7k - 10k (self employed)

I'm with the others as far as paying at least 11-21% first across the board and getting them below 89% UTI, but also stop spending on them! then the next step take another 10% across the board paydown and keep doing that each month. Once you get to 49% UTI, then start snowball payments (high interest or low bal..your choice), but once you get the UTI down call your creditors and see if they will lower interest.

I have been doing this method the last 12 weeks or so and have had wonderful results..lower interest and serious CLIs

Good Luck !

Re: Paying Off CC Debt

fliphusker — Tue, 20 Jun 2017 19:00:27 GMT

I will agree with ABCD2199 here. It is extravagant spending that got you into this spot. Take those store cards and give them so your son and tell him under no circumstances to let you have them. He is better at managing credit.

No eating out, no junk food, no home improvement, no cable tv/satellite, no buying of anything but the essentials. I am not familiar with some of the cards but be sure to only use the ones with the best cash back benefits. Sure your Citi has a very low limit, but nothing says you can not make multiple payments monthly to use it properly.

Also like ABCD said, ignore the snowball method. Small balances do not hurt, high-interest rates do. And high utilization.

I wish you the best of luck, but getting on a budget and sticking with it and cutting out the things in life that are not essential is going to be your key to getting out from under this mountain. Do not get discouraged, keep your head up and stick to your goal. After you have worked this down, sit down and think about some serious investments instead of wasteful spending.

Re: Paying Off CC Debt

Anonymous — Tue, 20 Jun 2017 19:38:23 GMT

I know that in the long run, the debt snowball would leave you paying more interest; however, you have way too many cards with balances and therefore too many minimum payments. I'd be scared that you'll forget to pay one or something. Personally, I would knock out those under $1000 balances (regardless of APR) as quickly as possible, then debt avalanche the rest. With your income, you should have those small balances gone in a month if you're eating beans and rice.

If you NEED those quick wins and motivation to keep going, snowball.

Re: Paying Off CC Debt

Anonymous — Tue, 20 Jun 2017 20:37:07 GMT

Rein in the wife. Pat son on the back and I'd say tackle the debt with highest APR to lowest since you have a good income...Definitely paint yourself blue and pretend you are chase and AA wifes cards though imo..that's what I would do to mine in similar situation anyway . It will be a fun game of dress up

Re: Paying Off CC Debt

medicgrrl — Tue, 20 Jun 2017 22:05:54 GMT

If you built the house and used the cc's to help with costs of build, have you considered taking out a HELOC to pay the cards off at a lower rate?

Re: Paying Off CC Debt

pipeguy — Wed, 21 Jun 2017 10:22:51 GMT

@Anonymous wrote:
You have CC debt thats only $10k smaller than your mortgage balance and $160-170k in total debt with a $7-10k monthly income? Thats a big shovel and a medium pile so you could cash flow it easily assuming your lifestyle isnt eatting up your income. Try paying everyrting below 90% before snowballing to make sure an interest fee doesnt break the limit. Another option is an attempt to use any equity you have stored in your house to roll all of the debt into a lower interest rate and one payment, but if you have the ability to get agressive and throw $3-5k a month at the debt then cash flowing it may be simpler.

Since you said you have a new house with no mortgage, I would take either an equity loan or add a first mortgage and get myself out of that big hole (cash flow, and gross amount). If your idea is to pay everything off in 12 months, there is no reason you can't use an equity loan and pay much less interest than you will on card payments.

I also would not pay off low interest rate car loans to convert cash flow to high interest rate cards unless I was sure I'd pay off all the high interest rate cards quickly. In addition I'd close duplicate cards between you and your wife especially since you have a lot of cards you can always add each other as AU's on an account.

Bottom line is you have a big asset (mortgage free house) and a lot of high interest debt, make one work for the other - at least that's what I would do especially since a bank considers an equity loan as "secured" they will be more willing to approve the loan even with the high debt load you currently have.

Edit/Add: I'd also dump the AmEx Platinum - $550 a year AF for a $5k credit line?

Re: Paying Off CC Debt

fliphusker — Tue, 20 Jun 2017 22:58:35 GMT

I did an HELOC on my house last year for major remodeling and it was paid off. The issue with the OP, how bad can their FICO be right now? Even with great on time payments, those utilizations have to crush their FICO. I know from playing around with my credit cards it is easy to kill your credit score by 50 points with a utilization over 90%. Not to mention overall utilization that high.

The other thing I asked when I was getting my HELOC is what another major factor, and my banker said DTI should be under 20%. Not sure how others work. I got my HELOC at 3.5% and fees of $300 for 7 years interest only. (Not paying only interest of course.)

I really would find it hard to think they could get an HELOC loan anytime soon with those utilizations and DTI. But if you could, that would be a major win to get those CC under control.

Re: Paying Off CC Debt

907grown — Wed, 21 Jun 2017 00:21:47 GMT

You should really think about seeing a credit counselor. That is an exorbitant amount of debt. With house and vehicles, you probably have enough debt to claim bankruptcy.
Hopefully you are having a real talk with your kid about debt and how much easier it is to get into then out of.
I am not trying to be judgemental seeming, look at my starting credit score, I know where you are.
My advice would be like so many others, STOP SPENDING MONEY YOU DON'T HAVE and I paid off my cards based on interest rate as opposed to balance. My biggest balance was on a 0% for 18 months, so I played that off last.
Good luck. It's a long road and if you are serious about it, initially you'll feel broke (because you will have nothing extra to spend and won't use credit cards) but you will get used to it and start enjoying watching those balances go down. You need to close a bunch of those cards too. I had to. I was bad with credit, so are you. Get the temptress out of your life.
So many people on here are in a race with themselves to get all these cards.... I was too..... I was dumb. It costed me a lot of money and headache. Glad I saw the error in my ways. You can fix this.

Re: Paying Off CC Debt

medicgrrl — Wed, 21 Jun 2017 01:42:32 GMT

Also, I would leave the installment loans and put the 12k towards the revolving accounts.

Re: Paying Off CC Debt

ChargedUp — Wed, 21 Jun 2017 02:12:15 GMT

I know the OPs FICO may be tanked right now, but going into a bank and using land and a new house as collateral to pay off debt which would significantly raise his scores makes sense to me. The lending banks interests would be guaranteed by your new house and land. You may get a high APR, but once you use the money to wipe out 99% of your debt, your score should rebound significantly as long as their are no other skeletons in the closet. Once your score comes back, refi the loan to a much lower APR and make double (or more) payments and you should be able to make faster progress on being debt free.

Highly recommend closing some accounts so you don't end up in the same predicament again. (It's easier than you think!)

best of luck!

Re: Paying Off CC Debt

Anonymous — Wed, 21 Jun 2017 02:33:08 GMT

I would pay the highest APR cards in order, so that your paying down the highest debt with interest. Also I know you might not like to hear this but, your son needs to get a part time job and start paying down his debt. I know every parent wants to make college less stressful for their kids especially as an incentive for doing great. Reality check, that is something he will do anyways if he wants to. Your also doing a disservice to him by not allowing him to have the responsibility of paying what he charges on credit. When he is on his own, its very possible he is going to fall in the same pattern that caused you problems in the first place. Trust me if you want to help him, he needs a job and to start helping pay down his debt and when it's cleared he will also be in a position to transition on his own. I see this all the time, and I understand that parents will give their shirt off their back because they love their kids and want them to be successful, but it's actually going to hurt him in the long run. Good luck, I wish you the best. Side note I worked 2 part time jobs to get my BA and Masters, my parents as much as they wanted couldn't afford to help me with college cost. They did however provided the encouragement and support I needed to get through it.

Re: Paying Off CC Debt

jdxprs1 — Wed, 21 Jun 2017 02:33:42 GMT

Unless the op is planning to finance something soon, his utilization isn't an issue. He should pay off the high interest stuff first.

Re: Paying Off CC Debt

Anonymous — Wed, 21 Jun 2017 02:36:39 GMT

Sorry but that's not good advice. Your asking OP to make insecure debt into secure debt with their home. What if the unthinkable happens and they fall behind then they will be in a much worst position of becoming homeless. Never use a HLOC to pay for unsecured debt, it almost no never makes sense.

Re: Paying Off CC Debt

medicgrrl — Wed, 21 Jun 2017 02:50:27 GMT

Except that it sounds like OP used credit cards to actually help build a house that is now owned free & clear. Would you suggest someone buy a house on a credit card or take out a mortgage?

Re: Paying Off CC Debt

fliphusker — Wed, 21 Jun 2017 03:09:48 GMT

Sorry, no clue how to make that format right with the quote.
The OP stated already that defaulting is not an option on any of the debt and is looking for options. While you are correct that one should never use the house for collateral, for unsecured debt, the OP has already used at least $10K of the credit cards with upgrades to the house. I am not familiar with some of the credit cards, but my guess it is probably a lot more than the $10K that is easily spotted.
See, I did the same exact thing but in reverse. (Except only spent money to upgrade the hosue on my CC.) I did a huge renovation and I took out the HELOC in preperation to run up my cards for the cash rewards and then just used my HELOC to pay them off. How is that different if the OP pays off half that debt and then gets a HELOC? My assumption the OP would have to cut that CC debt in half just to fix the FICO.
With most HELOCs, you pay interest on the draw period. Most I believe run 10 years, than another set time frame to pay it off. Interest only on a $30K HELOC at 3.5% (prime) will run under $100/month.
In a year's time, the OP would save $6K just in interest alone of $30K at 20%.
I am in no way encouragint the OP to do this, just showing the option to do it. Way better to do that than something like LC or Propsper down the road.

@Anonymous wrote:
Sorry but that's not good advice. Your asking OP to make insecure debt into secure debt with their home. What if the unthinkable happens and they fall behind then they will be in a much worst position of becoming homeless. Never use a HLOC to pay for unsecured debt, it almost no never makes sense.