topic Re: I need some advice on a plan of attack in General Credit Topics

I need some advice on a plan of attack

Woolfman — Sun, 31 Oct 2010 00:58:50 GMT

I have almost 5k in savings to put towards these bills and still leave us 1k in savings for an emergency fund.

I have

bb store card with 290 bl 850CL 0% $40.00 a month to stay on track to have paid off ahead of offer ending

ashleys 2500 of 4000cl 0% $100.00 a month to stay on track to have paid off ahead of offer ending

WF Card (new a/c and duct work for house ) 5k bl 6,4k limit 9.9% 115 a month min been paying 120.

Citi card 11.1k BL 12.5k CL 15.99% min payment is now 268 bt ended been paying 500+ a month but have had some set backs and used the card

Alliant card 1.3k bl 5k CL 12%

BOA AMEX 0 BL 3.5k CL Has a 12 month 0% BT offer right now .

Numerous other cards Usaa,UMB,hooters, Nationwide, 2 RZMC all are always PIF if we use one of them .

Some of it was unavoidable stuff most of it was just reckless spending on our part .

Current Util is 45%

So there is my mess We expect to get a decent tax return that will go to these bills (a/c has a 1.5k tax credit ) we generally get about 2k to 3k back each year. Also cant completely count on it nor know a set amount. But the wife generally gets 3k to 5k as a 4th quarter bonus (around march).

But im torn , Do i snowball it? lowest to highest forgetting the 0% rates. Or follow my mathematical side of the brain and pay down the biggest first. That is costing me more money.

I was thinking transfer 3350 to the BOA off of the Citi card to kill that interest for a year . put the almost 5k on the citi leaving the balance just under like 3.5k

and should have that paid off in 8 months and then move on to the WF next.

Any Ideas,insight or abuse would be appreciated !

Im amazed with all this my TU is still 675!

Re: I need some advice on a plan of attack

Anonymous — Sun, 31 Oct 2010 16:40:44 GMT

Woolfman,

From my calculations, you have ~ $20,190 in CC debt, is that right? And you have ~$5k to put towards this?

Here's what I would suggest:

Pay off the BB (I know it's at 0% but better to just kill it)

Pay off the Ashley's

Pay off the Alliant

Pay $100 on the Citi

Pay $800 (or whatever's left) on the WF

That'll leave you with only 2 cards with balances, which is a much better position since its easier to pay 2 bills than 5! It will also free up those payments to put towards the CITI. How much is the BoA BT fee? If you can pay ~ $5k off before the 12 mo are up, it might be worth transfering that from the Citi but honestly, I think the best thing for you is to just push forward and try to pay off the last two cards as soon as possible...If you do get a tax credit from the a/c, you should apply that to the card for sure! And I would use at least half of the remaining funds you recieve to build a "house" fund so you don't have to put that stuff on a CC next time.

If you just push ahead, you should be able to pay off the WF within the next 8 months, with the tax return added on and the Citi within the next 18 months, snowballing the payments for the other cards to it.

Finally, as you mentioned, reckless spending needs to be addressed or this will happen again...set a plan up for how to pay for something within 2-3 months of purchase before buying stuff and it will help keep you on track.

Hope that helps

Re: I need some advice on a plan of attack

Woolfman — Sun, 31 Oct 2010 22:07:29 GMT

Thank you for your thoughts .

The BT fee on the boa is the standard 3% So that's why I was thinking about doing that also . atleast it would help cut down some on the interest we are incurring and help us pay stuff off that much faster.

I have been working on the mind set , But its a battle so far to get my wife on the same page. I knew I was in a losing battle when we spoke about the Credit cards and to stop using them and her response was "I just don't get you, You have about 50k in CL's but don't want to use them. . She thinks I'm obsessed with money , When its just more that I'm uncomfortable with our debt. Are we struggling? No we can afford every payment we have and more. Just in my eyes we should be saving more for retirement and other stuff we want in life than throwing it all away in interest and CC payments.

Thank you again for your input.

Re: I need some advice on a plan of attack

haulingthescoreup — Mon, 01 Nov 2010 00:00:32 GMT

@Woolfman wrote:

...I have been working on the mind set , But its a battle so far to get my wife on the same page. I knew I was in a losing battle when we spoke about the Credit cards and to stop using them and her response was "I just don't get you, You have about 50k in CL's but don't want to use them. . She thinks I'm obsessed with money , When its just more that I'm uncomfortable with our debt. Are we struggling? No we can afford every payment we have and more. Just in my eyes we should be saving more for retirement and other stuff we want in life than throwing it all away in interest and CC payments...

There's a big difference between having $50K in available credit and having $50K in the bank!

The way I look at it is that I care a lot more about myself than I do about the banks, and I'd rather give money to me (via savings) than to banks (via interest payments.)

And the other thing that drives me is the knowledge that if I owe anyone money, I am to some extent in their power, because I'm a debtor. And I like to choose who I let have any power in my life. (I can assure you that it's not a financial institution. )

Good luck. There's a good reason that money issues are the #1 cause of marital tension.

Re: I need some advice on a plan of attack

RobertEG — Mon, 01 Nov 2010 03:36:22 GMT

There are two very different approaches. One is immediate FICO score improvement, and the other is current financial.

If you dont plan to apply for new credit in the near future, I would put FICO on the back burner, and look at if from a financial basis.

From a financial point of view, your card with the highest balance and highest interest rate is the CITI card.

With an APR of 15.99%, that is aprox 1 1/3% a month on the current balance. With a current balance of $11,100, that is a current payment out of pocket of over $140 a month just in interest on that card. CITI would clearly by my priority for financial purpose.

Using the same analysis, you are paying approx. $41 a month in interest on the WF card. That would mandate second priority.

From a FICO point of view, your highest % util card is also CITI, now at 89%. So that is having the most impact on FICO scoring.

WF is second at 78% util. You will get a lot more FICO improvement in paying down the highest % util cards than in getting a lower % util card down to $0.

Under either analysis, my priority would clearly be first on the CITI card, and then on the WF card.

Re: I need some advice on a plan of attack

RobertEG — Mon, 01 Nov 2010 03:58:40 GMT

Bottom line is that in your current monthly payments, approx. $200 is going only to interest, which does not lead to any quick improvements in reduced interest or increases in FICO scores. If you pay CITI $500 a month, over $140 does not go towards principal balance reducttion. At that rate, CITI would maintain a balance for around two years, assuming that the card had no further purchased during that time.

I doubt that your spouse would, if asked, willingly flush $200 a month down the toilet.

Re: I need some advice on a plan of attack

Anonymous — Mon, 01 Nov 2010 08:05:37 GMT

How much are you paying for your Alliant card monthly?

What is the minimum due on BB store card and Ashleys?

When does promo APR will end and what is the APR after that on BB store card and Ashleys?

Re: I need some advice on a plan of attack

Woolfman — Mon, 01 Nov 2010 10:52:08 GMT

That was my way of thinking Robert. I know some say the whole snowball the payments is the way to go but I just cant seem to get myself into that train of thought. Im not out to just improve my fico score. I honestly want to get out of debt

Bunny the BB store card still has like 8 months. I have been paying the 40 a month so it will be gone before the promo ends . min payment is $10

and the ashley's card i believe (i hate cards that have no website to look at everything) is till Feb 2013. min payment here is 25 i believe . I firmly believe that they give you the 0% terms and then dont send you statements everyother month just trying to get you to slip up and miss a payment or paylate so they can raise the rate. I dont seem to get a statement every month.

Re: I need some advice on a plan of attack

Anonymous — Tue, 02 Nov 2010 17:28:15 GMT

@Woolfman wrote:
That was my way of thinking Robert. I know some say the whole snowball the payments is the way to go but I just cant seem to get myself into that train of thought. Im not out to just improve my fico score. I honestly want to get out of debt

Bunny the BB store card still has like 8 months. I have been paying the 40 a month so it will be gone before the promo ends . min payment is $10

and the ashley's card i believe (i hate cards that have no website to look at everything) is till Feb 2013. min payment here is 25 i believe . I firmly believe that they give you the 0% terms and then dont send you statements everyother month just trying to get you to slip up and miss a payment or paylate so they can raise the rate. I dont seem to get a statement every month.

BB Store Card 290 bl Minimum Due $10 Pays $40 APR 0% until 06/2011

Ashleys 2500 bl Minimum Due $ 25 Pays $100 APR 0% until 02/2013 (really? it is over 2 yrs)

I was thinking reduce the payments to the minimum on those two ccs and pay the difference to the Citi to reduce the interest charge as much as possible. I guess not ...

Be careful ... Never Ever miss/Late the payments!

Re: I need some advice on a plan of attack

Woolfman — Tue, 02 Nov 2010 17:31:48 GMT

yes the ashleys is a furniture store . We got 36 months 0% interest

Re: I need some advice on a plan of attack

vanillabean — Tue, 02 Nov 2010 17:47:26 GMT

@RobertEG wrote:

I doubt that your spouse would, if asked, willingly flush $200 a month down the toilet.

Re: I need some advice on a plan of attack

marty56 — Tue, 02 Nov 2010 20:34:37 GMT

The best approach to getting out of debt is to use the debt snowball approach by making minimum payments on all but the account with the smallest balance and throwing any extra to that account till it is PIF and then attack the next smallest balance and so on. This approach is FICO friendly also. It is a prven method used by both Dave Ramsey and DMP programs and from my own personal experience in a DMP program, really works. It is also the simplest to manage. You also may consider a DMP program which can also reduce your interest rates so you would also beenfit financially as well.

Re: I need some advice on a plan of attack

vanillabean — Wed, 03 Nov 2010 04:48:18 GMT

@marty56 wrote:

The best approach to getting out of debt is to use the debt snowball approach by making minimum payments on all but the account with the smallest balance and throwing any extra to that account till it is PIF and then attack the next smallest balance and so on.

I don't know if debt-snowball is better than highest-interest.

Let's say you have one card with a $10,000 debt at 30% and ten cards each with a $1,000 debt at 10%.

If you can pay $800 a month towards your credit card debt, would the debt-snowball simplicity make up for the highest-interest savings?

Re: I need some advice on a plan of attack

Anonymous — Wed, 03 Nov 2010 14:52:33 GMT

Debt snowballing comes in a variety of flavors - some prefer hitting lowest balance first; some highest balance first; some go fo highest interest rate. If you like the debt snowballing concept (I do) pick a flavor that works for you, or come up with your own hybrid.

The bottom line on debt snowballing is that when one debt is paid, you snowball the funds from paying off that debt into paying off another debt, rather than viewing it as available cash to spend. Good stuff!

Re: I need some advice on a plan of attack

Woolfman — Wed, 03 Nov 2010 15:24:39 GMT

I think we have decided to go with paying the biggest off first and work down from there.

Re: I need some advice on a plan of attack

Anonymous — Sat, 06 Nov 2010 07:00:21 GMT

Woolfman: May I suggest you pay off the credit card account with the highest interest rate. And if you have a credit card with a low interest rate, check on doing a transfer from your high interest credit card. Even, if you don't have a high credit limit on your low interest credit card. A partial transfer will help lower the interest you are paying each month. Keep payinf as much as you can on the high per cent rate card, until you get if down to PIF each month. Hope this works for you. I started this about 18 months ago. And am now on my way to paying off a credit card which had a very high interest rate. I still have $1,300. to pay off.

Re: I need some advice on a plan of attack

DanMobbs — Sun, 07 Nov 2010 15:17:42 GMT

It looks like the highest-interest method is what this website uses

http://cgi.money.cnn.com/tools/debtplanner/debtplanner.jsp

I put Wolfman's cards in there, and he/she will be debt free in 2 years and 5 months at a fixed $800/mo, as you suggested.

That doesn't account for when the 0% cards expire or if the 0% defaults to something under or above to the highest card's rate of 15.99%.

I think both Suze Orman and Dave Ramsey reccomend using the highest-interest method.

Suze Orman did a great job of explaining that method on Oprah maybe about 1.5 years ago.

Re: I need some advice on a plan of attack

vanillabean — Sun, 07 Nov 2010 20:01:55 GMT

It is correct the web site uses highest-interest. I whipped up a small script, and the total interest is about the same. What surprised me is that debt-snowball carries only a little extra interest, nothing like say 50% more.

When I went to sleep last night, I set the alarm clock for 3 a.m. It woke me up then, at which time I set the alarm clock's time back to 2 a.m. and went back to sleep. An hour later it woke me up again because I didn't turn off the alarm.

Couldn't fall asleep again. That's how I had time to whip up that script. Just kidding.

Re: I need some advice on a plan of attack

haulingthescoreup — Mon, 08 Nov 2010 03:09:40 GMT

@Anonymous-own-fico wrote:
It is correct the web site uses highest-interest. I whipped up a small script, and the total interest is about the same. What surprised me is that debt-snowball carries only a little extra interest, nothing like say 50% more.

When I went to sleep last night, I set the alarm clock for 3 a.m. It woke me up then, at which time I set the alarm clock's time back to 2 a.m. and went back to sleep. An hour later it woke me up again because I didn't turn off the alarm.

Couldn't fall asleep again. That's how I had time to whip up that script. Just kidding.

Which is not all that surprising. We tend to get all anxious about nitty-gritty details, without projecting them out to real dollars and cents, and only when we do, do we realize that the dollar amount often isn't that different. Good for you for looking at that.

Both of these approaches are debt snowballing. The only difference is whether you target the highest-APR first or the lowest-balance first. Lowest-balance is good for those who are feeling overwhelmed and secretly convinced that they're defeated, and that nothing whatever will ever change. Paying off a few low-balance cards can be very empowering, and that can be incredibly important at keeping you on track.

But for a straight save-every-penny approach, high APR is the best approach. Even then, as you discovered, you don't necessarily save all that much, depending on how high the balances are and how insane the interest rates are.

Whichever target approach you choose, the snowball tactic is the same: pay minimums on everything but the targeted account, and throw everything you have at that one. Once it's paid off, take that same amount of money (don't fudge and reduce the payment), add it to the minimum you were paying on the next card in line, and go after that one. Wash, rinse, and repeat, over and over, until it's all done.

Either approach is perfectly valid, for different reasons. What matters is wading in and doing it.

Congrats on tackling this! You'll be amazed, after three or four months, how empowered you feel.

Oh, and with the alarm clock thing, I thought that daylight savings was last weekend, not this weekend. I re-set all the clocks last Saturday night and enjoyed my extra hour of sleep time. It was sheer dumb luck that I found out around 8 Sunday morning that I was wrong, and that I was running an hour behind. I joined my new church last Sunday, and it was already printed in the bulletin. That would have been somewhat more-than-awful had I missed the whole thing.

Re: I need some advice on a plan of attack

vanillabean — Mon, 08 Nov 2010 03:58:49 GMT

hauling, that reminds me.

I recently read a book (read the first few chapters and skimmmed the rest), whose title is Psych Yourself Rich: Get the Mindset and Discipline You Need to Build Your Financial Life. It's about how our emotions can stand in the way of handling money well.

I didn't read enough of it to know whether it deals with lowest-balance vs high-interest, but got the impression that you shouldn't simply settle for the system that suits you best. Instead you need to improve yourself before you can improve your finances.

The middle chapters of many personal finance books deal with how to organize your personal finances. In its simplest form, it's about putting it down on paper. If you have an outline on a piece of paper of how various methods will pay off your debt, it could be an eye-opener.

But I wonder whether a overwhelmed person would find the book among the others on the shelf. Its title somehow isn't quite right.