@Anonymous wrote:Thank you for your reply. I will list the credit limits below. So if I have $1000 to pay on these cards today, where should the $1000 go? Thank you for your input.
$1264.07/$1400
$658.39/$750
$2065.92/$2000
$2466.71/$2500
$571.19/$700
$500.51/$500
$870.57/$1000
$1314.24/$1500
$7627.01/$9200
$767.97/$2400
$46.78/$300
Sorry to hear of your predicament, @Anonymous. All data points are helpful for us to be able to help you more specifically. While the credit limits are somewhat useful, that is not what I would consider one of the most key pieces of information. Utilization affects credit score, both on individual cards and as a whole across all your accounts. But the breakdown between accounts is not that important right now. When you're in heavy debt, the first objective is get out of it as quickly and as cheaply as possible. Your score will naturally rebound as you do that. As you pay it down, tracking the utilization across accounts may help your score to rebound more quickly.
Instead of credit limits, the key piece of information I would ask for would be those actual APRs. If you don't know what they are already, you need to get a piece of paper and write them all down. When you're in debt, this is info with which you need to be very familiar.
Please repost with two additional things for us: The actual APRs on each card and which lender (Chase, Discover, AMEX) etc is behind each debt since some lenders may offer you balance transfers to help pay down the other debts.
@Anonymous wrote:I am also clueless as to how interest works on credit cards. Assuming I don't charge on any of these cards anymore, will the amounts go down as I pay them down? For instance, if I pay $100 on the $658.39 CC, will it go down to $558.39 and not amass more interest? I'm asking because I don't know if credit cards are different from home loans where a certain amount goes to principle and a certain amount to interest. Should I pay off certain cards fully instead of paying a little extra on every card? Any advice will help me a lot. Please let me know if there is anything else you need from me.
As @dragontears posted, you will continue to be charged interest monthly based on the Average Daily Balance from the previous month. That is why you need to pay the balances down as quickly as possible (every day is costing you more money in interest). And that is why you need to get those balances transferred onto the lowest interest rate card that you can.
If a credit card offers you 0% APR for 12 months on a balance transfer promotion with a 3% BT fee, you just effectively lowered your interest charges from 25% (or whatever the other card was charging you) to 3%, assuming you pay it off over the year. That is a HUGE savings. For example, on a $5K balance, your interest charges went from $1250 (at 25%) down to $150 (at 3%)!!!
Calculating your monthly interest charges is actually pretty simple. For example, 21.99% APR is expressed mathmatically at 0.2199 on an annual basis. To compute your monthly charges at that annual rate, just divide by 12 (0.2199 / 12 = 0.018325.) So if you know your balance on a card is $2,500 at annual APR of 21.99 your monthly charges for new interest would be balance times the monthly periodic rate (2500 x 0.018325) = $45.81. And your annual interest charges are roughly $2500 x 0.2199 = $549.75 (Actual figures will vary depending on monthly payments and new interest charges.) Understanding how it works can be very helpful. Look back over your last six months of statements and see if you can determine how balances were computed.