How to pay down CC debt?

[Anonymous]

hi guys, i unfortunately accumulated some CC debt about 14k worth. i transferred it all to my lowest interest rate CC. i plan to pay it 600 month till its paid off. and use 1 other card to do all other purchases, try to pay that off monthly. is this a good strategy for getting out of CC debt?

[Anonymous]

Here is what I did.

First FREEZE ALL YOUR CARDS!! Literally in your home freezer in a block of ice! 

Then use cash for everything or your debt card

Then pay as much as you can to the debt if it $600 then do that and if you can do more then do it. 

Then once you have gotten yourself out of the hole of debt then I started using my cards again because I felt more responsible with them because I no longer saw them as another banking account I saw them as what they are debt. I only charge what is in my checking account and never more. I only use credit cards for their cash back rewards. 

Hope you get out of debt soon it is such a rewarding feeling!! 

[Anonymous]

What does your fico look like? That strategy works, but if your credit profile looks good, then consider getting 0% card and aggressively pay down. You should only be dong pif for new expenses and see how fast you can pay that debt down.

[Anonymous]

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@Anonymous wrote:
hi guys, i unfortunately accumulated some CC debt about 14k worth. i transferred it all to my lowest interest rate CC. i plan to pay it 600 month till its paid off. and use 1 other card to do all other purchases, try to pay that off monthly. is this a good strategy for getting out of CC debt?

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This is a good strategy.  Moving all expenses to 1 card and PIF every month keeps new expenses from accrueing interest via the grace period.  Best to PIF right before due date on this card. 

On the card accrueing interest, make payments as soon as you have the money (maybe every payday), as everyday counts. 

[SamsungHDTV]

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@Anonymous wrote:
hi guys, i unfortunately accumulated some CC debt about 14k worth. i transferred it all to my lowest interest rate CC. i plan to pay it 600 month till its paid off. and use 1 other card to do all other purchases, try to pay that off monthly. is this a good strategy for getting out of CC debt?

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This strategy is fine except this part: use the 1 other card for all other purchases and try to pay that off monthly. It has to be always pay off monthly. If it gets to a point where you can't pay off that other card in full, then lower your $600 payment to $550 or $500. You would rather the debt stay on the lowest rate CC rather than start to accumulate on this other CC that has a higher interest rate. Make sure this other CC is a rewards card, which are best used by paying in full. 

@Anonymous at 14K worth of debt, $600 payments is roughly 2 years without accounting for interest. That's not bad. Keep in mind to put any extra money into the card. IMO you shouldn't have a savings account until you pay off this debt. Most savings accounts are paying less than .50%, and I'm sure your lowest rate CC is higher than that. So for instance if you have $2000 in a savings account earning pennies a month, it would be wiser to just apply it to the 14K debt. This would save you $2000 worth of interest @ whatever rate your lowest rate CC is. Saving = earning. Saving $2000 worth of interest > Earning pennies on savings account. Monthly.

Also find ways you can cut down on spending. For instance, I reduced my internet from the performance package to the economy package. Reduces my monthly bill by $20, and I do feel the difference in speed, but I'm okay with it for now. 

Hope this helps.

[Anonymous]

thanks for the great tips!

when the credit monster hits a certain size its hard to control.

I am thinking i might just PIF my primary CC weekly... so its basically like a debt card.

I think looking at it monthly is how i get into trouble... so easy to charge too much on the CC.

[jamesdwi]

I disagree with a couple points, first if your limit on the card with the lowest interest rate has room for your typical monthly expenses, it may be interesting to put all your charges on that one card, and PIF  all new purchases, so you get the benefit of recycling debt to take advantage of the 25 days of free interest.  

 My second dispute is about having a savings account while paying down your credit cards. You need a savings account they provide  overdraft coverage should you miscalculate your checking account balance, it doesn't need to be big but can keep you from paying over drawn fees that typically run $20-35 per check a small $100 in your savings accounts cover most problems, the account can also come in hady should you need actual cash for something and you otherwise would need to pay a 2-3% fee plus interest that starts at the moment the cash advance happens.  

[Anonymous]

Let me chime in an idea   If you are going to use a single rewards card for daily needs, then save your receipts on any purchases and as soon as you get home log into your bank and schedule those payments on your bill pay with your bank.  Even if this makes you pay a lesser amount on your consolidated card, that card is the lower interest one.  You do not want to get caught in a trap of carrying a balance on a second card again.  Now if the card you plan on using is not a rewards card, then use a check card or cash, then using all spare money to pay down the consolidated card.  Once you get the balance low enough (and your fico is high enough) you may want to apply for a new card that will give you a long 0% term.  Transfering that balance to a new card may cost you 2 or 3 months interest fees just in the transfer costs, but after that it is all savings.

I just got a new Citi card with 15 months at 0%, gonna transfer 3.5k to it and pay it down at 250 a month.  Even if something happens and I fall short in the future, 13 or 14 months from now I should have little problem finding another 0% intro offer and transfer any shortfall into it. 

Consolidating and paying down debt is always a good idea, just make sure you do not create new debt along the way.

[Anonymous]

I am with you one the savings account. I feel like you need at least some kind of cash cushion for the unsuspected too. Because if you do not have some kind of emergency fund even if is less than $500 then you are just putting more on the cards and this just keeps the cycle going.....not a good place to be. 

Sometimes I think it is good to press pause and really think about what you want to do. Is putting normal purchases on a CC a good idea based on me past? How will this affect my financial way of thinking? Am I really ready to Pay in full every week or month? Just a few questions I asked myself.

The cash/check card method remains the best option for me because I can see the money go away. 

[Meltdownblitz]

There if quite a few methods to this obviously, but you asked so I'm gonna give you my honest and personal opinion based upon what I've learned in my finance classes in college and also from personal experience. I did not read every reply on this thread either so sorry if I repeat what some of you have said.

- One of the first things your going to want to do is get a balance transfer card (citi has some good  ones for 18-21 months 0% APR.) to cut that apr to quit creating new debt.

- Secondly I'm gonna be honest, your going to need discipline for yourself and your family, don't spend more than you can afford, I would put any extra money I had to pay off debt.

- Third, I would get a high yield savings and put some extra money for unexpected events, aka an emergency fund. They say 6 months to a year of saved expenses. I'd say 3-6 months to start off until debt is paid off then boost your emergency savings to 12 months of savings. So if you spend 5000 a month on all your bills and expenses, that would mean you would need 30,000 saved for emergencies ONLY (5000 x 6). How do you do this? First off your going to need to track your expenses and try to cut as many as you can, for instance if you work alot, do you really have time to watch those 200 TV stations? Cut your plan completely, or at least lower your plan to save money and put it towards your debt.

- As many have said I would put all your expenses on 1 card with a 0 balance (after balance transfer possibly) and whatever is put onto that card, PIF before due date. (If you overspend 1 month, use your emergency savings, but MAKE SURE you repay what you borrowed from yourself but do not make it a habit to do this. This is an emergency fund... but just make sure you pay that card off in full to avoid future debt.)

- Lastly, put any extra money (after you've paid yourself (savings), and your monthly bills) to 1 card at a time. I would go with the snowball method. Pay off the lowest balance card you have with any extra money you have, then when that is paid pay the next lowest balance card off. The reason for this is to give you the excitement and momentum from seeing that 1, 2, 3, cards paid off to pay off the rest and become debt free. They say, if you see something working you'll want to continue to do what your doing.

Don't incure anymore debt, I will be completely honest, its going to be real hard and its going to take HUGE amounts of work and self discipline, but after its all done you will be more than glad that you did it. Being debt free is an awesome feeling, having an emergency fund is an even better feeling, your life will feel more secure and you will be glad you did it.

I hope I didn't miss anything, I lost my train of thought halfway through typing this because the girlfriend called me for something..grrr..

Anyway, feel free to ask any questions, good luck!