First off, welcome to the board! We're happy to have ya! Second, I think the community will need more information before they can give you an informed response. Things like, what's your monthly income and expenses, do you intend to use the full $7,000 to pay off the $23,000 that you owe, how is your CC debt allocated, and what are the corresponding APRs? That's all I can come up with at this late hour. This board can be extremely helpful in situations such as yours. Good luck!
There are usually 2 ways to pay off debt, the Snowball method or the Avalance method. I recommend the Snowball method, if you Google it there will be a ton of articles about it.
I would also couple that with something like Mint that also helps you track your spending and keep you on a budget each month. You'll need some financial discipline to pay off the debt while not accruing more. Get a plan and stick to it, it will feel good.
Goodluck, you can do it!
@Anonymous wrote:Hello Everyone,
I have been searching but couldn't find my answer. So at this moment, I am in 23,000 worth of debt. I have76% utilization at this moment per FICO. I will be coming into some money by the end of this year of $7000 in cash. However, I was wondering if the 3-year credit card repayment plan works. I see it on my statements all the time about paying a certain amount to them for 3 years. If I don't touch the cards and don't spend anything on them. Will this plan work?
Best regards,
Marcus W.
I think the best way to do it is the 'snowball' method.
1. Stop using the cards.
2. Pay minimum + $5 on each account except the account with the lowest balance.
3. Pay as much as you can towards the account with the lowest balance until it's zeroed out.
4. Move on to the next smallest balance, and so on.
The reason it works: once you zero out on account, you have no more monthly payments to make on that account, thus freeing up that money so that it can be applied to the next account on the list.
In your case, when that 7k comes in, don't even think about doing anything with it other than paying off accounts.
While I don't disagree with the snowball or avalanche methods, they should always be evaluated and modified as needed to fit an individual. They don't take into consideration that there are alternatives to just leaving the balances as-is when it comes to APRs. If you have balance transfer options, it is perfectly reasonable to pay off the largest balance with the lowest APR (rather than choosing the smallest balance or the highest APR card) so that the remaining balances (or at least as much as possible) on other cards can be moved there with a minimal fee and little to no interest accruing, saving you potentially thousands of dollars in interest over a few years and resulting in the balances being paid off faster. Win-win.
People considering those methods should also take a look at any current promotional APR balances they may be carrying - if you have a $3000 "0% interest for 24 months" Amazon purchase that expires next month that you haven't chipped away at all, by all means pay that first before considering anything else to avoid the $1,000+ in back-interest that you're about to be hit with.
OP, as always if you'd like to list what cards you have, their balances, limits, and APRs, you will get a lot of suggestions. It's probable that not everyone will agree on the best way to do it, but you will at least have a lot of options to consider and make an informed decision with.
