@ddemari wrote:
Ive always been told not to do the 401k withdrawl. Isnt there a penalty u have to pay or lose on? Unless its the most practical for u, is try to make the largest payments u can on cards. When i start to rack up some bills, i only use a card with 0 balance and charge what i can pay realistically ( wish i could just follow that logic all the time)
This is good advice. Withdrawal from the 401k or IRA has penalties, and you usually have to pay income tax on it as well.
What OP is doing, however, is taking a loan out of the 401k, which has a payment plan that takes the funds directly out of your paycheck to pay it back over whatever payment time period you select. These are usually very low interest rate loans, and as CreditCuriosity says, you are paying the interest into your retirement fund, not to a bank. A 401k loan, if one is disciplined to it, is a good option. However, if one takes the 401k loan, pays off credit cards, and then runs up those credit cards again, not a good choice.
@IWOL wrote:Over the last year and a half I have amassed quite a lot of credit card debt due to some large medical bills, some IRS back taxes, having to replace a broken air unit, and a young dog with cancer.
Right now I have a total debt of $54,300 spread over these cards on available credit of $350K, so my overall util is still fairly low at around 15%.
AMEX ED - 0% until Feb 2016 - 5150 balance
SPG - - 8265 balance
CSP - 8100
Ritz - 6200
Freedom 5800 - 0% till 3/2016
Prestige 5462
Arrival 4740
Venture 10,670
I have 20K cash that Im taking out of my 401K to pay toward these balances right away. Im only 40 and I have a good amount in my 401K, so not too concerened about this. I also just got a hefty increase in my salary that will cover the deficit in my monthly living expnses and allow me to pay these down at $2500 a month.
After the 20K I will have balances around $34K so at $2500 a month I should be able to get this paid off in 14 to 16 months which is not too bad.
What would be the best way to pay these down? I would like to try avoid any AA but I have more than enough available credit form a slew of lenders, so its not a big concern. My scores are all around 710 to 720 with my current util and 8 cards reporting balances out of 26. Im not going to be aplying for anything so maximizing scores is not a concern.
Keeping the interest I will pay to a minimum is the most important thing. So Im wondering, do I pay the 2 balances that are at 0% at close to the min until the 0% runs out?
Should I spread the 20K over several cards, or pay off 2 or 3 to 0 so that I can put more towards each card every month?
Most of my interest rates are at about 15% except for Arrival which is 18%.I plan to make a round of calls this week to request further APR reductions. I have 6 cards to pay outside of the 2 with 0%, so on a monthly basis should I pay $400 to each for the $2500 or like $2000 to one till paid to 0 and min to others.
As much as I hate to even be in this position, its shows how having a large amount of available credit can be usefull when carrying a much larger than normal balance. Despite these large balances reporting my scores have not dropped alot nor has anyone taken any AA yet. Ofcourse in teh best scenario I would never have accumulated this much debt but life happens.
Use the 20k to PIF CSP 8100 + Ritz 6200 + SPG 8265 =22,925 so roughly 23k if you can squeeze the extra 3K out of somewhere if not leave 1k on each. For that month pay the minimum on everything else.
My reasoning for this is three things:
1.These cards are all currently accruing interest.
2.your wanting to avoid AA. Chase and AMEX are more likely than Citi or Cap1 to do something like that if a high balance is carried too long. Most people value these relationship more highly than those with other banks as well (I know I do).
3. Chase is the only bank you are carrying 3 balances with, getting it down to one card (especially a 0% one) looks a little better and is less likely to raise any flags.
After these debts are PIF and you have protected those relationships then pay the other off starting with the snowball method which is throwing the majority of your monthly payment (minimum payment on everything else) towards the card with lowest balance. In your case it would be the Arrival. This is good because Barclay's also gets pissed off easily. Completing the snowball will get you down to 4 cards (much easier to manage than 5). At this time I would calculate through simple division exactly how much you need to pay per month on each of your 0% cards to pay them off before the introductory period ends. If possible I would pay that amount for those 2 cards and split the rest evenly between the other 2 remaining cards til the 0% cards are both paid off and eventually Citi and Cap One. Side note: at some point during this time if you keep a zero balance on CSP and Ritz you may receive a 2% BT offer, I get them all the time from Chase Marriott and CSP you might be able to use these to move things around and save on interest. Most importanly good luck to you. I have some cards of my own to pay down but they are all at 0% and will be paid before this period ends.
@Anonymous wrote:I'd pay something over the min to all. I've heard paying min can flag you for potential AA if the overall picture is questionable.
There's always the debate about highest interest rate first or lower balance first. The first is always the best financial decision, the later is good for emotional wins.
I'll add a couple other variables to consider, while not giving any answers.
Are there cards you'd like to be putting current spend on? You should only be spending on cards where the balance has been PIF (not in the pay-to$0 myfico way to max scores, but in the pay-the-last-statement-balance way to avoid interest and get to keep your grace period). I'd not worry about rotating categories etc., but I'd pay down Arrival and/or Venture first. Then I'd decide what to pay down based on a combination of which cards I might like to free up first and which lenders I'd like best to stay in good graces with (assuming the interest rates on the non 0% cards are mostly the same). AmEx has been sort of twitchy lately for some. Years ago I was balance chased by Citi and Chase. I'd think that Cap One is the least averse to the balance stretching out, so maybe that's a big one to leave to the end?
Sorry to hear about all you've been through. I've had two dogs with different cancers this year and am down to one dog now. Thankfully I, like you, had positioned myself to weather it financially. Maybe not in the most optimal way, but being able to make choices where the finacial concern wasn't the deciding factor.
IMO OP should not be putting spend on any card. OP should rely on liquid until cards are paid off.
@Anonymous wrote:This is kinda out of my realm of expertise here so please take this lightly...
But what if the OP did the debt shuffle?
Call each one, get all APRs as low as possible.
Then take 1 card, get it paid off, get a balance transfer on it, move one card to that card.
Then that card you just transfered, get a bt offer with it, and move one card to it.
Do this as much as possible, then you have basically lessened the cost of interest. Pay as much as you can so that all are paid before interest resumes.
I would immediately begin using the amex charge card whenever possible so you still earn some points but have to PIF.
I agree with the stement about the AMEX charge card completely. I neglected to notice that OP had that card. I am doing the same thing while paying down my balanes.
I had this issue with medical treatment at a hospital. The hospital was in-network, my primary specialist was in-network, but another physician that examined me several times was not. The insurance company denied the claim for that other physician, saying it was out-of-network. Since my insurance is through my employer, I contacted human resources and explained the situation. HR contacted the insurance company (UMR - UnitedHealthCare). UMR re-processed the claim as in-network, as I explained to HR that it was not my fault that the doc was not in network even though the hospital and specialist were. The other doc had to examine me as a requirement for treatment.
If you have insurance through your employer, contact HR if you haven't already done so. Otherwise, contact the insurance company directly to see if the claim(s) can be reprocessed. It's worth a try. If you have already done this, my apologies for making the suggestion again. If the insurance company does not give in, I think it might be worthwhile contacting your state's insurance commission and/or Attorney General to find out if anything can be done.
Starting Score: 10-2011 TU-08 FICO 725 (Walmart) / EQ FICO 683 (MyFICO)