DEBT!

"Steve is equipped with Electronic Fool Injection" (itsalwayssteve)
11/18/2015 at 09:43 • Filed to: None

So, in the grand scheme of things, my wife and I don’t have a whole lot of credit card debt. It’s a total of about $5,000, and we could conceivably pay it off in the next ten months. The issue, however, is that it’s spread across ten credit cards. Ten! So we have to budget nearly $350 per month if we only want to make minimum payments.

That’s a car payment every month just to keep credit cards paid on time. So...

We’ve got a plan and a goal. By September of next year, we’re going to get it all paid off. The highest interest rate card is first priority, so we’re going to pay it down more and then hopefully when our grants come through from school, we’ll pay off the rest.

It’s hard to get ahead when 90-95% of your income is used to keep ahead of bills and the costs of living. I’m considering getting a second job through the new year until my 12-hours of class start in the middle of January.

DISCUSSION (39)

RazoE > Steve is equipped with Electronic Fool Injection
11/18/2015 at 09:45

You’re doing it all wrong. Consolidate those 10 cards into 1 lump sum. You’ll have only a single payment, usually with a lower interest and it’ll be a lot easier. That said, if you want to keep each card separate, pay off the LOWEST amount FIRST. Once you pay it off, snow ball that payment, into the next lowest, and so on.

deekster_caddy > RazoE
11/18/2015 at 09:48

The snowball plan works really well. Make the minimums on all of them and pay off the smallest first with all the extra, that’s easiest. Each time one gets paid off you shove the extra money towards the next smallest.

Steve is equipped with Electronic Fool Injection > RazoE
11/18/2015 at 09:48

The issue with that is that we’re also working with FICO scores on the wrong side of 650, we don’t own our home, and neither of us has been on our current job for more than two years. Banks tend to not like those numbers for debt consolidation loans.

RazoE > Steve is equipped with Electronic Fool Injection
11/18/2015 at 09:51

$5k is nothing for a large institution, such as Wellsfargo (which I love), or, say Chase. You should also look into a Credit Union, as they tend to lend more for less. I use NuVision Federal, not sure if they have locations in your area, but I’d take a look.

Party-vi > Steve is equipped with Electronic Fool Injection
11/18/2015 at 09:53

I’m in a similar boat - same amount of debt but on one card. It’s a PITA when I make three times the minimum payment only to put another couple hundred bucks on it again in the same month -_-

deekster_caddy > Steve is equipped with Electronic Fool Injection
11/18/2015 at 09:55

Even without a debt consolidation you can use the snowball plan. If you are talking under a year to get them paid off it’s not really worth refinancing them all. Just start paying.

Ash78, voting early and often > Steve is equipped with Electronic Fool Injection
11/18/2015 at 09:56

If a bank doesn’t do it for you, try a promo rate on a credit card. A lot of those “0% for 12 months!” deals might not work with your credit score, but I bet you could get under 10% and might be able to consolidate all of them for $50-$75 in fees. Your credit score should jump quickly once you close down all the extra cards.

Sure would make life simpler.

When my wife and I first started out, job #1 was getting rid of credit cards. Now we only have a mortgage and a car loan and work hard to keep it that way. We basically break even, but there’s a lot of peace in not going into debt.

deekster_caddy > Party-vi
11/18/2015 at 09:56

Yeah, the hardest part is to stop using it in the first place. We’ve been making that transition and it took a couple of months to get the ball swinging the other way so we don’t need to use it anymore.

Steve is equipped with Electronic Fool Injection > Party-vi
11/18/2015 at 09:56

Yeah - I’ve been there. A trip to the Urgent Care the other week led to a $350 bill between the $75 copay and $275 in meds to clear up my infections. If the FSA plat at my wife’s job was like literally any other FSA we’ve used, we would have put $2000 or so in it. But instead of the FSA debit card, it’s a reimbursement plan that takes 30-60 days to pay back. Screw that noise.

spanfucker retire bitch > Steve is equipped with Electronic Fool Injection
11/18/2015 at 10:00

Either consolodiate it with a personal loan (That’s the route I went with two credit cards) or open up a new card with free balance transfers and something like 12 months of no or lower interest. Put all of your disparate balances on that one card, and pay it off in a lump sum each month.

Steve is equipped with Electronic Fool Injection > Ash78, voting early and often
11/18/2015 at 10:03

My wife was sick and on disablity for a good portion of last year so we wound up using them for basic living expenses and now they’re all around 80-85% of their balances. Once we’re out of school in two years we’ll have 2-300 a month in Student loans to pay so we’re looking for that and hopefully a bigger income to offset that.

minardi > Steve is equipped with Electronic Fool Injection
11/18/2015 at 10:03

Keep 2 credit cards, no more. Pay the other ones. As you bring them to zero, cut them up.

Rico > Steve is equipped with Electronic Fool Injection
11/18/2015 at 10:12

You could see which of your cards is offering a balance transfer promotion. Many cards will let you do a balance transfer from another Credit card and give you something like 0% interest for 12 months. That would help you considerably with the high interest debt.

Tripper > Steve is equipped with Electronic Fool Injection
11/18/2015 at 10:12

Get you an 0% card. Then call them or use the checks that they usually send with the new card to pay off the others

Aaron M - MasoFiST > Steve is equipped with Electronic Fool Injection
11/18/2015 at 10:13

Look for a promo credit card that offers free balance transfers for six months. Then, consolidate. Even with a 650 there’s bound to be one credit card offer that has 3-6 months of promo. Admittedly the APR once the promo is over will be around 22.99%, but if the plan is to stop having credit card debt that shouldn’t matter.

TheBloody, Oppositelock lives on in our shitposts. > Party-vi
11/18/2015 at 10:32

Best bet is to see if you can’t get a personal load with a lower interest rate and just pay off the card. Don’t close it though as that will reflect negatively on your credit score.

Brickman > Steve is equipped with Electronic Fool Injection
11/18/2015 at 10:33

Sounds like you need chapter 13 bankruptcy. My parents had to do that. With the credit card bills it’s like paying for two new cars, but no new car. Had to cut back on food and couldn’t pay utilities. You have to still pay back the credit cards, but you are paying much much less and no intrest.

random001 > Steve is equipped with Electronic Fool Injection
11/18/2015 at 10:50

Can you do balance transfers from those 10 cards to 2 or 3? That would be easy and require no credit checks or anything on your side.

miadaman? yes please > Steve is equipped with Electronic Fool Injection
11/18/2015 at 10:50

I will third the suggestion for 0% promo cards, as long as you have a proven track record of employment and are straight forward about what you’re using the credit card for they will approve it. This will also be a good chance to snowball your debts into one place.

DoYouEvenShift > Steve is equipped with Electronic Fool Injection
11/18/2015 at 10:52

We went to a bank and got a loan for about that same amount. Same situation, about 5-6k among several cards. So we paid them all off with the loan and paid the loan off in a year.

Party-vi > TheBloody, Oppositelock lives on in our shitposts.
11/18/2015 at 11:03

Am I a bad consumer if I don’t know my interest rate on my card? I might look in to that.

OCD-CO > Steve is equipped with Electronic Fool Injection
11/18/2015 at 11:14

$5k?! Try $30K credit debt, mortgage, 3 car notes, 2 student loans, kids, and the rest of life!

My Wife and I are in that lovely boat. I was laid off last New Years Eve and was unemployed for 6 months. Now we have credit debt out the wazoo.

Ironically though our FICO’s are outstanding. I could finance a Ferrari. But the problem is the debt to income ratio. That is what hurts on a consolidation loan.

I am currently working with three lenders to try and get a single loan just for the credit cards. Because of debt to income ration I can’t qualify for anything higher than $25k.

Yes boys and girls, credit debt is a bear!!!

Stay away from things you can’t afford and do not buy on credit!

TheBloody, Oppositelock lives on in our shitposts. > Party-vi
11/18/2015 at 11:17

Yeah, it might not be that big a difference but every little bit counts.

Luc - The Acadian Oppo > Brickman
11/18/2015 at 11:18

Any sentence with the word bankruptcy for such a small amount sounds like a TERRIBLE idea.

The damage that would cause to your credit score is way worst than the 5g’s of debt.

Luc - The Acadian Oppo > Steve is equipped with Electronic Fool Injection
11/18/2015 at 11:28

I have ONE card and I use it for one thing only. Online purchases. I only do online purchases if I have the money to pay it back in my checking account.

EX: I buy something today online. Tomorrow when it shows on my credit card I pay it off in full.

Credit cards is the EASIEST way to totally fuck you up financially do not ever use it unless your life depends on it. EX: food(not restaurants) or medical expenses.

I was in the same boat a few years back with about 6k on that one card. I ended up living on cereal and ramen noodles for almost a year to pay that sumbitch off. Still to this day was the smartest thing I’ve ever done.

When you have no debt you would be surprised by just how fast you actually build up money.

I have a mortgage and one car payment. That is it. everything else I either buy cash or I don’t buy at all.

Nothing worst than paying $350/month for minimum payments when the minimum payments will do NOTHING to pay off the balance. If you paid only the minimum payment you would be looking at atleast another 20 years before it is paid off.

Steve is equipped with Electronic Fool Injection > Luc - The Acadian Oppo
11/18/2015 at 11:30

I posted in another reply:

My wife was sick and on disablity for a good portion of last year so we wound up using them for basic living expenses and now they’re all around 80-85% of their balances.

That’s a major cause of the debt. It’s not like we were just haphazardly spending.

BigBlock440 > Party-vi
11/18/2015 at 11:37

If you pay the card of every month, the interest rate doesn’t matter. If you’re paying interest, yes it would help focus priorities if you knew what the rate was.

Luc - The Acadian Oppo > Steve is equipped with Electronic Fool Injection
11/18/2015 at 11:37

And that is totally understandable and a very valid reason to do so.

The problem you are currently facing is that you are paying ten interest charges. No matter how you slice it that’s not good.

Do you have one card with a high limit that could cover most of the other ones? 5 grand on one card at 23% is actually a lot cheaper than $500 on ten cards at 15%.

Even if you can take the cards and realistically combine everything on 5 cards rather than 10 you are making a huge leap forward.

No one should ever carry 10 cards.

Party-vi > BigBlock440
11/18/2015 at 11:39

I do not pay the card off each month. It’s the only debt I have besides the mortgage.

BigBlock440 > Steve is equipped with Electronic Fool Injection
11/18/2015 at 11:44

2nd (or 10th, whatever) the balance transfer thing. In the beginning of the year, my wife had that amount two of her cards from wedding expenses but didn’t want to tell me about it. $250/month in interest gone with no gain. I used a balance transfer promo from one of my cards to pay off both of her’s, what I couldn’t afford to pay off right there, and my card had a better interest rate anyway (17% vs 23% for her’s). Luckily it was around tax time and filing jointly basically doubled my return, so I was able to pay off the balance transfer after that came in. But yeah, 10 payments is bad. Do something about that.

Steve is equipped with Electronic Fool Injection > OCD-CO
11/18/2015 at 12:35

I mentioned in another reply that student loans are forthcoming. Right now we’re both in school and hopefully this will translate into a more lucrative career path. That will make things easier.

We still owe ~$10k on the car, 40k in student loans between the two of us, and a pile of medical bills that could pay for a new Civic or Elantra. Plus another ~$250/month for medication/therapy/doctor visits and it can be a bit overwhelming. If I could work in a way that utilizes my skillset and talents and make ~45-50k per year we would be fine. In the meantime I’m going to stay at my current low-pay-low-stress job and finish my degree.

Eric @ opposite-lock.com > Ash78, voting early and often
11/18/2015 at 12:36

Gah, this is terrible advice. NEVER close a card unless the lender defines cock-up.

Also, if you can get such a low percentage rate card, you can probably get a card that will give you a 0% intro rate for 6-12 months, which you might as well get to save on interest. It also increases your available credit, which will increase your score.

My parents are an epic failure when it comes to finances (I try to avoid talking to them, they’re that bad) and have crap for a score, but they have been playing the balance transfer merry-go-round for at least 30 years now (though, last I heard, they gave in to some hard-sell debt consolidation place that obliterated their credit). Their crap score is (was) in spite of somewhere around 4-5 times the value of their house in credit lines.

Eric @ opposite-lock.com > Luc - The Acadian Oppo
11/18/2015 at 12:44

No it isn’t, your math is broken.

There is so much bad advice and math in this thread. No wonder people are in debt up to their eyeballs.

Luc - The Acadian Oppo > Eric @ opposite-lock.com
11/18/2015 at 12:53

I don’t know how it works in the States but in Canada if you have many credit cards it WILL hurt your score.

What happens is if you ever want to get a mortgage or car loan ect. They will look at the credit cards you have and determine if you had all of those maxed out what you would be paying in interest and deduct that from your available monthly income.

So even if you do not carry a balance on any those cards it will still “act” like you do. As in if you had all these maxed out could you still afford your mortgage? It messed with your debt to income ratio.

1 card is plenty.

Eric @ opposite-lock.com > Steve is equipped with Electronic Fool Injection
11/18/2015 at 13:20

Pay it all off ASAP. Other stuff can wait. Compounding interest will kill you.

Definitely pay off the highest-interest one first. Consider getting a card with a balance transfer promo to make it easier to pay off, but ensure the card used as a balance transfer destination is all paid off before the promo period expires. Chase Slate (my recommendation for numerous reasons, if you can get it) and American Express Everyday (I’d actually get this as a normal card; using it just for a balance transfer is wasting the bonuses) have a 0% for 15 months deal with no transfer fees during the first 60 days. Get enough of them to cover your entire balance (this has two effects - it reduces your interest and increases your credit limit (which helps your credit score, and as you pay it off you’ll end up with that much higher a score)). Aim for 9-10 months to pay it off, holding the flexibility of the longer term in your back pocket for if you cannot make ends meet at some point (but don’t abuse it!). Do not use the balance transfer destination card(s) for anything else until it is paid off. In the worst case, get whatever limits you can on one (or more) and pay the minimum on it until you have higher-interest debt paid, then pay this one off. It sounds like a juggle, but your prime objective is to minimize the interest you pay.

Don’t worry about the number of cards your debt is on. This doesn’t matter aside from your aggregate interest rate (which depends on the balances on each one). Worry about how much it costs you over the long term. Only caring about your minimum payment is how you stay in these kinds of messes. Thinking it is just $350 (minimum payments) is a trap because you will never get out of debt paying that amount. Your 10-month ~$550/month plan is good. Stick to it and utilize #2 to get it paid off faster.

Learn to use cards responsibly. Don’t use them if you don’t have money in the bank to pay them. I never do and have never paid interest. I get all the benefits of a credit card without the drawbacks. Also start a rainy day fund after you get out from under this, since it can help you avoid going into debt in the first place.

Closing cards will hurt your score because it reduces an important factor in your score: Your available credit (that is, the limit of all your cards added together). You don’t want to hurt your score in this process.

Living paycheck-to-paycheck is a fact of life for many. The best advice I can give is, if you can, don’t start spending the money you used to pay off that debt. Save it or invest it. Don’t think of it as part of your income. Set a budget that is well below your net income (say, 75% of it) and stick to it. When things happen (and they will), you won’t need to stress about it.

Hopefully that helps some.

Steve is equipped with Electronic Fool Injection > Eric @ opposite-lock.com
11/18/2015 at 13:35

That’s all good advice - and stuff that I know about.

Points 4 and 6 are excellent but when my wife was sick and my income wasn’t enough to cover living expenses and medical bills, that’s where most of the debt came from. All of our savings was exhausted, and my paychecks were going to immediate-need expenses, like keeping the phone and lights on and keeping the car note paid. Sometimes life gets in the way of the best financial plans and there’s no reason to denigrate anyone for having to go into debt to keep from getting evicted. If my in-laws didn’t let us move into one of their four houses we would have been in a much worse position.

Eric @ opposite-lock.com > Luc - The Acadian Oppo
11/18/2015 at 13:35

You are confusing two completely different things here and don’t have even a marginal fundamental understanding of how credit is scored. Trust me, you’re not alone. The number of myths and beliefs about credit borders on a religion.

Credit limit doesn’t matter. If people are willing to extend you more and you don’t use it, you are seen as a better credit risk. What matters is your utilization. Keep your utilization low over the long term. They’re looking for responsible credit management, not whether you’ll do something stupid.

For best results, you want a lot of available unsecured credit limit, low utilization of that limit, long account/credit history, and a flawless payment history.

Eric @ opposite-lock.com > Steve is equipped with Electronic Fool Injection
11/18/2015 at 13:45

That’s super rough and I see why you did it. You’re on the right track, so I’m sure you’ll get out from under it. The fact you already had some savings is impressive - many people don’t have any.

Good luck. Let us know what direction you went and how it all goes.

Ash78, voting early and often > Eric @ opposite-lock.com
11/18/2015 at 14:30

Too many cards does hurt. If I wanted to post a longer version of it, it would be more like “just keep the 2-3 open that you’ve had the longest.”

I focus more on keeping my utilization rate below 30% or so (across all revolving lines), which means 50%-75% on my main card — paid in full every month — and 0%-5% on a couple other cards.

Length of credit, never missing a payment, low utilization, having at least one installment loan or mortgage, and keeping your “hard pulls” to a minimum (ie, not shopping credit) are, IIRC, universal metrics used by all three bureaus to varying degrees.

I’m in finance, but not directly in the consumer lending world anymore, so correct me if that’s off base...