Payoff order - how should I

[eyam]

I was in the same boat as you with regard to the struggle of saving vs paying off all debt. I have a high income, but since I made poor choices with budgeting, my savings was/is abysmal. Luckily, I finally wised up, built a budget and I've been sticking with it pretty good so far.

I posted this same type of question about a month ago and got some really solid feedback. I'm currently using the snowball method to tackle my debt. I personally took the route of taking what little savings I did have (all but $1,000) and put it towards CC debt. 

I took a suggestion from others here and paid all cards down to 87.5%, paid off two completely, and started snowballing. I'm scheduled to be debt-free by December '22. I throw an extra $1,200 towards CC each month.

To answer your question, I would put all of the $30K toward the debt and get it off my back once and for all. All of those minimum payments can be annoying and it's a nice reward to see them going into your savings account each month, or towards the remaining debt. For me personally, if I were to save half of it, I'd constantly be looking at it in my savings and then looking at my remaining debt still wondering if I should put the rest towards my debt. So I'd just do it so I don't have to think about it anymore.

Whatever you choose, just remain consistent and focused, you've got this! Good luck on your debt-free journey, I'll see you at the finish line!

[radfam]

We are both high income earners (HENRY bracket, lol) with the capacity to throw money at debt.  I've just needed to curb my swiping habit and actually focus on paying down/off.  Undebt It is the tool I'm using to weigh options for Snowball/Avalanche/Highest Interest First in terms of debt payoff planning.  I'm just going by what that model says, as far as payoff dates, to get an idea of when I can pay it off.  

[radfam]

Thank you for your first-hand experience that mirrors mine.  It helps a lot to see how others have done the same thing I'm doing.  We have ended up deciding to go with throwing all but 1k at the debt instead of sitting on money.  

[CreditOnTheRise1]

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@radfam wrote:

Thank you for your first-hand experience that mirrors mine.  It helps a lot to see how others have done the same thing I'm doing.  We have ended up deciding to go with throwing all but 1k at the debt instead of sitting on money.  

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Good luck. I'm in a similar situation but I did keep a bit more in my savings than the recommended $1k. I understand what others have said, however I experienced my CL's being decreased once I got to a certain point, and one card closed my account all together, so there is no true rationale that if you used all your $30k to pay down cards and then had an emergency, you would be able to charge again...because the credit limit might no longer be available. Hopefully that doesn't happen to you, but I experienced it and thankful that I had some savings cushion since my credit availability was decreased. My CL's being decreased happened during the peak of covid so I'm hoping lenders are getting passed that....especially for people like me who was blessed enough to still have consistent income and increases through the last 2 years. 

[radfam]

Scoring-wise, is it smarter to get as many at 0 as possible in my case?  Or smarter to get as many pulled down to the next threshold for utilization?

[coldfusion]

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@radfam wrote:

Scoring-wise, is it smarter to get as many at 0 as possible in my case?  Or smarter to get as many pulled down to the next threshold for utilization?

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"smarter" is relative, but both criteria are relevant for scoring purposes. 

The commonly quoted thresholds are roughly at the 9s with the primary percentages being approximately 9/29/49/69/89% both in aggregate across all cards and each card individually.   I believe there is also a penalty for having more than 50% of your cards reporting a balance. 

As I had alluded to earlier in this thread IMO you're at legitimate risk of being balance-chased on at least some cards as you pay down your debt, so IMO you should also temper your expectations accordingly with regard to boosting scores until you start making payments and seeing how your creditors react.

[radfam]

Thank you for your concern and your reiteration that I may be balance chased.  If I am, I am.  I cannot change it, nor can I worry myself over it at this point.  What I CAN do is pay off half my credit card debit seemingly in one whack, and pay the remainder over the next 9 months.  It is reasonable to consider the most effective way to do that payoff in order to impact my score.  

[tacpoly]

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@radfam wrote:

Thank you for your concern and your reiteration that I may be balance chased.  If I am, I am.  I cannot change it, nor can I worry myself over it at this point.  What I CAN do is pay off half my credit card debit seemingly in one whack, and pay the remainder over the next 9 months.  It is reasonable to consider the most effective way to do that payoff in order to impact my score.  

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Nothing will raise your score more than eliminating your credit card debt.  Unless you are planning to take out a loan in the time it takes to pay off all your credit cards, who cares how your pay down impacts your score along the way?  Nine months is not that long -- use whatever method will get rid of your credit card debt the fastest and take the score hit along the way.  It's not like you really have a lot to worry about in terms of scoring -- your scores are low because your cards are maxed out.  Paying them down, no matter which method you use, are bound to improve your scores.   

[MrT_521]

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@radfam wrote:

Scoring-wise, is it smarter to get as many at 0 as possible in my case?  Or smarter to get as many pulled down to the next threshold for utilization?

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It's hard to say exactly what would happen, because every situation is somewhat unique. However, your score should be the least of your worries right now. Don't even think about how different pay-down methods may affect it! The best thing you can do is get rid of your expensive debt ASAP.

Your credit score will take care of itself.

[radfam]

Ok, thank you for your feedback.