topic Re: Need advice on paying down debt in Credit Cards

Need advice on paying down debt

Anonymous — Mon, 17 Dec 2007 06:06:42 GMT

Hello! This is my first post but I've been reading the postings for hours over the past week & have gained a lot of great info. Here's my situation:

My wife & I have made some bad financial decisions in the past but are working very hard to pay down our debt & wanting to do it in the best way possible. We've heard from some like Suze Orman to pay down our credit cards w/ the highest interest rate first. Then I read an article from David Bach who had his own method. Here's our debt list:

Name/Credit Limit/Balance/Interest Rate

Target Visa/$1000/$940/21.74%
Target Redcard/$200/$0/23.74%
Nebraska Furniture Mart/$1600/$1500/18%
USAA Platinum MC/$500/$450/11.65%
JCPenney/$1100/$965/21%
Chase Visa/$1500/$0/29.99%
Capital One Platinum Visa/$1000/$948/22.8%
Capital One Platinum MC/$1000/$918/17.9%
RadioShack/$1100/$910/23.85%

We currently have just over $2000 to pay towards this debt. One thought was to pay off Nebraska Furniture Mart and JCPenney as they have the highest minimum payments therefore freeing up the most money (as we currently are only able to pay the min) towards further debt reduction. Another thought was to split the $2K evenly amoungst those w/ balances.

Any advice is greatly appreciated. Thank you!

Re: Need advice on paying down debt

pattycake — Mon, 17 Dec 2007 17:22:36 GMT

How about paying down the smallest balances first? That way, you'll have a sense of accomplishment that you did so (your smallest is $450 - get that paid off, then sock drawer the card!).

Take the remainder and pay down as close as you can to some of the others, preferably the Target Visa and the CapOne that have the highest interest rates.

There are all sorts of recommendations, but do whatever you think is going to get you in the groove of bringing your debt down.

Best of luck to you - the others will weigh in!

Re: Need advice on paying down debt

Anonymous — Mon, 17 Dec 2007 17:26:12 GMT

Hi rlc, and welcome to the forum.

Ouch! The interest you are paying out monthly must be really hurting you! I know it would be for me.

You are maxed out on 7 of your 9 cc's and that unto itself is hurting you.
You will get several opinions as to the best course of action.

My suggestion, is to stop using all of your cc's, cold turkey. Stop using them 100% while paying down on them. You will have to go to the bank more often, to be sure, but you have to get a handle on the interest you are paying.

One way is to allocate that $2,000. Your total debt = $6,631. What % does each cc balance represent of that amount? Then apply that % to the $2.000 you have to spend:
Target Visa $940................pay $284
Nebraska Furniture Mart $1500...pay $452
USAA Platinum MC$450............pay $100
JCPenney $965...................pay $292
Capital One Platinum Visa $948..pay $286
Capital One Platinum MC 918.....pay $276
RadioShack $910.................pay $374

That is but one way. I'm sure others will disagree, but that's ok. There's more than one way to skin a cat. (old texas saying).

Re: Need advice on paying down debt

Anonymous — Mon, 17 Dec 2007 17:33:38 GMT

pattycake wrote:
How about paying down the smallest balances first? That way, you'll have a sense of accomplishment that you did so (your smallest is $450 - get that paid off, then sock drawer the card!).

Take the remainder and pay down as close as you can to some of the others, preferably the Target Visa and the CapOne that have the highest interest rates.

There are all sorts of recommendations, but do whatever you think is going to get you in the groove of bringing your debt down.

Best of luck to you - the others will weigh in!

Suze Orman says always pay the highest and if anyone recommends anything else they are crazy. however, I agree w/ Pattycake- you can do whichever you want- but for some people, using the snowball method- paying off the smallest and then the next, and the next helps alot.

I used the snowball method years ago and when I paid off that first bill I really got momentum. Again, financially it makes the most sense to pay off highest int. rate- but psychologically a lot of people have used the snowball method.

I say whatever works well and gets you moving to eradicating your debt is what is best for you.

Re: Need advice on paying down debt

Anonymous — Mon, 17 Dec 2007 17:34:54 GMT

PS- the one thing to remember is that once you pay one off you take what money you were paying on that one and apply it to the next.

DO NOT try to fool yourself into thinking you have more cash!! You don't. You will finally have cash when you pay them all off.

Re: Need advice on paying down debt

Ausfarm — Mon, 17 Dec 2007 17:36:59 GMT

I'm w/ Suze Orman. Pay down the higher interest cc first. However, I would call each cc company and ask for them to reduce my interest rate. After calling all of them, I would determine who you're paying the highest interest rate to and throw any additional $ at them. Also, as a previous poster said: stop using your credit cards. You've got to seriously commit to that. Otherwise, you're efforts will be futile.

Once you pay a cc off, they may also be willing to offer you something like 0% BT or (even better) a fixed rate BT (say, 3.4% for the life of the balance). Then you're getting somewhere. An offer like that is obviously not going to happen w/ dept or furniture store accounts.

If Chase Visa is unwilling to lower their interest rate, pay them off first --29.99% is too high. Alternatiively, you may want to pay that off and then ask if they have any BT offers to address some of the other debt. If they do, transfer the next highest cc balance to that card and go to the next highest. Remain aware of the interest you are paying and the BT they give you. NEVER BE LATE on a BT deal otherwise you lose it.

Re: Need advice on paying down debt

SmartCookie — Mon, 17 Dec 2007 19:24:52 GMT

I'm in with Suze, but there is something important to be said about paying off small accounts first for people that are stressed out and quite overwhelmed.

I'd start with calling every store card up and asking for an APR reduction. Then call ever major cc up and ask for the same, plus a CLI if there will be no hard INQ and then asking about what BT offers they have for you. In your situation I'd only take no-fee BTs. Search around for the Cap1 back door number. Check BT offers on Chase online... they probably have a fee free one for under 10%APR for you.

So that aside, with 2k I would be apt to

PIF Radio Shack and Cap1 Plat Visa

pay the remaining $142 to Target Visa leaving a new balance of $798. Put any 'extra' money you can on this balance till paid off while paying the min and working in order on JCP, Nebraska, Cap1 MC and USAA.

Re: Need advice on paying down debt

Anonymous — Mon, 17 Dec 2007 19:28:52 GMT

Dang SmartCookie- your scores are really getting high!! Kewlness and congrats on all your hard work.

Re: Need advice on paying down debt

granny031350 — Mon, 17 Dec 2007 20:57:58 GMT

ok, not to disagree here but Dave Ramsey also offers some good advice which I have followed and it is working for me. But I paid off my smallest balance first, in full. Wow, what a great feeling, 1 down and 3 to go etc mentality.

Re: Need advice on paying down debt

rubaty — Mon, 17 Dec 2007 21:03:06 GMT

Suze is right but I say do what will make you feel good about your situation! When I decided to try and get on the right path, I started with 2 lower balances and then moved on to the 1 with the highest APR.

Re: Need advice on paying down debt

Anonymous — Mon, 17 Dec 2007 21:45:48 GMT

Read the CC Tactics link in my sig.

Call Chase and ask about an APR reduction and CLI. Tell 'em you have other high interest CC debt, and if they could reduce the APR and raise your CL, then it would be advantageous for your to BT some CC debt onto the Chase VISA. But a 29.99% APR just won't do. They'll probably do an INQ, but if you get something outta them it would be worth it.

Pay USAA $300 and get the balance down to $150. Once they cash the check, hit them up for a CLI. That will give you somewhere to which you can BT your highest APR CC debt.

Pay the Capone VISA and MC balances down to about $300 each. When they've cashed the checks, call 'em up and ask if they'll combine both CCs into one CC, and give you both an APR reduction and CLI. If they ask, tell 'em you want a $5K CL.

As you make headway, BT your highest APR CC to your lowest APR CC. Try not to max things out, but you're already at 74% util overall, 91% on those CCs with a balance.

Re: Need advice on paying down debt

SmartCookie — Tue, 18 Dec 2007 00:38:39 GMT

granny031350 wrote:
ok, not to disagree here but Dave Ramsey also offers some good advice which I have followed and it is working for me. But I paid off my smallest balance first, in full. Wow, what a great feeling, 1 down and 3 to go etc mentality.

That's not at all a disagreement. Like my mother in-law says 'that's why there is vanilla and chocolate'. Glad it is working so well for you! That's what counts... everyone is individual.

Re: Need advice on paying down debt

SmartCookie — Tue, 18 Dec 2007 00:41:10 GMT

netpanther wrote:
Dang SmartCookie- your scores are really getting high!! Kewlness and congrats on all your hard work.

Thanks netpanther! It was a good year for increasing CLs, dropping a mystery derog, and adding a very old AMEX account back in. Appreciate the comments!

Re: Need advice on paying down debt

Anonymous — Tue, 18 Dec 2007 00:48:56 GMT

SmartCookie wrote:

netpanther wrote:
Dang SmartCookie- your scores are really getting high!! Kewlness and congrats on all your hard work.

Thanks netpanther! It was a good year for increasing CLs, dropping a mystery derog, and adding a very old AMEX account back in. Appreciate the comments!

No problem! I was just noticing how high they are getting! You Fused, and Brammy!

Re: Need advice on paying down debt

Anonymous — Tue, 18 Dec 2007 00:49:42 GMT

SmartCookie- but what I am really impressed w/ is that you are ALL OVER 720 and two over 760!!! That is sooooooooooooooooooooooooooooo Cool!

Re: Need advice on paying down debt

Anonymous — Tue, 18 Dec 2007 07:58:09 GMT

Thank you SO much for everyone's advice so far. It has been very helpful!!

Re: Need advice on paying down debt

Anonymous — Wed, 02 Jan 2008 19:57:42 GMT

SmartCookie, how did you get your old AMEX account added back in? I had a closed, positive AMEX TL on my credit report from 1997 that TU deleted by accident. They will not put it back on, and I was nervous to call AMEX because I don't want them to just delete the account all together. I would also like them to report this on my EQ. Is there a # or an addy that you can share? I would appreciate greatly anything you can tell me. Thank you.

Re: Need advice on paying down debt

Anonymous — Wed, 02 Jan 2008 20:58:22 GMT

The way you pay down your debt is completely up to you. Some say pay those with the highest interest rates first, though depending on the balance they may not be costing you the most. Some say pay off the smallest balances first for a sense of accomplishment. Personally I use financial software to guage what payment goes where. I love my pocketbook.

Message Edited by Brammy on 01-02-2008 03:58 PM

Re: Need advice on paying down debt

Anonymous — Wed, 02 Jan 2008 21:30:16 GMT

Brammy wrote:
Some say pay those with the highest interest rates first, though depending on the balance they may not be costing you the most.

When you say "most", per $X of debt, the highest interest rate is usually costing you the most.

If one has $1K at 21%, and $20K at 18%, the $1K at 21% is costing the most per $X of debt. The $20K at 18% might cost more in finance charges, but it's a larger amount of debt. Ya always look at it on a "per capita" basis, so to speak. If I had $500 to pay debt, in this example, I'd make the minimum on the 18% debt and pay the rest to the 21% debt.

That's just me. No feelings, no heart, and no reflection.

Now, some CCCs play big games with interest rate calculations, but you can usually figure 'em out. On one's monthly statement, there will a breakdown of what dollar amount is costing what APR and what finance charges.

Might read like this:

$1,298.45 at 16.59%

$4,107.12 at 18.42%

$3,001.08 at 24.51%

There will be dollar amounts of finance charges at each APR. Just divide the finance charges by the balance at that rate to get a real, basic APR.

Not all 19.49% APRs are created equal.

PIF a small debt can have the advantage of using it as leverage. PIF a $500 CL CC, and pressure 'em to give you a CLI and APR.

"Hi, First National Bank of Ratejacking? Yes, I just called to inquire about a CLI and APR. I just PIF my CC with y'all because, well, for one, I can, and two, y'all are charging me the highest interest with a very tiny CL. Do you think you could gimme a CLI and APR reduction? I have other high interest debt, but the rate is much lower than what y'all charge."

OK, when you call, maybe you don't wanna use all the invectives that I freely toss about.

Re: Need advice on paying down debt

Anonymous — Wed, 02 Jan 2008 21:41:34 GMT

Noah_Bodie wrote:

Brammy wrote:

Some say pay those with the highest interest rates first, though depending on the balance they may not be costing you the most.

When you say "most", per $X of debt, the highest interest rate is usually costing you the most.

If one has $1K at 21%, and $20K at 18%, the $1K at 21% is costing the most per $X of debt. The $20K at 18% might cost more in finance charges, but it's a larger amount of debt. Ya always look at it on a "per capita" basis, so to speak. If I had $500 to pay debt, in this example, I'd make the minimum on the 18% debt and pay the rest to the 21% debt.

That's just me. No feelings, no heart, and no reflection.

Now, some CCCs play big games with interest rate calculations, but you can usually figure 'em out. On one's monthly statement, there will a breakdown of what dollar amount is costing what APR and what finance charges.

Might read like this:

$1,298.45 at 16.59%

$4,107.12 at 18.42%

$3,001.08 at 24.51%

There will be dollar amounts of finance charges at each APR. Just divide the finance charges by the balance at that rate to get a real, basic APR.

Not all 19.49% APRs are created equal.

PIF a small debt can have the advantage of using it as leverage. PIF a $500 CL CC, and pressure 'em to give you a CLI and APR.

"Hi, First National Bank of Ratejacking? Yes, I just called to inquire about a CLI and APR. I just PIF my CC with y'all because, well, for one, I can, and two, y'all are charging me the highest interest with a very tiny CL. Do you think you could gimme a CLI and APR reduction? I have other high interest debt, but the rate is much lower than what y'all charge."

OK, when you call, maybe you don't wanna use all the invectives that I freely toss about.

Nope not what I meant at all. But if that 10.99% with a 2100.00 balance is compared to that 250.00 at 12%. The 2100.00 Is costing you the most solid money in interest a month. that is until you bring the 2100.00 balance down enough were the monthly finance charges are less than the smaller balance.

Thats why I use financial software, I am often surprised at how my payments are allocated. But I have it set to cost me the least amount of money.

Message Edited by Brammy on 01-02-2008 04:41 PM