topic Re: Credit Card Payoff Plan - Please Advise in General Credit Topics

Credit Card Payoff Plan - Please Advise

cet2062 — Tue, 24 Apr 2018 01:00:09 GMT

Hello Everyone,

My husband and I have gotten ourselves in quite the predicament as it pertains to credit card debt. We both realize we were living beyond our means and really overextending ourselves for the past 3 years. I've been trying to help my parents as my dad hasn't been able to work, we financed our wedding, and just everything else that occurs with being young and moving has gotten us to this point. We both are working at great jobs and able to make a good income, which looks to be growing this year, but I wanted some advice on what the forum would recommend in terms of where to start and impacts that you might see to credit scores. Some information:

1. Income (Joint) - $123,000

2. Credit Cards (All)

Account	Balance (Current)	Min Payment	Credit Limit
Chase Disney (1)	$4,895.20	$120	$5,000
Citi Costco (0%)	$3,835.99	$58	$4,000
Chase Disney (2)	$4,831.66	$119	$5,000
Navy Federal (1)	$19,243.33	$385	$20,000
Navy Federal (2)	$13,697.00	$267	$14,400
American Express (0%)	$9,936.72	$99	$11,000
Bank of America (0%)	$3,151.14	$32	$3,500
Chase Freedom	$7,805.20	$210	$9,000
Hilton Honors	$1,682.78	$45	$2,000
Capital One (1)	$2,374.59	$63	$3,000
Capital One (2)	$1,615.52	$53	$2,050
Jetblue	$2,149.25	$70	$3,000
Discover (1)	$1,345.31	$40	$2,000
Macy's	$685.28	$27	$2,000
Old Navy	$767.53	$26	$3,500

Our current plan involves paying off the Old Navy, Macy's & Jetblue (highest interest rates) in the next 3-4 months. We have about $2,750 a month we can throw at credit cards right now as we are saving concurrently to move towards a mortgage. As you can see our current minimums as it stands is $1,614. If anyone has advice past the plan mentioned above, or if you thing we should put our funds elsewhere, please let me know. Our hope would be to get these balances to a point where we could either be granted a personal loan to consolidate all (or at least portions of these debts).

Also - would love to not hear - go file bankruptcy. We got ourselves into this mess and we are determined to get out. We know it won't happen overnight, so we are just looking for some guidance into what would have the biggest impact on our credit scores (to improve our chances of qualifying for a personal loan) and/or advice from people who have ate into this kind of debt and what their plans of attack were. We've set our amount at $2,750 a month because that's where we feel comfortable because we want to refrain from using cards from now until we get this back to manageable territory and if we go higher I know me, I'll use the card. As our income grows, we will continue to add to this monthly amount which should help. AGAIN - IF YOU ARE GOING TO PASS JUDGEMENT, I WOULD APPRECIATE YOU NOT RESPOND. BELIEVE ME WHEN I SAY THAT WE ARE BOTH VERY DISAPPOINTED IN THESE DEBT LEVELS AND IT'S NOT LOST ON US THAT IT WAS IRRESPONSIBLE.

Thanks in advance for all your thoughts and advice.

Re: Credit Card Payoff Plan - Please Advise

Anonymous — Tue, 24 Apr 2018 01:13:53 GMT

can you consolidate all this into one low interest loan? then cut all the cards up..then just plug away until it's gone. way to go on changing your life and habits!

Re: Credit Card Payoff Plan - Please Advise

joltdude — Tue, 24 Apr 2018 01:34:11 GMT

Im not good with the numbers but id be trying to get the utilization down on some of the cards that are in maxxed out territory....

Also do you have a totals for what your paying for minimums and the total due?

Somewhat of a mix of paying off and trying to get things below the thresholds for maxxed out would be my goal....

You might have to find a bit more to throw at these accounts ... at least trying to get things out of maxxed out land.. which some of these cards are.... How much are you putting aside for saving... Your right not to stop saving, but might be in your better interest to shave a little bit off temporarily.... just to get some of these cards off in a safer place ...

Know folks who are better with the numbers will chime in.. but thats what I see so far... Hey. you acknowledge theres an issue and you are working to resolve it.. It may take some short term sacrifices and juggling, but you can likely do this.....

Good luck and know there are folks here for you

-J

Edit: theres actually a great google sheet you might want to look at.. youll have to copy it to yourself to edit/use it.. but it will do some of the math for you with percentages and calculating stuff.... esp good when trying to tackle debt... Made by one of the forum members...

ABCD2199

https://docs.google.com/spreadsheets/d/1E-bRrVpw0UrQfOsLdox4ocwFQBbuvgXjX-KW5NKgiiI/edit?usp=sharing

Re: Credit Card Payoff Plan - Please Advise

SouthJamaica — Tue, 24 Apr 2018 01:19:10 GMT

@cet2062 wrote:
Hello Everyone,

My husband and I have gotten ourselves in quite the predicament as it pertains to credit card debt. We both realize we were living beyond our means and really overextending ourselves for the past 3 years. I've been trying to help my parents as my dad hasn't been able to work, we financed our wedding, and just everything else that occurs with being young and moving has gotten us to this point. We both are working at great jobs and able to make a good income, which looks to be growing this year, but I wanted some advice on what the forum would recommend in terms of where to start and impacts that you might see to credit scores. Some information:

1. Income (Joint) - $123,000
2. Credit Cards (All)
Account Balance (Current) Min Payment Credit Limit
Chase Disney (1) $4,895.20 $120 $5,000
Citi Costco (0%) $3,835.99 $58 $4,000
Chase Disney (2) $4,831.66 $119 $5,000
Navy Federal (1) $19,243.33 $385 $20,000
Navy Federal (2) $13,697.00 $267 $14,400
American Express (0%) $9,936.72 $99 $11,000
Bank of America (0%) $3,151.14 $32 $3,500
Chase Freedom $7,805.20 $210 $9,000
Hilton Honors $1,682.78 $45 $2,000
Capital One (1) $2,374.59 $63 $3,000
Capital One (2) $1,615.52 $53 $2,050
Jetblue $2,149.25 $70 $3,000
Discover (1) $1,345.31 $40 $2,000
Macy's $685.28 $27 $2,000
Old Navy $767.53 $26 $3,500

Our current plan involves paying off the Old Navy, Macy's & Jetblue (highest interest rates) in the next 3-4 months. We have about $2,750 a month we can throw at credit cards right now as we are saving concurrently to move towards a mortgage. As you can see our current minimums as it stands is $1,614. If anyone has advice past the plan mentioned above, or if you thing we should put our funds elsewhere, please let me know. Our hope would be to get these balances to a point where we could either be granted a personal loan to consolidate all (or at least portions of these debts).

Also - would love to not hear - go file bankruptcy. We got ourselves into this mess and we are determined to get out. We know it won't happen overnight, so we are just looking for some guidance into what would have the biggest impact on our credit scores (to improve our chances of qualifying for a personal loan) and/or advice from people who have ate into this kind of debt and what their plans of attack were. We've set our amount at $2,750 a month because that's where we feel comfortable because we want to refrain from using cards from now until we get this back to manageable territory and if we go higher I know me, I'll use the card. As our income grows, we will continue to add to this monthly amount which should help. AGAIN - IF YOU ARE GOING TO PASS JUDGEMENT, I WOULD APPRECIATE YOU NOT RESPOND. BELIEVE ME WHEN I SAY THAT WE ARE BOTH VERY DISAPPOINTED IN THESE DEBT LEVELS AND IT'S NOT LOST ON US THAT IT WAS IRRESPONSIBLE.

Thanks in advance for all your thoughts and advice.

My recommendation is that you follow the snowball method, which is to (a) stop making credit card purchases, and (b) pay off lowest balance first, then next lowest, and so on.

The genius in the snowball method is that each time you stop making monthly payments on a paid off account, you have the money you saved from that to apply to the next account you're tackling.

Re: Credit Card Payoff Plan - Please Advise

MySunrise271 — Tue, 24 Apr 2018 01:23:58 GMT

Poster ABCD2199 Has a great link in his signature “FICO Score what Debts to Pay First”. If you search on his name his post should come up. Good job making the decision to change your life!🙂

Re: Credit Card Payoff Plan - Please Advise

Brian_Earl_Spilner — Tue, 24 Apr 2018 01:25:03 GMT

You can either go the snowball route, or the high interest route. The snowball route tends to be more motivational.

Snowball - Pay the minimum on all except the smallest balance. Once it's paid off, carry the payment on to the next smallest, etc.

High Interest - Pay the minimum on all except for the card with the highest interest rate. Depending on balances owed, it may seem like forever to pay them off, but you will save more money in the long run.

Re: Credit Card Payoff Plan - Please Advise

Anonymous — Tue, 24 Apr 2018 01:31:35 GMT

The advice I can offer is more on the budgeting side. You and your husband make 123k. You need to live off of as little of that as possible for your normal living expenses (food, shelter, transportation). There are people who live off of 40k salaries before tax is deducted. You need to shoot somewhere between the 40k-50k mark. Don't eat out, don't buy any gifts, cancel the cable. Trip planned for your anniversary or summer vacation? Cancel it. No ridiculous phone bills. Take all that extra savings and plug it into your debt. Still save cash for a rainy day. The 2 of you should sit down and look at all your current monthly expenses and trim that fat. Good luck on your journey.

Re: Credit Card Payoff Plan - Please Advise

Anonymous — Tue, 24 Apr 2018 01:54:26 GMT

@cet2062
Account Balance (Current) Min Payment Credit Limit
Chase Disney (1) $4,895.20 $120 $5,000
Citi Costco (0%) $3,835.99 $58 $4,000
Chase Disney (2) $4,831.66 $119 $5,000
Navy Federal (1) $19,243.33 $385 $20,000
Navy Federal (2) $13,697.00 $267 $14,400
American Express (0%) $9,936.72 $99 $11,000
Bank of America (0%) $3,151.14 $32 $3,500
Chase Freedom $7,805.20 $210 $9,000
Hilton Honors $1,682.78 $45 $2,000
Capital One (1) $2,374.59 $63 $3,000
Capital One (2) $1,615.52 $53 $2,050
Jetblue $2,149.25 $70 $3,000
Discover (1) $1,345.31 $40 $2,000
Macy's $685.28 $27 $2,000
Old Navy $767.53 $26 $3,500

Based on what you stated, you have an additional $1,136 per month to throw at the debt after paying minimums. I would pay using the snowball method so you can see & feel your gains.

Month 1 - pay off Old Navy = 767.53 throw remaining $394.47 towards Macy’s
Month 2 - use same concept towards Macy’s & Discover

If you keep applying this logic each month, you tackle from smallest to largest and can have Old Navy, Macy’s, Discover (1), Capital One (2) & Hilton Honors paid off in 6 months. Keep pushing with that concept & you can have all your cards paid off in 2.5 years.

Not too bad considering it’s better than dealing with bankruptcy for 7-10 years. Great decision to take responsibility of your debt & I wish you the best of luck!

Re: Credit Card Payoff Plan - Please Advise

Anonymous — Tue, 24 Apr 2018 02:01:26 GMT

Have you looked into personal loans? Hopefully some have lower interest rates.

Re: Credit Card Payoff Plan - Please Advise

Anonymous — Tue, 24 Apr 2018 02:27:56 GMT

If you are sufficiently motivated (and it sounds like you are) I would not use the snowball, instead pay off highest interest debt, and that sounds like your plan. It is more efficient and saves money, snowball is for those that need feedback that they are making progress even if they are spending more in the long term.

Also, while some savings is good, I would use spare money to pay down more aggressively and not worry a whole lot about saving for a mortgage. You don't mention your scores, but with so many cards nearly maxed out, you are certainly not going to get a good mortgage rate. So focus on paying down, and when things are more under control, build up savings towards a down payment. You are unlikely to be getting 2% on savings, whereas the interest you are paying is going to be much more.

Re: Credit Card Payoff Plan - Please Advise

SoundoftheSuburbs — Tue, 24 Apr 2018 04:10:15 GMT

The high-interest route is the only plan that should be considered. The "snowball method" has the potential to be much more expensive than the high-interest route.

Re: Credit Card Payoff Plan - Please Advise

pipeguy — Tue, 24 Apr 2018 03:18:33 GMT

You know your post made my day, it really did, and not for the reasons you might think. First, you realize you are in credit card hades, second, you acknowledge why and third you are going to fight to make it right.

Also - would love to not hear - go file bankruptcy. We got ourselves into this mess and we are determined to get out. Bravo !! Good for you a person that takes responsibility for their situation and is willing to fight to recover.

IF YOU ARE GOING TO PASS JUDGEMENT, I WOULD APPRECIATE YOU NOT RESPOND. I think you'll find very few people on this forum that will seek to pass judgment and I'd say most if not all of the folks on here found their self in "trouble" a lot during the meltdown of 2006-09, but also for medical reasons, loss of a job or for thinking (young and naive) that thought a $10,000 credit limit card meant they actually HAD $10k rather than a loan.

You are getting good advice as to how to tackle your debt, and I'm not going to add to that advice more than say live on cash for the next 12-18-24 months, throw everything you have at your bills until its all paid so that you are not paying 12-15-25 percent interest on money spent on "stuff" you don't even remember. You'll come out wiser - chances are it'll be hard in the beginning but you'll actually have much more money to invest into a mortgage or retirement or educational savings and I doubt you'll even miss overspending.

My personal experience mirrors yours to some extent, I refused to declare bankruptcy because of personal pride (I don't blame those that do) and I had every reason to go Chapter 7. Think of a 18-year-old business doing well in excess of a million dollars a year out of my home going to barely $200,000 and then to basically nothing over the course of 2+ years, followed by an IRS audit that went back 10 years after we'd closed down and basically discarded many of the records - the audit demanded close to $200k and while I knew I owed nothing because I had paid my taxes over the years, I couldn't back up my expenses. Step by step I paid off debt, step by step I reestablished credit standing, I settled with the IRS for more than I could afford, but much much less than they demanded. This was followed by a major bank shutting down my second mortgage because they wanted a higher interest rate - I refused, they foreclosed on the house on my wife's birthday 1 week before Christmas (and note we went 4 years without exchanging anything but love for holiday presents) - we settled on a new "foreclosure" payment 2 days before the auction at 3X the old payment. I worked 3 p/t jobs paying basically minimum wage, we sold one car and kept the old one and we survived. My attitude was exactly yours, my fault-my problem-my solution.

Today I have scores in the mid to high 700's, my wife's scores are 25+/- points above mine. I have $400k in available credit cards lines, my wife has another $275k +/-, we have positive cash flow monthly and we are both employed full time at well-paying jobs and just refinanced our home at 3.5% with a very quick top-tier mortgage - the easiest one we've ever had.

Step by painful step you will make it, I love your attitude and drive!

Re: Credit Card Payoff Plan - Please Advise

Kforce — Tue, 24 Apr 2018 03:14:11 GMT

I ran the numbers on your CC debt and average CC rates. If you continue to pay 2,750/mo you can do this in 3 years and save more than 22,000 as compared to locking in the current minimum payment numbers. If you pay highest interest down and add about 500 in payments you can be debt free in just over 2 years. If you are sufficiently motivated, you can dig your self out of this debt. "Good Luck"

Re: Credit Card Payoff Plan - Please Advise

UncleB — Tue, 24 Apr 2018 04:11:36 GMT

Not every method is for everybody... what's important is finding and using the method that's effective for you.

It sounds like our OP is off to a good start here.

Re: Credit Card Payoff Plan - Please Advise

Gregory1776 — Tue, 24 Apr 2018 22:40:05 GMT

@SouthJamaica wrote:
@cet2062 wrote:
Hello Everyone,

My husband and I have gotten ourselves in quite the predicament as it pertains to credit card debt. We both realize we were living beyond our means and really overextending ourselves for the past 3 years. I've been trying to help my parents as my dad hasn't been able to work, we financed our wedding, and just everything else that occurs with being young and moving has gotten us to this point. We both are working at great jobs and able to make a good income, which looks to be growing this year, but I wanted some advice on what the forum would recommend in terms of where to start and impacts that you might see to credit scores. Some information:

1. Income (Joint) - $123,000
2. Credit Cards (All)
Account Balance (Current) Min Payment Credit Limit
Chase Disney (1) $4,895.20 $120 $5,000
Citi Costco (0%) $3,835.99 $58 $4,000
Chase Disney (2) $4,831.66 $119 $5,000
Navy Federal (1) $19,243.33 $385 $20,000
Navy Federal (2) $13,697.00 $267 $14,400
American Express (0%) $9,936.72 $99 $11,000
Bank of America (0%) $3,151.14 $32 $3,500
Chase Freedom $7,805.20 $210 $9,000
Hilton Honors $1,682.78 $45 $2,000
Capital One (1) $2,374.59 $63 $3,000
Capital One (2) $1,615.52 $53 $2,050
Jetblue $2,149.25 $70 $3,000
Discover (1) $1,345.31 $40 $2,000
Macy's $685.28 $27 $2,000
Old Navy $767.53 $26 $3,500

Our current plan involves paying off the Old Navy, Macy's & Jetblue (highest interest rates) in the next 3-4 months. We have about $2,750 a month we can throw at credit cards right now as we are saving concurrently to move towards a mortgage. As you can see our current minimums as it stands is $1,614. If anyone has advice past the plan mentioned above, or if you thing we should put our funds elsewhere, please let me know. Our hope would be to get these balances to a point where we could either be granted a personal loan to consolidate all (or at least portions of these debts).

Also - would love to not hear - go file bankruptcy. We got ourselves into this mess and we are determined to get out. We know it won't happen overnight, so we are just looking for some guidance into what would have the biggest impact on our credit scores (to improve our chances of qualifying for a personal loan) and/or advice from people who have ate into this kind of debt and what their plans of attack were. We've set our amount at $2,750 a month because that's where we feel comfortable because we want to refrain from using cards from now until we get this back to manageable territory and if we go higher I know me, I'll use the card. As our income grows, we will continue to add to this monthly amount which should help. AGAIN - IF YOU ARE GOING TO PASS JUDGEMENT, I WOULD APPRECIATE YOU NOT RESPOND. BELIEVE ME WHEN I SAY THAT WE ARE BOTH VERY DISAPPOINTED IN THESE DEBT LEVELS AND IT'S NOT LOST ON US THAT IT WAS IRRESPONSIBLE.

Thanks in advance for all your thoughts and advice.
My recommendation is that you follow the snowball method, which is to (a) stop making credit card purchases, and (b) pay off lowest balance first, then next lowest, and so on.

The genius in the snowball method is that each time you stop making monthly payments on a paid off account, you have the money you saved from that to apply to the next account you're tackling.

This is the best option, as usual. Trying to get credit cards out of “maxed out territory” is like trying to run up an escalator that’s going down, Quite a stupid idea if you ask me.

Pay off the lowest balance, quick, Inside a month. Then go up from there, its really going to take you time to dig out of this hole unless you can throw a couple k a month at them.

Best of luck!

Re: Credit Card Payoff Plan - Please Advise

Gregory1776 — Tue, 24 Apr 2018 22:42:36 GMT

@Anonymous wrote:
The advice I can offer is more on the budgeting side. You and your husband make 123k. You need to live off of as little of that as possible for your normal living expenses (food, shelter, transportation). There are people who live off of 40k salaries before tax is deducted. You need to shoot somewhere between the 40k-50k mark. Don't eat out, don't buy any gifts, cancel the cable. Trip planned for your anniversary or summer vacation? Cancel it. No ridiculous phone bills. Take all that extra savings and plug it into your debt. Still save cash for a rainy day. The 2 of you should sit down and look at all your current monthly expenses and trim that fat. Good luck on your journey.

Agreed! Check out Dave Ramsey, too. Great ideas to get out of debt fast. And his videos are very motivational!!

Re: Credit Card Payoff Plan - Please Advise

Gregory1776 — Tue, 24 Apr 2018 22:45:20 GMT

@Anonymous wrote:
Have you looked into personal loans? Hopefully some have lower interest rates.

Taking out a loan with a dozen credit cards isn’t going to be easy.

Also, Getting into more debt to pay off debt doesn’t make sense.

Re: Credit Card Payoff Plan - Please Advise

Anonymous — Tue, 24 Apr 2018 23:41:45 GMT

@Gregory1776 wrote:
@SouthJamaica wrote:
wball method, which is to (a) stop making credit card purchases, and (b) pay off lowest balance first, then next lowest, and so on.

The genius in the snowball method is that each time you stop making monthly payments on a paid off account, you have the money you saved from that to apply to the next account you're tackling.

This is the best option, as usual. Trying to get credit cards out of “maxed out territory” is like trying to run up an escalator that’s going down, Quite a stupid idea if you ask me.

Pay off the lowest balance, quick, Inside a month. Then go up from there, its really going to take you time to dig out of this hole unless you can throw a couple k a month at them.

Best of luck!

Well, except the snowball method is suboptimal in two key ways:

1) Amount of interest paid, and therefore

2) time to pay off debt

which really should matter. Its claim to fame is to help people stay the course, but to me it focuses on the wrong thing, # of accounts to pay. If instead you focus on "total amount owed" (which is a good figure to know!) you could use that to measure slow but steady progress by paying off the highest rate account.

If your biggest account has the highest interest rate, yes, you may be paying off accounts, but at a rather large cost. Which to me is more like running up a down escalator!

Re: Credit Card Payoff Plan - Please Advise

Anonymous — Tue, 24 Apr 2018 23:57:43 GMT

Agreed, getting a loan with the existing debt might be difficult. On the other hand, obtaining more debt with lower interest rates and using that to pay off high interest rate cc debt might not be a bad idea.

Just my thoughts. What are the downsides?

Re: Credit Card Payoff Plan - Please Advise

sdsoccerdad — Wed, 25 Apr 2018 00:12:19 GMT

I think everyone here covered it with good advice. I just want to say good luck with that. I know what you're going through and have been there before. You can do it!