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Is there a way out of this debt??

bk510
Valued Contributor

Re: Is there a way out of this debt??


@soloman wrote:

@K-in-Boston wrote:

Not saying it is the best option, but what has been working for me (and to be honest I would do almost anything to "only" have $31k left to pay)... balance transfers.  You may not get wonderful limits or the best long-term APR at the moment on new card(s), but if you are truly not continuing to use your cards and  can be disciplined enough to not go further into debt, it's probably your best bet.  For me, Citi and Discover ALWAYS have some sort of 0% or (better in our cases since we're probably not going to pay it down in 12 months, the term is much longer and has lower or no transfer fees) low APR balance transfer offers.  Chase and CapOne are hit-and-miss, with Chase usually having no offer and CapOne offering to transfer with no fee to my existing APR of 25.49% (my highest APR non-store card by about 9%).

 

@With that said, even if you had offers you wouldn't be able to use them since you're close to maxed. Have you considered a Bank Americard with 21 mos @ 0%? PenFed? Citi Diamond Preferred? I am sure many others can be suggested with decent intro BT periods. If you can get the cards down to $0 that do/should have good BT offers, then you could start shifting those balances over, saving you a TON and getting the high APR balances paid down faster.  Even if you could just get the CapOne and Freedom balances shifted over to 0%, that would free up another $2000+ in the next 12 months that you could pay down the Citi card you're already paying over $1000 in interest on each year.  Once you get them shifted around to more managable interest rates, certainly choose one of the snowball methods mentioned before - throw everything over your absolute minimums to pay off the smallest balance first if you need visual feedback for your progress, or go after the highest APR card and use the funds there.  Best of luck, and take it from someone with a decade of experience in trying to stay afloat, and just finally beginning to bail out... it CAN be done!


I have no experience with prime cards; therefore, I don't know the answer to this question: if OP is maxed out with high utilization, can OP get approved for a 0% card to transfer balances?


Unfortuneately no.........

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Message 81 of 87
tax_society
New Member

Re: Is there a way out of this debt??

The emergency fund is to prevent you from using credit in case "life" happens while you're paying off your debt. Credit is amoral. You swipe one thing and guess what, you'll have to swipe for something else soon after that. Now, you have a couple grand in new debt that you'll have to pay off. Now you're back at step one. The "good ol piggy bank" is a reliable source that won't add interest to what you have to pay off. If someone doesn't have the money to pay for small life emergencies then I can assure them credit shouldn't be their number one concern. Paying small debts off first no matter the interest rate is the number one concern.

you build up to the larger debts. If you try and pay the larger debts first, it'll take you MORE time and money than paying smaller balances first then using those "cleared" amounts to add on the principle of the larger loan

Message 82 of 87
longtimelurker
Mega Contributor

Re: Is there a way out of this debt??


@tax_society wrote:
The emergency fund is to prevent you from using credit in case "life" happens while you're paying off your debt. Credit is amoral. You swipe one thing and guess what, you'll have to swipe for something else soon after that. Now, you have a couple grand in new debt that you'll have to pay off. Now you're back at step one. The "good ol piggy bank" is a reliable source that won't add interest to what you have to pay off. If someone doesn't have the money to pay for small life emergencies then I can assure them credit shouldn't be their number one concern. Paying small debts off first no matter the interest rate is the number one concern.

you build up to the larger debts. If you try and pay the larger debts first, it'll take you MORE time and money than paying smaller balances first then using those "cleared" amounts to add on the principle of the larger loan


Well, the claim for snowball is that it has a psychological advantage, i.e. people find it easier to stick to as they can see one metric of progress (number of bills they have to pay).   But to save time and money, paying off higher APR, regardless of the amount, is going to win

Message 83 of 87
Chris679
Established Contributor

Re: Is there a way out of this debt??


@tax_society wrote:
The emergency fund is to prevent you from using credit in case "life" happens while you're paying off your debt. Credit is amoral. You swipe one thing and guess what, you'll have to swipe for something else soon after that. Now, you have a couple grand in new debt that you'll have to pay off. Now you're back at step one. The "good ol piggy bank" is a reliable source that won't add interest to what you have to pay off. If someone doesn't have the money to pay for small life emergencies then I can assure them credit shouldn't be their number one concern. Paying small debts off first no matter the interest rate is the number one concern.

you build up to the larger debts. If you try and pay the larger debts first, it'll take you MORE time and money than paying smaller balances first then using those "cleared" amounts to add on the principle of the larger loan


What I like to do is give people facts rather than bogus rhetoric.  

 

FACT: credit is not immorial in my mind and in the mind of many on this forum.  A forum that is entired centered around credit and credit cards for this specific sub-forum.  You of course can choose to believe whatever you like.  Believe a guy built an ark and put two of every animal on there to save it from a flood if you like, that is your right. 

 

FACT: Putting your emergency fund toward high interest credit card debt and keeping the cards open to use for the actual emergency is going to save you money on interest.  That may or may not be your cup of tea but you cannot argue with math, 2 + 2 always equals 4. 

 

FACT: The Dave Ramsey snowball method will cost you more money and take you longer to pay off your debt than paying off higher interest rates first.  Again this is a math equation and not a question of your indvidual will power or emotional reaction to paying down debt.  If the snowball method works for you by all means use it.  The extra interest you will pay is probably minimal compared to the overall debt.  Personally, I believe that people need to take emotion out of their finances in order to handle them properly.  Many people with a debt problem had unavoidable circumstances that they could not control.  Lots of people on the other hand just can't stop themselves from spending money.  The sooner they take the emotion out of it and just look at it like a math equation the better off they will be in my opinion.  

Message 84 of 87
MyLoFICO
Valued Contributor

Re: Is there a way out of this debt??


@longtimelurker wrote:

@tax_society wrote:
The emergency fund is to prevent you from using credit in case "life" happens while you're paying off your debt. Credit is amoral. You swipe one thing and guess what, you'll have to swipe for something else soon after that. Now, you have a couple grand in new debt that you'll have to pay off. Now you're back at step one. The "good ol piggy bank" is a reliable source that won't add interest to what you have to pay off. If someone doesn't have the money to pay for small life emergencies then I can assure them credit shouldn't be their number one concern. Paying small debts off first no matter the interest rate is the number one concern.

you build up to the larger debts. If you try and pay the larger debts first, it'll take you MORE time and money than paying smaller balances first then using those "cleared" amounts to add on the principle of the larger loan


Well, the claim for snowball is that it has a psychological advantage, i.e. people find it easier to stick to as they can see one metric of progress (number of bills they have to pay).   But to save time and money, paying off higher APR, regardless of the amount, is going to win


I am following a hybrid plan of both of these. Several of my cards (Lowes and Amazon for example) are in a 0% period. I have a BT card (Slate) but it is maxed as it gets 0% on BT’s until August of this month, and it has a low limit ($2K). So the cards I am paying off right now are the ones with small balances and then high APR’s. I make minimums +5 on the others.

My hope is that once I have it down a little ways and my score recovers I can get a 0% promo on an existing card or transfer it all over to my Stash Visa which is my lowest APR card at the moment, but I am attacking the ones charging interest now in hopes that my snowball will be a good size by the time the 0% terms are met on the other cards. If that is wrong, let me know. I know a lot but I don't know it all. 


Experian: 677 (28) | TransUnion: 697 (27) | Equifax: 684 (6)
Gardening as of: 1-23-2018
Updated 1-25-18
Message 85 of 87
tacpoly
Established Contributor

Re: Is there a way out of this debt??


@Chris679 wrote:
Ok great but how are you better off paying the guaranteed 20% interest on $1000 balance on the credit card? Instead take the $1000 and pay down the balance. If an emergency does happen and you have to use the card you are no worse off than you were before! In fact you are still better off because you saved interest in the meantime. Credit card interest compounds daily and it is 100% guaranteed. No other investment can come close. If I told anyone on earth they could get an ROI of 20% compounded daily on their money 100% of people would take it. That's exactly what you are getting if you pay off your credit card debt.

I just wanted to clarify that the published credit card interest rates are annual percentage rate (APR).  So it is not 20% compounded daily, it is actually a little less than 0.055% compounded daily to add up to 20% for the year. 

 

Message 86 of 87
Chris679
Established Contributor

Re: Is there a way out of this debt??


@tacpoly wrote:

@Chris679 wrote:
Ok great but how are you better off paying the guaranteed 20% interest on $1000 balance on the credit card? Instead take the $1000 and pay down the balance. If an emergency does happen and you have to use the card you are no worse off than you were before! In fact you are still better off because you saved interest in the meantime. Credit card interest compounds daily and it is 100% guaranteed. No other investment can come close. If I told anyone on earth they could get an ROI of 20% compounded daily on their money 100% of people would take it. That's exactly what you are getting if you pay off your credit card debt.

I just wanted to clarify that the published credit card interest rates are annual percentage rate (APR).  So it is not 20% compounded daily, it is actually a little less than 0.055% compounded daily to add up to 20% for the year. 

 


You're half right.  APR is not the same thing as APY.  When lenders list accounts that pay you interest like a savings account they will list annual percentage yield. With APY the compounding interest is calculated so 20% APY does indeed add up to 20%.  APR does not factor in the compounding interest.  That is why that use that figure when they state the rate of interest you will pay.  That number is much lower than what you will actually pay them. Some cards will use average daily balance while others will absolutely be compounded daily at 20%/365.  Either way, with 20% apr you are paying much more than that and that is why paying down CC debt should always be top priority. 

Message 87 of 87
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