Best solution right now to get out of debt?

Anonymous · ‎02-10-2017

Good day all. This is my first post on myFico. I was wondering if someone can give me a bit of advice right now with my credit card debt. My wife recently borrowed a loan to pay off her credit card debt. She pays a little over $725 a month (she pays half of that bi-weekly). She has had a little over $20,000 in credit card debt.

I have approximately $30,000 in credit card debt. I have A LOT of credit cards. Some with banks (Chase, Capital One, etc.), some store branded ones (Best Buy, Macy's, etc.). Most are Hotel credit cards issues by banks. Most of my cards I no longer use however. I do pay ALL of my credit cards On Time.

Just recently, 2 of my credit card companies decreased my credit limit. One was American Express which dropped one of my limits from $5000 to $1000 (balance on that card has been about $500). The other was Discover which dropped my limit from $6700 to $5500. Not a significant drop but a drop nontheless (and the balance on that card right now is about $4800)

Unfortunately the 2 of us, more so her, have a habit of spending more than we make. We use our debit cards quite a bit but our checking account is very low so we have no choice but to use my credit cards now and then too.

Most of my credit cards have a credit limits of $5000+. I have one as high as $15000 (the balance on that as of now is about $5500) and another one as high as $10000 (balance of about $1500). 2 of my credit cards are charing me very very high interest (one is a Barclays JetBlue card which charges me at least $60 in interest every month, and another is an American Express Hilton card which charges about the same). The balance/limit on these 2 cards is $3800/$5000 and $5000/$8700 respectively. Who knows, they might decrease those too

Anyway, I'm here to ask which of these options do you suggest I do.

1- Transfer some of my balances to my credit card(s) with a very high limit to get them to $0 or as close as possible

2 - Get a personal loan right now

3- Wait til my wife pays off her loan (in a few years) and then get a loan for myself

I can't apply for any more credit cards which is why I suggested option 1.

Unfortunately I don't have a great job, but I do have a FT job along with 2 PT jobs.

This is not an easy decision for me and we can only blame ourselves. I just want to make the right decision. Hopefully I don't get a TL;DR (Too Long Didn't Read in case anyone doesn't know what that means). I do apoologize too if I have posted this on the wrong forum.

stellar · ‎02-10-2017

Sounds like you guys need to work on a mindset/lifestyle adjustment. It can be fun to save money, pay off debt and live below your means. You can make a game of it.

First make a detailed budget, you can get help with this online or ask here.

Spend much less than you make.

Allocate some to pay off debt and to savings.

There are probably tons of things you guys can sell/return to pay off some of the debt, since you said you guys are spenders.

Doing this together can strengthen your relationship and make you both feel good about your accomplishment!

Good luck!

Anonymous · ‎02-10-2017

This is not rocket science unless you're mentally limited.

Cut down on expenses or increase your income by getting another job etc. You can uber,lyft or airbnb very easily.

Anonymous · ‎02-10-2017

zumroff, well of course that's not rocket science. I should have pointed out we Have cut down on our expenses, me in particular. And it's not easy to just get another job, although Uber/Lyft isn't a bad option, though we lease a car. Can't do Airbnb as we live in an apartment. My main question was if I should get a personal loan immediately or do balance transfers. Yes, it's quite obvious that the spending has to be limited (and it has been over the past couple of weeks).

Anonymous · ‎02-10-2017

I would go with a balance transfer if you can get something like 0% for 12 or 18 months. A personal loan under 5% or really less than your average APR would work ok too.

A leased car can be used to uber. You can do airbnb and have guests sleeping on the couch etc, a room is not a requirement.

wa3more · ‎02-11-2017

i agree with zum and stellar.

No more borrowing. Just keep paying down and then cut up some of the cards especially the stores.

We have all been there....But concentrate on changing lifestyle and have disipline. You should feel good you are going to get rid of the debt, most would have pulled BK card.

stick with it.

RobertEG · ‎02-11-2017

Getting a loan to pay other types of debt can be a good move if the interest rate on the loan is lower than that of existing debt.

While it does not reduce your remaining principal debt balance, and thus is shifting of the deck chairs, it does reduce potential future debt in the form of higher interest accruing on the credit card debt.

The huge peril in taking out a loan to pay other CC debt is that it requires discipline by NOT using part of the loan money for other purposes, thus increasing your overall debt.

The credit pattern picture portrayed in the post may not suggest such discipline.

Do you have the discipline to use all of the loan to pay down your credit card balances, or will part be used for other purposes, thus increasing net debt?

Anonymous · ‎02-11-2017

Immensely helpful post by RobertEG.

I would take the question a step further. My guess is that you feel certain that if you got the loan you would use all of it to pay off cards. But are you certain that you would never under any circumstances be tempted to start using the cards again (beyond small purchases for essentials that you pay off in full)? Emergencies will happen, cars will break down, a nice washer/dryer that you've always wanted will go on sale, etc. Are you certain that in three years from now you won't be carrying CC debt each month?

Until you have a plan to prevent any chance of CC debt "creep", the personal loan solution just means going further into debt.

Since bankruptcy has been mentioned, let me say that I think you should not rule that out. BK can be the proper move if it will get you out of this terrible hole you are in. There may be other people who are being affected by your debt, beyond just you and your wife -- kids for example. Finding a way to get some or all of that debt discharged can be the right move, as long as you can couple that with a well designed plan to shift your lifestyle into one where you spend about 3/4 of what you take home. 2/3 is really a better target, until all debts are completely paid off and you have four months of cash set aside for emergencies.

Anonymous · ‎02-11-2017

Thank you all very much for the info. I have not ruled out bankruptcy but that is the very last thing I want to do (obviously). I wanted to say I have very slowly cut down the debt so far. When I mentioned I was $30000 , I should have pointed out I was as high as $35000 in debt at one point. My wife and I got very big bonuses at Xmas.

And one final question , when I have balances due , what do you suggest ?
1 - Paying off low balances (ex $400) entirely while paying close to minimum balances on my credit cards with high debt ($4000+). Or...
2- Pay minimum or slightly above minimum on the low balances while paying as much as I can on the high balances

I have read tips in the past and both options have been suggested before. Allow me to point out that I Never use cards with high balances. There are cards that I haven't used in Months , some approaching a year.

SouthJamaica · ‎02-11-2017

@Anonymous wrote:
Good day all. This is my first post on myFico. I was wondering if someone can give me a bit of advice right now with my credit card debt. My wife recently borrowed a loan to pay off her credit card debt. She pays a little over $725 a month (she pays half of that bi-weekly). She has had a little over $20,000 in credit card debt.

I have approximately $30,000 in credit card debt. I have A LOT of credit cards. Some with banks (Chase, Capital One, etc.), some store branded ones (Best Buy, Macy's, etc.). Most are Hotel credit cards issues by banks. Most of my cards I no longer use however. I do pay ALL of my credit cards On Time.

Just recently, 2 of my credit card companies decreased my credit limit. One was American Express which dropped one of my limits from $5000 to $1000 (balance on that card has been about $500). The other was Discover which dropped my limit from $6700 to $5500. Not a significant drop but a drop nontheless (and the balance on that card right now is about $4800)

Unfortunately the 2 of us, more so her, have a habit of spending more than we make. We use our debit cards quite a bit but our checking account is very low so we have no choice but to use my credit cards now and then too.

Most of my credit cards have a credit limits of $5000+. I have one as high as $15000 (the balance on that as of now is about $5500) and another one as high as $10000 (balance of about $1500). 2 of my credit cards are charing me very very high interest (one is a Barclays JetBlue card which charges me at least $60 in interest every month, and another is an American Express Hilton card which charges about the same). The balance/limit on these 2 cards is $3800/$5000 and $5000/$8700 respectively. Who knows, they might decrease those too

Anyway, I'm here to ask which of these options do you suggest I do.
1- Transfer some of my balances to my credit card(s) with a very high limit to get them to $0 or as close as possible
2 - Get a personal loan right now
3- Wait til my wife pays off her loan (in a few years) and then get a loan for myself

I can't apply for any more credit cards which is why I suggested option 1.

Unfortunately I don't have a great job, but I do have a FT job along with 2 PT jobs.

This is not an easy decision for me and we can only blame ourselves. I just want to make the right decision. Hopefully I don't get a TL;DR (Too Long Didn't Read in case anyone doesn't know what that means). I do apoologize too if I have posted this on the wrong forum.