topic Re: Strategy for paying off cards in General Credit Topics

Strategy for paying off cards

Anonymous — Tue, 28 Aug 2007 00:54:08 GMT

Sorry in advance for the length of this... And I hope I posted this in the right place.

I have too many cards. With low limits and too high util, more than half are over 85% util, and overall is at 68%. I thought I could PIF in two years, but am starting to wonder if I'm kidding myself. I'm hoping someone will help with a strategy... let me know if my plan is totally off base... or just lend some support...

Please know that I am sufficiently annoyed with myself about this, and have resolved to never do it again. No chiding needed - I do a pretty good job of that myself.

If it weren't for interest, this would actually be very manageable as I currently pay $1000-$1100 each month to this debt. It's about 40% of my take home and doesn't allow for much entertainment, but I will do what I have to. I already cut up several (felt great), so at least psychologically, I've made headway.

So... very humbly, I offer the following: Interest goes from very low to 28%.

Here's my 9 card summary:

2 with about 4700 balance - one at 8.9%, the other at about 20% (no brainer #1)

2 with about 2K balance - 3.9% for about a year, and 28% (no-brainer #2...)

3 with 1500-1700 balance - 8.9%, 15%, 19%

2 with 1000 balance - 13.9%, 15.5%

Total about $21K

I have never been late or over limit on any. I've been paying at least the minimum + interest rounded up to the next "nice" round number - but always $100+ per card. I hate paying interest on interest, if you know what I mean, hence my min + int approach. I now realize I may not be able to do that and get this paid in two years.

My inclination is to snowball smallest to largest, just to make some headway, since all but two are $2K or less. Does that make sense? Should I knock out the two at 1K then tackle the one 2K at 28%? I'm just having trouble prioritizing it, and still hoping to find a way to pay min + int at least (knowing I may not be able to), yet still be able to make a real dent ($300?) in at least one each month.

Any help is most appreciated. Thanks for any guidance, and for your patience in reading this.

Re: Strategy for paying off cards

Anonymous — Tue, 28 Aug 2007 00:55:36 GMT

Sowball is the BEST possible way to pay your debts down FAST... Great way to play the game.

Rob

Re: Strategy for paying off cards

Anonymous — Tue, 28 Aug 2007 01:12:14 GMT

Yes, but am I stuck paying interest on interest? Given the monthly $1000+, any ideas on splitting payments, or do I just bite the bullet and pay min (no interest) on all but the one at the top of the snowbank (as it were) - traditional snowball method? Wouldn't I actually end up paying more interest doing that?

Re: Strategy for paying off cards

illcrew3 — Tue, 28 Aug 2007 02:56:33 GMT

I pay 100 a month on all my cards and when the lowest is paid off I split the 100 i would have spent it to the rest of my cards an so forth. Eventually you can be making 2 3 4 or even 500 dollar payments on 1 card.

Re: Strategy for paying off cards

Anonymous — Tue, 28 Aug 2007 05:06:15 GMT

illcrew3 wrote:
I pay 100 a month on all my cards and when the lowest is paid off I split the 100 i would have spent it to the rest of my cards an so forth. Eventually you can be making 2 3 4 or even 500 dollar payments on 1 card.

I do the same. I pay way before the due date also...this cuts the int. I always pay down the hightest int. first. When you pay when it first appears on your bill you will see your payments go futher.

Between DH and myself we have 15 CC....7 are new so we have to use them in order to get the credit to report. then they will be in sock drawer.

I can not pay all at one time, so ..I pay part pmts every week on all cards BUT I am always paid in full before due date...I also pay as much as I can on the highest int. first.

Re: Strategy for paying off cards

Anonymous — Tue, 28 Aug 2007 15:18:38 GMT

I'm kind of embarassed to say this, but I bought one of those John Commuta "paying off your debts strategies" DVDs and while it was worthless, it did offer a strategy that worked for me (This was the only worthwhile thing so save your money and don't buy good old John's DVDs. I will sell you mine if you still can't resist:-).It said that the best way was to focus on one credit card (pay the most you can on the one that can be paid off first) and pay minimum payments on all the others. This strategy works and I am now debt free. No credit card debt, cars are paid for and nothing else. All I have is a house payment, cable, internet and utilities. It makes a GIANT difference in the way one sleeps.

Another thing that works and I realize that it sounds silly. Take all of your credit cards out of your wallet. Grab them from your wife too. Get two sandwich bags. Put ALL of the cards in bag one and seal it. In bag 2, fill it with water. Put bag 1 into bag 2. Stick both bags in your freezer and leave them there. It is amazing how your attitude at buying something changes in the two or three hours it takes to thaw out the sandwich bags. If you microwave the bags to speed it up, the credit cards will turn to mush. You still have the credit for emergencies, but you aren't using it. I only carry a debit card and it forces me to ask myself this question. How much do I really want to buy this thing-a-ma-jig? Usually in two hours I have at least ten reasons to postpone the purchase.

This is a great habit former and it works

Re: Strategy for paying off cards

Anonymous — Tue, 28 Aug 2007 17:11:53 GMT

kommandant wrote:
I'm kind of embarassed to say this, but I bought one of those John Commuta "paying off your debts strategies" DVDs and while it was worthless, it did offer a strategy that worked for me (This was the only worthwhile thing so save your money and don't buy good old John's DVDs. I will sell you mine if you still can't resist:-).It said that the best way was to focus on one credit card (pay the most you can on the one that can be paid off first) and pay minimum payments on all the others. This strategy works and I am now debt free. No credit card debt, cars are paid for and nothing else. All I have is a house payment, cable, internet and utilities. It makes a GIANT difference in the way one sleeps.

Another thing that works and I realize that it sounds silly. Take all of your credit cards out of your wallet. Grab them from your wife too. Get two sandwich bags. Put ALL of the cards in bag one and seal it. In bag 2, fill it with water. Put bag 1 into bag 2. Stick both bags in your freezer and leave them there. It is amazing how your attitude at buying something changes in the two or three hours it takes to thaw out the sandwich bags. If you microwave the bags to speed it up, the credit cards will turn to mush. You still have the credit for emergencies, but you aren't using it. I only carry a debit card and it forces me to ask myself this question. How much do I really want to buy this thing-a-ma-jig? Usually in two hours I have at least ten reasons to postpone the purchase.

This is a great habit former and it works

Kammandant - Well, you got one useful strategy from it, so it was worth it on some level.

Did you - and the others who have posted here - pay only the actual minimum they required, or minimum + interest? This is where I'm really struggling. As I said, I hate paying interest on interest - it's bad enough as it is. Seems I can't have it both ways. I'm just going to have to chip away at it.

Great ideas about freezing... and I'm amused imagining your microwaving them only to find out that turns them to mush... But my problem has never been using the cards for "stuff". In the past, I had a gambling problem that is now being dealt with (severely), so most of my debt is from cash advances (yes, I know, bad girl). I've cut up the five that I used for cash, and all others stay in the sock drawer except for one low int rate card and my debit card which I carry with me. I always try to use debit/cash for day to day things.

Re: Strategy for paying off cards

Anonymous — Tue, 28 Aug 2007 17:43:14 GMT

I can not always pay more then the min due....BUT I pay when new bill is posted...this saves on new int.

I do not freeze my CC I put them in a socdrawer & bring them out once or twice a year to keep them active.

Message Edited by HappyDays on 08-28-2007 10:43 AM

Re: Strategy for paying off cards

Anonymous — Tue, 28 Aug 2007 18:08:07 GMT

What are your scores? If you can pay down your debt to about 50% util or less, why not apply for a couple new cards that offer either very low or 0% BT? Then just transfer all your higher APR cards to the new ones. Then when you make a payment 100% of your money is going to principal. I know there are quite a few cards out there that offer 0% or 3.9 - 5.9 APR for BT.....Just a thought.

Re: Strategy for paying off cards

scorepower — Tue, 28 Aug 2007 19:43:39 GMT

Hi,

I would call the high interest rate cards first and request they reduce the APR. I did this on all my cards and they reduced. This saved me a bunch in interest.

Re: Strategy for paying off cards

Anonymous — Tue, 28 Aug 2007 20:03:46 GMT

Yes, I intend to call the highest and see about lowering the rates. That definitely would help on a couple.

I also intend - once I get util down - to see about lower rate transfers. I just have too many lines with too much util right now for that... Just got turned down by CCCU for that reason.

No idea what my scores are right now, but last I checked, I was in the 630 range. Imagine I'm not too far off that now, since I'm still not maxed out or ever late, etc. But who knows; the scoring thing seems quite arbitrary at times...

Thanks for all the ideas - I appreciate it. Anyone else?

Re: Strategy for paying off cards

George2037 — Wed, 29 Aug 2007 12:40:16 GMT

This is the stratigy I came up with for myself, on my larger TL's I pay min payment or intrest whichever is the greatest, that way the balance either stays stagnent or go down. I take all extra money and place it on the smaller TL's and once they are paid off I take the money and apply it to the larger TL's. My goal now is to establish a history of payments over time, not too worried about UTL%. I know once they are all paid off in 8 months or so I'll have 4 years of history, 5% UTL and 2 Paid in Full TL's with no missed payment's.

But again my goal now is History, I'll worry about UTL in the spring.

Re: Strategy for paying off cards

Anonymous — Wed, 29 Aug 2007 13:18:34 GMT

Check out Dave Ramsey's book. The debt snowball strategy sounds perfect for your situation, and he has a good budget strategy that will help also. Google him and you'll get his website and plenty of additional information.

Re: Strategy for paying off cards

Anonymous — Wed, 29 Aug 2007 13:54:44 GMT

Want to know a secret...???

If you have multiple credit cards issued by the same bank, like Bank of American, Chase Bank...consolidate the credit lines into one and only borrow the money or owe the money from that credit card alone, instead of owe the money on several credit cards.

And the bank(credit card company) only report to credit bureau once per month after the statement closing date, by doing this, I made balance transfer (7 days after statement closing date which the bank might already report the account status to 3 credit bureau) to pay off some credit cards then consolidate 3-4 credit lines together to $57,500.00 and leave the credit cards I don't use the credit lines to be just $1,000.00 and let only one card carry high balance...because credit score system only look how many cards that you owe high balance, it doesn't care how much money you owe, so in this case I can owe more money to the bank but still get high credit score from 3 credit bureau (Exp. Eqx. TU)...believe it or not, I made balance transfer from 2 banks total of $121,400.00 and my credit score still go up from 757 to 777.

What a shame!!!

Re: Strategy for paying off cards

Anonymous — Wed, 29 Aug 2007 16:57:19 GMT

George2037 wrote:
This is the stratigy I came up with for myself, on my larger TL's I pay min payment or intrest whichever is the greatest, that way the balance either stays stagnent or go down. I take all extra money and place it on the smaller TL's and once they are paid off I take the money and apply it to the larger TL's. My goal now is to establish a history of payments over time, not too worried about UTL%. I know once they are all paid off in 8 months or so I'll have 4 years of history, 5% UTL and 2 Paid in Full TL's with no missed payment's.

But again my goal now is History, I'll worry about UTL in the spring.

Though still not paying both int + min, I like this - at least it gives me an option to pay some interest. I know I'm not going to be able to do both, so this is a good compromise. Don't know why I didn't think of that myself.

Thanks.

Re: Strategy for paying off cards

Anonymous — Wed, 29 Aug 2007 16:58:47 GMT

SirBabyWawah wrote:
Want to know a secret...???
If you have multiple credit cards issued by the same bank, like Bank of American, Chase Bank...consolidate the credit lines into one and only borrow the money or owe the money from that credit card alone, instead of owe the money on several credit cards.
And the bank(credit card company) only report to credit bureau once per month after the statement closing date, by doing this, I made balance transfer (7 days after statement closing date which the bank might already report the account status to 3 credit bureau) to pay off some credit cards then consolidate 3-4 credit lines together to $57,500.00 and leave the credit cards I don't use the credit lines to be just $1,000.00 and let only one card carry high balance...because credit score system only look how many cards that you owe high balance, it doesn't care how much money you owe, so in this case I can owe more money to the bank but still get high credit score from 3 credit bureau (Exp. Eqx. TU)...believe it or not, I made balance transfer from 2 banks total of $121,400.00 and my credit score still go up from 757 to 777.
What a shame!!!

SirBaby - Yes, could try to consolidate a few lines but most are separate companies.

As for the second paragraph... I'm sure there's good info in there, but I'm having trouble following what you're saying. You lost me about three lines in...

Re: Strategy for paying off cards

George2037 — Wed, 29 Aug 2007 17:27:01 GMT

George2037 wrote:
This is the stratigy I came up with for myself, on my larger TL's I pay min payment or intrest whichever is the greatest, that way the balance either stays stagnent or go down. I take all extra money and place it on the smaller TL's and once they are paid off I take the money and apply it to the larger TL's. My goal now is to establish a history of payments over time, not too worried about UTL%. I know once they are all paid off in 8 months or so I'll have 4 years of history, 5% UTL and 2 Paid in Full TL's with no missed payment's.

But again my goal now is History, I'll worry about UTL in the spring.

Thanks.

I came up with my stratigy when I was applying for new credit and was being rejected for "Limited History". Yes just paying intrest is a waste of money, and carring a balance kills your UTL (30% of your FICO? I once read). But Length of time is third on the list right behind UTL, Payment History for effects to your FICO. I figure if my history shows that I once had a high balance of $XXXX.XX and after 1 year have a balance of $X.XX, I gain all three positive factors. Hense the "Not in a hurry to pay off" additude I have for my balances, wasting money on intrest? Probably. Worth it? Most definatly, what price tag can you put on rasing your FICO through legit account usage. I spend $500 in intrest on High CL's while lowering my UTL on lower CL's, my score goes up 50 points I save 1-2% on a mortgage, bam I get my $500 back plus about $40k in intrest over the course of the loan.

Forgot to mention, once the lower CL's are paid off I go after CL increase. I figure if my History with the company is good, my FICO will have less of a impact on ther aproval. I got a Citi Financial Personal Loan 2 years ago, after one year got a Citi Card with $2500 CL, and now approved for a Home Depot ~Citi Store Card (I think it's $4600 CL, but wont be sure until I get my paperwork). Everything that goes up, is free money towards UTL. Heck my Circuit City Card CL doubled after one year, same with my Macy's and they didn't pull anything from my CR....the increases came from History with the company.

Message Edited by George2037 on 08-29-2007 10:27 AM

Re: Strategy for paying off cards

Anonymous — Wed, 29 Aug 2007 22:51:21 GMT

My problem isn't history related. I have a long history of very good credit, but almost 4 years ago, filed BK7 for a variety of reasons. Even so, my EX score is 659 (per CCCU, who just turned me down for too many TL and too high util... ), so I'm doing okay. I just gotta get out from under paying (juggling?) 10 cards a month.

Thanks for your input - always interesting to hear others' situations and thought processes. I think there are many ways to approach it; one should do what works for them at the time, not necessarily the least expensive, or that which others would do...

Re: Strategy for paying off cards

Anonymous — Wed, 29 Aug 2007 23:45:37 GMT

Given your situation, instead of paying on low balance card first,pay off the highest interest rate card first-everything towards that the rest get minimum payments. The way to get cards paid off is to make more $ go towards principal paydown and the best way to do that is to eliminate the highest interest card balances first. This might not be true if you had a bunch of cards with minimum payments and your high interest cards had very high balances. But it is true here so the decision is a no-brainer in my opinion.

Re: Strategy for paying off cards

Anonymous — Thu, 30 Aug 2007 02:05:00 GMT

rhinocl wrote:
Given your situation, instead of paying on low balance card first,pay off the highest interest rate card first-everything towards that the rest get minimum payments. The way to get cards paid off is to make more $ go towards principal paydown and the best way to do that is to eliminate the highest interest card balances first. This might not be true if you had a bunch of cards with minimum payments and your high interest cards had very high balances. But it is true here so the decision is a no-brainer in my opinion.

I see your point. That 28% card is killing me psychologically and financially - and it's not that high a balance. I will be calling them and a few others within a few weeks to see if I can get rates down. If I have some success, I may re-evaluate my approach. However, I think I need to get a couple of the smaller ones gone first just to eliminate some payments... Both approaches have merit.