topic Re: Paying down credit cards recommendation? in Credit Cards

Paying down credit cards recommendation?

Anonymous — Mon, 09 Jul 2018 06:24:28 GMT

So I was looking to start paying more each month on my cards to try to get them all to zero or at least 30 utilization.

My question is - is it better to pay a card down completely and then work on the next or try to get them all close to 30 utlization?

Sorry if this seems like a silly question, but I'm trying to figure out the best way this. I've read a few different methods but honestly not sure what the best option is for me.

The cards I'm trying to pay down right now is a secured discover - 24.74 interest, capital one - 27.24%, and a store card 26.49 (this will be paid off completely this month since it has a super small balance) just listing so you can see a full picture.

The only reason they are so high is because when I was in the hospital I had to rely on my cards more than I would liked. So I am hoping to fix this problem. ^^"

Hope I'm posting this in the right area if not feel free to move. Thank you everyone!

Re: Paying down credit cards recommendation?

Anonymous — Mon, 09 Jul 2018 17:23:16 GMT

How many cards are we talking, and what are their balances, limits and APRs?

The best way to pay them down is... "it depends". If you're looking to boost your credit scores, getting total and individual utilization down is key. If you're looking to save on interest, paying down the highest APR card first works best. If you want to see the quickest progress, the snowball method is best: pay down the smallest balance first while paying a bit over the minimum on the others, then when that one is paid off, apply that amount plus the "bit over minimum amount" toward the next smallest balance, etc. Each card you pay off improves your score and also gives you more to put toward the next card's balance.

Re: Paying down credit cards recommendation?

Brian_Earl_Spilner — Mon, 09 Jul 2018 17:43:39 GMT

It really boils down to what motivates you most. If you want to save money, pay down the highest interest cards first. If you need that boost of accomplishment, pay the lowest balances first and snowball it.

Re: Paying down credit cards recommendation?

Cookiegrabber — Tue, 10 Jul 2018 05:37:50 GMT

If we were talking 12% vs 25% cards, I'd say pay off the 25% first. But since yours are 24.74% - 27.24%, I'd go with what others have said above -- do what motivates you best. Usually that's the snowball (pay off the smallest balance, see your progress, get motivated to pay off the others one by one).

Hope you're doing better health-wise, by the way!

Re: Paying down credit cards recommendation?

SouthJamaica — Tue, 10 Jul 2018 11:41:50 GMT

@Anonymous wrote:
So I was looking to start paying more each month on my cards to try to get them all to zero or at least 30 utilization.

My question is - is it better to pay a card down completely and then work on the next or try to get them all close to 30 utlization?

Sorry if this seems like a silly question, but I'm trying to figure out the best way this. I've read a few different methods but honestly not sure what the best option is for me.

The cards I'm trying to pay down right now is a secured discover - 24.74 interest, capital one - 27.24%, and a store card 26.49 (this will be paid off completely this month since it has a super small balance) just listing so you can see a full picture.

The only reason they are so high is because when I was in the hospital I had to rely on my cards more than I would liked. So I am hoping to fix this problem. ^^"

Hope I'm posting this in the right area if not feel free to move. Thank you everyone!

IMHO your best bet will be to pay off the lowest balance card, then the next lowest, and so on. It's called the snowball method.

Re: Paying down credit cards recommendation?

HeavenOhio — Tue, 10 Jul 2018 16:39:52 GMT

@Anonymous, your question isn't silly at all. As mentioned above, the answer is "it depends." If you could list all of your cards, their banks, their balances, their limits, and their APRs (including cards with balances of $0), people here can offer up their best suggestions. Also important to know is what your goal is, e.g. to save the most money, improve your score quickly, etc.

Advice can differ depending on the above information. Oftentimes, it's tailored according to what's the most achievable given one's situation. And it can also be tailored to hopefully avoid adverse action (AA). AA can include credit limit decreases or card closure, although neither Capital One nor Discover are particularly known for doing that.

With the information at hand, I think you're on the right track by paying off the store card first, then tackling the others. After the store card is paid off, I'd start by taking the higher interest card down to 87%, then bringing the other card down so it's also at 87%. After that, I'd bring the balances down to 67% (higher interest card first), then 47% (higher interest card first), then 27% (higher interest card first). At that point, bring the higher interest card down to zero, then tackle the last one. In the meantime, make sure you're paying at least twice the minimum on all your cards.

You mentioned "below 30%." Note that known FICO thresholds are at 88.9% (maxed), 68.9%, 48.9%, 28.9% (responsible borrowing and generally the second best scoring tier), and 8.9% (usually the best scoring tier). As an example, "below 30%" actually means 28.9% or below. That's because all fractions round up. 29.000000001% rounds up to 30% and is no longer below 30%.

The reason for suggesting 67%, 47%, etc. is to keep interest charged on the following statement from bumping you back up over the threshold.

Once you pay a card to zero, make sure you check the following month's statement for trailing interest. If that occurs, it'll be a trivial amount that you can pay immediately. Don't use the card again until you see a statement balance of zero.