Credit card payment question... - Page 2

[MsFortune]

I do agree with DR on this - even if for long term finances it makes sense to pay off the highest interest first, there is some satisfaction that comes from paying off a card entirely. If it keeps you motivated to keep paying off debt, and makes you want to keep going, that makes more sense than the small amount of difference in the interest rates.

[velochic]

Originally Posted by MsFortune 

I do agree with DR on this - even if for long term finances it makes sense to pay off the highest interest first, there is some satisfaction that comes from paying off a card entirely. If it keeps you motivated to keep paying off debt, and makes you want to keep going, that makes more sense than the small amount of difference in the interest rates.
 

Correct me if I'm wrong, as I'm not a DR follower, but doesn't he advocate paying off the LOWEST BALANCE first, no matter what the interest rate is?  He goes more for the emotional angle than the practical one, which is what Suze Orman advocates.

OP - Unless it's causing you so much undue stress that it's affecting your mental health, I'd still go with what I first suggested, even if it means there will be balances remaining on the cards.  I guess I read your post that those smaller balances were totals owed and not partial totals.  What are the actual balances, then?  Can you still pay them off, leaving just the one large bill?

Another thing to be cautious of is why you accumulated so much debt.  Don't let yourself pay these off, then start using them again with teaser rates.  Get to the root of why the balances got so high in the first place.  (Especially as you say that you're not on solid financial ground.) Good luck!
 

[cristina47454]

Velochic, I think the poster before you worded her post a little confusingly, but when I reread it I understood what she meant, and it is line with DR methodology.

Yes, I'm going to pay off highest interest rates first.  The remaining balances will be paid off by Oct (except for the huge one, obviously) and we are not using the ccs anymore, although I almost got tempted by a groupon this morning (!). No more spending til this thing is under control.  That's another reason I feel so strongly about paying them off and not settling or defaulting. This is pain that I will not forgot or go back to! And it's not a situation we will ever be in again...dh had been self employed for several years, always waiting for his next project or next break and the ccs bridged the gap for years. We know better now, thankfully, although it was a hard lesson.  And dh is now working for a company as an employee, which means steady paychecks and steady progress...

[heatherdeg]

Quote:

Originally Posted by cristina47454 

The math isn't quite accurate....once the numbers I posted are paid off, there will still be balances left on the first two cards, just at negligible interest rates.  So the minimums might go from $160 to $60...something like that. I did some rough math and that's about where it lands.  I'm going to call Discover tomorrow just to make sure my math is in the ballpark.

And this was my question:  how much are the TOTALs on those first three cards.  Because that's going to make a huge difference.  If you're not fully removing the minimum payments like velochic's post assumed, then nobody can really help figure out the best option because we can't calculate your monthly min payments.

[A&A]

Originally Posted by velochic 

If you pay down the $40k by $10k (the amount you have to work with), you save $235/month in minimum payments.

If you pay all of the 3 smaller ones off plus use the remaining $5k to pay down the large one, you save $435/month in minimum payments.  You will have the one large payment, but instead of paying $1160/month total, you will be paying $725.  So, in the end it turns out that not only will paying off the highest interest cards save you money in the long run, but it will make your monthly payments lower, too.  At least that's how it works out with the numbers you gave.

Oh, and please, please, please don't trade unsecured debt for secured debt by paying credit cards with a home equity loan.  That is like... a cardinal sin, financially.  Especially if you are on financial rocky ground.

I completely agree with all of this.

[LadybugMamma]

We had a similar goal, cut back monthly minimums. What no one has mentioned are the obsurd late fees and overlimit fees you will see if you end up with a handful of cards that can't get paid each month.

What we did, paid off the looming promo balances first, then using the income I was confident we would get each month, I wrote down a plan for how much to pay to each card, taking in consideration interest rates and later promo dates. Setting our focus to several cards at once. What I did was take the promo amount and decided it by how many weeks letf before it expires (minus a few for wiggle room, were paid weekly) put that amount in the plan, the rest of the income was set to pay the next highest apr. We paid off 6 cards in 3 months. Now, we are confident we can handle our minimums so we are paying the highest interest rates. If we were to get a lump sum though, we would pay off multiple smaller balance cards first though.

[tinuviel_k]

I agree with paying off the three smaller balances first, then throwing the extra $5,000 at the larger balance and increasing your regular payments to the larger card.

[berkeleyp]

Forgive me if this has already been mentioned but did you consider making a settlement on one or more of the cards.  Sometimes the credit card companies will forgive up to half the balance if you pay the other half in one lump-sum. I'm sure this isn't good for your credit and you have to pay income tax on the amount of forgiven debt but with such a large amount of debt, this might be a good option since you have the available chunk of money.  Also, have you considered meeting with a financial advisor.  They might be able to help you, especially if they have the opportunity to invest some money for you.  They often get kick backs from the investments rather than from their clients.

[cristina47454]

Originally Posted by berkeleyp 

Forgive me if this has already been mentioned but did you consider making a settlement on one or more of the cards.  Sometimes the credit card companies will forgive up to half the balance if you pay the other half in one lump-sum. I'm sure this isn't good for your credit and you have to pay income tax on the amount of forgiven debt but with such a large amount of debt, this might be a good option since you have the available chunk of money.  Also, have you considered meeting with a financial advisor.  They might be able to help you, especially if they have the opportunity to invest some money for you.  They often get kick backs from the investments rather than from their clients.

I've looked into charge-offs and hung out on creditboards.com. I haven't done enough research to know ALL the pros and cons of going that route, but we are current on all of our bills and always have been, and last time I checked our credit score was in good standing (it may have changed considering all the credit line decreases). Our current plan has us debt free in 2 years...I kind of feel like we should just suck it up and pay it off. We are renting a house and hope to buy in the next couple of years...if it takes 2 years to  pay off the CCs, it'll take another two or three years to save up for a downpayment. Thats 5 years. It occurs to me that if we go the route of having the ccs discharged we're looking at the same kind of timeline...

Anybody want to chime in on this?

(and I think that if you are insolvent, you don't pay tax on discharged debt, but not sure whether we are insolvent)

[A&A]

Originally Posted by cristina47454 

I've looked into charge-offs and hung out on creditboards.com. I haven't done enough research to know ALL the pros and cons of going that route, but we are current on all of our bills and always have been, and last time I checked our credit score was in good standing (it may have changed considering all the credit line decreases). Our current plan has us debt free in 2 years...I kind of feel like we should just suck it up and pay it off. We are renting a house and hope to buy in the next couple of years...if it takes 2 years to  pay off the CCs, it'll take another two or three years to save up for a downpayment. Thats 5 years. It occurs to me that if we go the route of having the ccs discharged we're looking at the same kind of timeline...

Anybody want to chime in on this?

(and I think that if you are insolvent, you don't pay tax on discharged debt, but not sure whether we are insolvent)

Personally, from a moral standpoint, I think you should pay off your debts yourself if at all possible.  It hurts our entire economy when people don't.  (And cc companies won't even think of bargaining with you until you're 180 days delinquent on your account.)

I would pay off as many of the smaller balances as you can with the 10k, because I really do believe it gives you a psychological boost.