Update: Credit card debt advice

[skipper]

I'm a regular but dont want my financial info connected online

Anyway, I had a tough 2022/2023 financially and racked up some credit card debts.

Nothing super crazy but not great (under 4k), I make my payments regularly but my credit usage is high. I've been doing ok with lowering that but I need some specific advice so I'm going to lay it all out.

balances
Card 1 = 1450
Card 2 = 915 (very high interest rate - 5% higher APR than others) so this balance hasn't been moving!
Card 3 = 350 (has $8 monthly fee)
Card 4 = 69 (this will be paid off Monday)
Card 5 = 250


So I'm basically making a little over minimums on most but am throwing extra on the lowest balance card. My plan was to throw the extra payments from card 4 after its paid off, onto another card BUT I'm wondering if it would be better to do bi-weekly split payment on card 2. or should I focus on card 2?

for clarity...
I have $300 a month to pay on everything.
Minimums total are just under $200. (this will drop to $175 next week)

I have an extra at least an extra 125 a month or so to go toward them all.

Sometimes I will get more than $300 coming in so I'd want to throw anything over that on a card as well.

If I do the split payment on card 2, it'll be $211 a month for minimums.

So thoughts?

Do I throw extra on Card 2 or throw it on card 3 and cancel to eliminate monthly fee. or focus on card 5 and eliminate another balance and therefore be able to use that payment on another card?

Oh and I don't have a great credit score so transferring to 0% cards is likely not a possibility and I don't want to take a hit on my credit by applying.

thanks...sorry if this is confusing. I tried to simplify best I could.

[wanderingback]

Pay and put extra money on the highest interest card first. That way will save you the most money to pay it offer sooner.

[bex1973]

With those amount I'd snowball - except I'd start with the high interest one and the one with the monthly fee. And I'd consider cancelling some of the cards once you pay off. I find it easier to keep track of spending on just one or 2 cards - we have one main card and then a second that is just for emergencies.

[simpsongal]

Good for you tackling this! I'm a fan of snowballing in cases like this - e.g., when you have several debts, I like eliminating debts and winnowing, even if it means paying the lower interest ones first. And in your case, they're all in the same ballpark.

I'd focus on getting rid of cards 3,4,5 and then taking what's left to chunk down the other high balance cards. Depending on the extra money you have to throw at these, those 3 cards could be gone in 2.5 months - and any money used to pay those cards goes to pay the other cards.

Are you getting a tax refund by chance? Have any points to redeem to pay balances off?

[skipper]

Apr 4, 2024 9:52:02 GMT -5 simpsongal said:

Good for you tackling this! I'm a fan of snowballing in cases like this - e.g., when you have several debts, I like eliminating debts and winnowing, even if it means paying the lower interest ones first. And in your case, they're all in the same ballpark.

I'd focus on getting rid of cards 3,4,5 and then taking what's left to chunk down the other high balance cards. Depending on the extra money you have to throw at these, those 3 cards could be gone in 2.5 months - and any money used to pay those cards goes to pay the other cards.

Are you getting a tax refund by chance? Have any points to redeem to pay balances off?

tax refund is a loaded question. Let's just say, it's unknown. But if I can, I'll definitely use toward this.

No points. I stopped using them a while ago.

[flygirl]

I know card 2 has a higher interest rate but I’d start with the one with the lowest balance and work up from there. The amount of time for you to pay the smaller ones off isn’t that great and then you can throw all the extra to #2 and then move to #1

ETA also, you’re doing great by wanting to tackle this.  Unfortunately sometimes we get in a bind and have to take a step back to move forward.  You got this!

[skipper]

thank you.

Things are looking up :-) Just hope I'm able to keep making progress.

[jinkies]

I'd start with Card 3 since it seems like you could pay it off in a couple months and get rid of the monthly fee.

Then move to throwing extra at card 2 with the high interest.

In order, I'd pay off:

3, 2, 5, 1

Good luck!

[Roc A Bee]

I’d do 4,5,3,2,1 because I like little victories to keep myself motivated.

[lavenderblue]

Apr 4, 2024 10:25:15 GMT -5 Roc A Bee said:

I’d do 4,5,3,2,1 because I like little victories to keep myself motivated.

This is the exact order that I would do. I'm not a big fan of Dave Ramsey, but his Snowball method is a good one. There is something to be said for small victories, and paying off the lower balance cards should happen quickly and will keep you motivated to keep moving forward. 

Also, if you don't need to have your credit run any time soon, I would also consider closing the card with the monthly fee and the one with the higher interest rate. You'll take a temporary hit on your credit report, but in the long run, you'll be better off not having those cards available to use. 

[dexteroni]

Apr 4, 2024 10:25:15 GMT -5 Roc A Bee said:

I’d do 4,5,3,2,1 because I like little victories to keep myself motivated.

This is what I would do as well. Seeing those zero balances is a psychological boost, and it simplifies things from a bookkeeping perspective. If you prefer to tackle 3 before 5 to get rid of the $8 fee, that’s fine too. Then when you only have 1 and 2 left, you can throw everything you have at them.

One thing I remember from the old MM days is that sometimes people would call a creditor and ask for a lower interest rate. I don’t know if that’s something that’s still done, but it’s worth looking into for card 2. Or maybe you can transfer the balance of card 2 to one of the lower rate cards. But your debt isn’t that bad, so even if you don’t take these extra steps, you’ll still be able to tackle this. Good luck!

[followyourarrow]

Apr 4, 2024 9:51:48 GMT -5 bex1973 said:

With those amount I'd snowball - except I'd start with the high interest one and the one with the monthly fee. And I'd consider cancelling some of the cards once you pay off. I find it easier to keep track of spending on just one or 2 cards - we have one main card and then a second that is just for emergencies.

I wouldn't cancel the cards, because that will lower your available credit.  I'd put the cards in a safe, or some people literally freeze them in a glass or water.

[dragon's breath]

Do you need the psychological boost of getting balances paid off? Snowball.

Do you want to minimize the interest you pay? Avalanche.

undebtit has calculators where you can fill in info to compare them
undebt.it/debt-avalanche-calculator.php#snowball-calc

Personally, I would go with highest interest for maximum savings, but I prioritize the math over the mental boost.

Also, if the card that charges the $8/month fee always charges a fee, whether you have a balance or not, I would call and request your account be "downgraded" to the no-fee version, if they have one, or cancel that card. Fees only really make sense for those with low/no credit who can only get those cards, or for people who spend/earn so much in rewards that the fee version works out to more rewards than no-fee version.

[quesyrah]

The Dave Ramsey debt snowball worked best for us. In the end it doesn’t typically cost that much more than doing higher interest rate first and it’s very motivating to eliminate debt.

List your debts smallest to largest
Pay the minimum on everything but the smallest debt. Each time a debt is laid off, snowball that money to the next debt.

If you don’t have enough margin in your budget to pay more than the minimums, you need to eliminate expenses and/or increase income.

We paid off $43,000 of medical and vet bills and CC debt using this method. It was HARD and life sucked for awhile. Dave Ramsey isn’t my favorite person but we did his baby steps and it was life changing for our finances.

[bex1973]

Apr 4, 2024 11:12:34 GMT -5 followyourarrow said:

Apr 4, 2024 9:51:48 GMT -5 bex1973 said:

With those amount I'd snowball - except I'd start with the high interest one and the one with the monthly fee. And I'd consider cancelling some of the cards once you pay off. I find it easier to keep track of spending on just one or 2 cards - we have one main card and then a second that is just for emergencies.

I wouldn't cancel the cards, because that will lower your available credit.  I'd put the cards in a safe, or some people literally freeze them in a glass or water.

Sure but that only matters if you need all that available.  Once we got our debt under control we found it helpful to rein it in where possible. Personally - even though we closed things I still qualified for a mortgage and a car loan but of course each person's story is different.  Because we only have the one main card that we pay off monthly they've upped our limit on that card.

But debt sucks and kudos to the OP for your efforts!!

[mccallister84]

Apr 4, 2024 14:16:20 GMT -5 bex1973 said:

Apr 4, 2024 11:12:34 GMT -5 followyourarrow said:

I wouldn't cancel the cards, because that will lower your available credit.  I'd put the cards in a safe, or some people literally freeze them in a glass or water.

Sure but that only matters if you need all that available.  Once we got our debt under control we found it helpful to rein it in where possible. Personally - even though we closed things I still qualified for a mortgage and a car loan but of course each person's story is different.  Because we only have the one main card that we pay off monthly they've upped our limit on that card.

But debt sucks and kudos to the OP for your efforts!!

I believe debt to total credit available ratio factors in to your credit score, but if you don’t plan on needing credit any time soon I’d definitely close them so you don’t have to keep track of them if not literally freezing them is a great plan.

**** I haven’t actually looked at how the calculate the credit score lately so if I am wrong here, my apologies.

[dancingnancy]

I paid off my debt this way and I had a lot more debt than you:

Pay off card 4 on Monday as planned.
Then pay the minimum on cards 1,2 and 3 and put all you can towards 5 until it is paid off. Then work on card 3, then 2, then 1 -
So go from lowest balance to highest.

[isabel]

There are sort of two schools of thought - pay down the lowest balance card one at a time and snowball to the next as you go or pay down the highest interest rate card first.

While paying down the higher interest rate card is usually best in terms of limiting your overall interest payments, I’m the kind of person who needs that gratification to stay motivated. If you need that too, it’s perfectly ok to focus on your lowest balance card first and just get that off your plate before moving to the next one.

Either way, I’d focus on paying extra on one at a time, as you’ll see your balances decrease faster that way rather than carrying a balance on all of them for longer.

[isabel]

Also, I credit YNAB 100% with getting and keeping us out of debt. It’s worth looking int if you want something to help you manage money.

[sadlebred]

I'd pay off 3, then 4, then 2, finally 1.

The other question is can you bring in some extra money for a few months? Doordash, Instacart, Shipt, get a PT job 2-3 days/week? Then put 80% towards the CC and 20% in a HYSA (high yield savings account)? That would go to pay off the debt and start your cushion again.

I think you will get through this in no time since you have a plan!

[chpmnk1015]

I'd get that card 3 then determine if you need it for an $8 a month fee? What benefits does the card give you for that?

[skipper]

Apr 5, 2024 5:59:52 GMT -5 chpmnk1015 said:

I'd get that card 3 then determine if you need it for an $8 a month fee? What benefits does the card give you for that?

It's really not worth it except it was my first credit card that approved me so...length of credit history I guess. lol

[chpmnk1015]

Apr 5, 2024 6:15:42 GMT -5 skipper said:

Apr 5, 2024 5:59:52 GMT -5 chpmnk1015 said:

I'd get that card 3 then determine if you need it for an $8 a month fee? What benefits does the card give you for that?

It's really not worth it except it was my first credit card that approved me so...length of credit history I guess. lol

Hmm. Yea, your credit may dip for a bit but, if you have no large purchases or anything for a whole may seem of its worth it. Or pay it off and call and ask if they can lower the monthly fee as a long time customer?

[skipper]

Apr 4, 2024 22:58:19 GMT -5 sadlebred said:

I'd pay off 3, then 4, then 2, finally 1.

The other question is can you bring in some extra money for a few months? Doordash, Instacart, Shipt, get a PT job 2-3 days/week? Then put 80% towards the CC and 20% in a HYSA (high yield savings account)? That would go to pay off the debt and start your cushion again.

I think you will get through this in no time since you have a plan!

This $300 is from a second job.

[skipper]

Apr 5, 2024 6:16:58 GMT -5 chpmnk1015 said:

Apr 5, 2024 6:15:42 GMT -5 skipper said:

It's really not worth it except it was my first credit card that approved me so...length of credit history I guess. lol

Hmm. Yea, your credit may dip for a bit but, if you have no large purchases or anything for a whole may seem of its worth it. Or pay it off and call and ask if they can lower the monthly fee as a long time customer?

yeah, I hate how certain things affect credit and they are certain quick at dropping it.

I bought a car last year (I was rear-ended and they totaled my car) and went to 1 dealership and got dinged 12 times! I think those are gone now but I haven't pulled my report in quite a while. I have the free experian so I know 1 of my scores and can see increases/decreases and a little activity but not a complete report.

It's so hard to get it to go up. Opening my available credit I'd helping. Slowly! lol

[chpmnk1015]

Apr 5, 2024 6:25:29 GMT -5 skipper said:

Apr 5, 2024 6:16:58 GMT -5 chpmnk1015 said:

Hmm. Yea, your credit may dip for a bit but, if you have no large purchases or anything for a whole may seem of its worth it. Or pay it off and call and ask if they can lower the monthly fee as a long time customer?

yeah, I hate how certain things affect credit and they are certain quick at dropping it.

I bought a car last year (I was rear-ended and they totaled my car) and went to 1 dealership and got dinged 12 times! I think those are gone now but I haven't pulled my report in quite a while. I have the free experian so I know 1 of my scores and can see increases/decreases and a little activity but not a complete report.

It's so hard to get it to go up. Opening my available credit I'd helping. Slowly! lol

You are doing great!! You have a plan!! If you are not on it, the money matter board has a lot of great people to run stuff off of. I've learned a lot over the years

[skipper]

Apr 5, 2024 6:32:58 GMT -5 chpmnk1015 said:

Apr 5, 2024 6:25:29 GMT -5 skipper said:

yeah, I hate how certain things affect credit and they are certain quick at dropping it.

I bought a car last year (I was rear-ended and they totaled my car) and went to 1 dealership and got dinged 12 times! I think those are gone now but I haven't pulled my report in quite a while. I have the free experian so I know 1 of my scores and can see increases/decreases and a little activity but not a complete report.

It's so hard to get it to go up. Opening my available credit I'd helping. Slowly! lol

You are doing great!! You have a plan!! If you are not on it, the money matter board has a lot of great people to run stuff off of. I've learned a lot over the years

thanks...

[cheeseplease]

My bank gave me a line of credit at half the interest rate of credit cards. If you have the discipline to not reuse the cards, then that is saving you money as well. It has worked out great for me. I much rather have all of that combined into one payment and see the balance dropping right there on my account.

[meanie]

I would pay the highest interest one first and only pay minimums for the rest. What is your main goal - paying down debt or raising your credit score? The don't necessarily go hand in hand.

[quesyrah]

Apr 5, 2024 6:25:29 GMT -5 skipper said:

Apr 5, 2024 6:16:58 GMT -5 chpmnk1015 said:

Hmm. Yea, your credit may dip for a bit but, if you have no large purchases or anything for a whole may seem of its worth it. Or pay it off and call and ask if they can lower the monthly fee as a long time customer?

yeah, I hate how certain things affect credit and they are certain quick at dropping it.

I bought a car last year (I was rear-ended and they totaled my car) and went to 1 dealership and got dinged 12 times! I think those are gone now but I haven't pulled my report in quite a while. I have the free experian so I know 1 of my scores and can see increases/decreases and a little activity but not a complete report.

It's so hard to get it to go up. Opening my available credit I'd helping. Slowly! lol

It’s so frustrating because it feels as though you have to always utilize debt to have a good score.

After we paid off all our debt we actually closed the cards. Our scores took a dip, but it wasn’t too bad. After about 5 years we each opened a new card and our scores went up. We rarely use them, but maybe just enough to not tank our credit. Mainly we use them to book airfare and hotels and when we travel.