How to utilize my tax refund?

[Anonymous]

So my goal for 2014 is to finally get out of credit card debt. I have paid down quite a bit for 2013 and I am hoping this year I can finish.

My question is, what would be the best way to utilize my tax refund this year? Here are the cards I need to pay off:

Capital One $392 balance / $500 limit

Capital One Journey   $461 balance / $500 limit

Merrick Bank   $3650 balance / $3650 limit

Discover   $1563 Balance / $1700 limit

Citi Platinum   $1655 Balance / $1700 limit

Old Navy   $135 balance / $300 limit

Victoria Secret   $298 balance / $500 limit

Belk   $1135 balance / $2000 limit

Almost all the interest rates are equal on all cards except the Merrick Bank card which is the highest interest. My total refund is $1920.00, not even enough to pay off half of the debt but it is a start. Should I put all $1920 on my Merrick Bank card since it is the highest interest? Or should I pay off both Capital One Cards, the Victoria Secret Card and the Old Navy card which would leave me $634 to put down on one of the larger balance cards but give me 4 cards with no utilization...which would hopefully up my FICO score some. And I could also use the monthly payments for those 4 cards and put it towards another larger balance card to pay it off quicker.

Suggestions? Advice?

[Anonymous]

It seems like the most critical issue is not going over limit.

Assuming that you've tended to that, there are two or three issues -- saving interest, paying down maxed cards (maxed = 80%+), or reducing the number of cards with reporting balances.

I'm not sure how easy it would be to quote a point value for the various approaches.  If it was me, I would probably try to pay off the low balances, and then not use those cards until the whole situation is resolved.

Another approach would be to talk to some local CUs re a consolidation loan to clear out everything, or perhaps check out Lending Club.  In general, moving revolving debt to installment will boost your scores and may save you interest.

[Anonymous]

I would love to get a loan from a Credit Union. I currently have an account with a local one, had it for a year or so but I have never used it. Do most credit unions have pretty much the same standars for loans? My FICO was 620 last time I check about two months ago, I'm not sure if I would qualify with a score that low. I never go over my limits and have always paid on time so I am not worried about that. Juggling so many cards is stressful though. It might be worth paying off the smaller cards just to have less to keep track of. Thanks for the advice!

[Anonymous]

If it was me, I'd definitely try to simplify my life, by clearing out balances and so on.

I don't know about your local CUs, but you could go around and talk to several, and tell them what you'd like to accomplish, and see if they can help you.

It might help matters if you tell them you have a tax refund coming in, and also if you arrange direct deposit of your income to the CU and so on.  There may be also some angle like securing a loan with tangible property like a house or car.

There are also certain CUs known to be very generous, for example NFCU and PSECU, and many people are able to qualify for these.

[titanofold]

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@Anonymous wrote:

So my goal for 2014 is to finally get out of credit card debt. I have paid down quite a bit for 2013 and I am hoping this year I can finish.

My question is, what would be the best way to utilize my tax refund this year? Here are the cards I need to pay off:

Capital One $392 balance / $500 limit $198

Capital One Journey   $461 balance / $500 limit $61

Merrick Bank   $3650 balance / $3650 limit $730

Discover   $1563 Balance / $1700 limit $203

Citi Platinum   $1655 Balance / $1700 limit $295

Old Navy   $135 balance / $300 limit $135

Victoria Secret   $298 balance / $500 limit $298

Belk   $1135 balance / $2000 limit

Almost all the interest rates are equal on all cards except the Merrick Bank card which is the highest interest. My total refund is $1920.00, not even enough to pay off half of the debt but it is a start. Should I put all $1920 on my Merrick Bank card since it is the highest interest? Or should I pay off both Capital One Cards, the Victoria Secret Card and the Old Navy card which would leave me $634 to put down on one of the larger balance cards but give me 4 cards with no utilization...which would hopefully up my FICO score some. And I could also use the monthly payments for those 4 cards and put it towards another larger balance card to pay it off quicker.

Suggestions? Advice?

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See above in red for what I would do. This would eliminate the double ding you're getting for the high utilization and also pays off a couple TLs and significantly lowers another.

The amount given would be in addition to your minimum payments, not in place of. So, if your minimum payment onthe Journey card is $15, the payment you'd make would actually be $76.

Roll over any minimum payments that you don't have to make to another TL. Snowball effect.

[RushXTC]

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@Anonymous wrote:

So my goal for 2014 is to finally get out of credit card debt. I have paid down quite a bit for 2013 and I am hoping this year I can finish.

My question is, what would be the best way to utilize my tax refund this year? Here are the cards I need to pay off:

Capital One $392 balance / $500 limit

Capital One Journey   $461 balance / $500 limit

Merrick Bank   $3650 balance / $3650 limit

Discover   $1563 Balance / $1700 limit

Citi Platinum   $1655 Balance / $1700 limit

Old Navy   $135 balance / $300 limit

Victoria Secret   $298 balance / $500 limit

Belk   $1135 balance / $2000 limit

Almost all the interest rates are equal on all cards except the Merrick Bank card which is the highest interest. My total refund is $1920.00, not even enough to pay off half of the debt but it is a start. Should I put all $1920 on my Merrick Bank card since it is the highest interest? Or should I pay off both Capital One Cards, the Victoria Secret Card and the Old Navy card which would leave me $634 to put down on one of the larger balance cards but give me 4 cards with no utilization...which would hopefully up my FICO score some. And I could also use the monthly payments for those 4 cards and put it towards another larger balance card to pay it off quicker.

Suggestions? Advice?

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I would pay off the ones I bolded, Then throw what's left on Belk... This eliminates the need for multiple payments and you're only left with the high balanced accounts.. Easier to pay off.

[Anonymous]

Great advice guys, I really appreciate it. I am looking at trading in my car sometime this year so I am trying to up my credit score as much as possible. I'm thinking paying off the 4 lowest balance cards and then throwing the extra money from what those monthly payments were on the higher balance is probably going to be the quickest way to get this paid off.

[USF813]

I would pay off what I can and then cut those cards up. Once you gotten your utilization down to a reasonable number I would start closing accounts. I see my pre-bk habits in your credit card usage. Do you need all of these accounts?

[Anonymous]

I would pay off what I can and then cut those cards up. Once you gotten your utilization down to a reasonable number I would start closing accounts. I see my pre-bk habits in your credit card usage. Do you need all of these accounts?

No I absolutely do not need all of these accounts, cutting them up is a good idea. How long should I wait before closing them for it not to hurt my score as much? Keeping them open for a while with a $0 balance should help me because it will lower my utilization, correct?

[Anonymous]

Closing accounts right now will hurt your utilization.

Closing them later with low utilization will have no immediate effect, but will affect your AAoA at a later point when they drop off your reports in the years to come.