Best Tips:Paying CC Off When Tight

Charge on LOWEST rate card...pay as much as you can towards the HIGHEST rate...

Eventually you will be able to get a few BT'S @ 0.00% (CITIBANK, CHASE) or 4.25% (BofA)

Not a solution for SOME...but spreading out the DEBT among other cards might help in "TIGHT" times...(5 cards @ $10 per card is better than 2 cards @ $50 each)

 

Use somebody elses cards...

 

When you get the highest rate card paid off, add the amount you were paying towards that card to the next highest rate card, and so forth, until they're all paid off. Sock-drawer them as they're paid off.

Called the snowball effect, eventually you'll be paying all of your budgeted amount for credit card payments on that last card and the balance will drop dramatically every month.

Here's what we're doing, as an example:

cc1, 29.9% (guess who? lol) - $296/mo.
cc2, 23.99% (guess who again) - min payment of $45
cc3, 18.5%, min payment of $15
cc4, 15.5%, min payment of $15
cc5, 9.9%, auto payments of $75 already set up so I'm not messing with it

In 4 months when cc1 is paid off, I'll add the $296 to the $45 for a total of $341/mo payment to cc2.
When cc2 is paid off, $341 + 15 = $356/mo to cc3.

cc4 will then get $371/mo.

cc5 will then get $446/mo until they're paid off. Unfortunately this is also the one with the highest balance.

Once that's done, I'll send an extra $200/mo to my student loan company, and enjoy the other $246 added to my entertainment budget. In the meantime, ANY extra money I get (tax refunds, christmas money, etc.) will go to paying off whichever cc we're working on at the time. Estimated date of payoff right now is 4/2004, not counting any extra payments. So a year of tightening our belts a little more will help put us completely out of cc debt, and then any purchases will be paid in full that month. I've learned my lesson!

 

I'd start with the lowest BALANCE first to pay off using the snowball effect. It'll be gone the QUICKEST! Then use the same money towards the next smallest balance until you've got a massive payment going on a large balance.

You'll be paying them off so fast that you really won't care what your rate was because your NET INTEREST PAID will be rather minimal.

If only I can follow my own advice . . .

 

Oh yeah!

If you can add a few extra dollars to each minimum payment WHILE adding the majority of your extra money to your smaller balance, it'll be gone that much quicker.

Also, be aware which types of loans you are / should be paying off. Loans may have higher interest rates, but they'll be paid off in a FIXED amount of time. Lines of Credit can carry balances for FOREVER.

My own example:
Wescom Visa: $955
WFB Visa: $3300
Wescom Loan: 3800
OCCU Loan 2817

My loans are automatically going to be paid off in 4 years. I'm not too worried about paying them off that fast because revolving credit balances are really detrimental to my scores.

Any other ideas?

 

Clark Howard said that you can pay twice a month and save a bunch of interest. And pay it off much, much faster.

I cant remember how it works but I posted it here awhile back. Try a search or take a glance at his book. Or maybe website?

 

You DON'T need a book...just send 2 payments...or do 2 payments ON-LINE...

Payment #1 in the first week for the min. or more...
Payment #2 a week before the due date for as much as you can...

 

The book was to explain how it pays it off much quicker..something to do with the billing cycle.

I can't thibk now because its too late and I am tired.

 

I always want to pay off my lowest balance first, but in my case all my low balance ones are MED bills and are 0% interest, so all they get is the minimum.

I believe waalien said once one is paid off add that amount to the next card. YES YES YES!!!!

BTW Nana tip #3...cut up the cards! hehehehe

 

I would NEVER pay off my 0.00% cards before my 9.99% cards...BUT THAT IS ME!!!

I pay the min. (or a little more) on the 0.00% cards till the last month then PAY IN FULL...

 

I agree with this method, Nana. I'm going to start this month attempting this and hope it works out.

 

Personally, I'd recommend this method. Obviously there are two schools of thought on how to best pay down debt.

1. Paying the lowest balance gives the faster gratification in having something paid off. For some this is important and a great psychological boost.

2. Paying the highest APR first saves the most money. I LIKE keeping more of our own money.

(I like method #2 with monitoring the total of interest paid each month. THAT should help with the quick gratification point too.)

DemPooches

 

Great thread! I'm in the same boat. Credit reports look great, but the only way I'm going to get any score boosts is to pay down balances. Creditexpert now shows me at 100% utilitzation, folks...lol. Can we say plumetting score???

I'm all ears


L

 

1. Dempooches is right.

2. Tip #3. Figure out when your cc is reporting and get your payment in to them before that date.



0, zero, zip, zilch, nada, null (aliases for my FICO)

 

Another tip for someone with little will-power. The hardest thing for my fiance and I to pay off our debt was to quit using the cards. So I put them in a plastic sandwich bag, then in another sandwich bag filled with water, and put the whole kit and kaboodle in his mom's freezer. My fiance jokes that I "froze his assets"! I didn't bother explaining that cc are a liability, NOT an ASSET!

 

I think most of us would pay down our cards if we just had the cash. So here are some tips for finding extra dollars to pay down your credit cards (from one of our publications):

Save energy.
Deregulation in some states has allowed electric and natural gas suppliers to compete for your business. Shop around for better deals. A more energy-efficient home can also help. There are some services both on line and in person which can give you an analysis of your home and make suggestions.

How about doing the simple things like turning up the thermostat in the summer and down in the winter to save on heating and cooling costs? Shutting down the computer when not in use? Turning off the lights when you leave the room?

Mortgage.
Are mortgage rates so favorable right now that you could refinance and get a lower payment? How about getting rid of PMI (mortgage insurance)? Mortgage insurance is very expensive, but you can usually stop paying it once you have 20% equity in your home. If the value of your home has increased, contact your bank to learn how to stop paying this insurance.

Lower your long-distance bill.
Examine your phone bills to see what you're paying for local, long-distance and wireless service. There are so many choices now to choose from, you are bound to find a better deal. Also, many people are choosing to use their cell phone free long distance minutes rather than the more expensive land-line calls.

Coupons.
We all hate â??em, but they do help to save you money. Do a little homework: can cutting coupons make a difference in your grocery bills?

Use your local library.
Do you really need things like cable TV? How about borrowing movies from the library rather than renting them. And while weâ??re talking about the library, how about borrowing books rather than buying them? Iâ??ve also heard many libraries have computer games for rent as well. Most libraries allow free use of the Internet as well, so you can think about canceling your internet access account.

Cut down on the use of your car.
The expenses here are not just gas, but the wear and tear on your car. Can you use public transportation, walk or bike to work, carpool? Not only are these great ways to save money, but youâ??ll have a better social life and be in better physical shape to boot?

Pack Your Lunch
Most people spend $5 - $9 each time they go out to lunch while at work. Most packed lunches of an apple, cookies or chips and a sandwich cost about $2 to make. Many micro-wavable lunches cost $1.50 - $2.50. You do the math.

Convenience foods are expensive
Have you heard the one about the frozen peanut butter and jelly sandwiches or the frozen micro-wavable baked potatoes? Itâ??s not a rumor. A little extra effort in the kitchen can save you large dollars.

Avoid buying coffee in coffee houses
If you stop for coffee each morning on your way to work you're probably spending between $1 and $3. Bringing a thermos of coffee from home to work could save you $5 to $15 per week.

Free Checking
Another no-brainer way to pare expenses is by finding a checking account that's right for you. Don't let bank fees steal your money. Many programs offer reduced or no fees if you keep an account balance above a certain limit.

Avoid recreational shopping
For some people shopping at the mall is a way to unwind and relax. However, this can get very expensive if youâ??re buying things you donâ??t need. Find another outlet for yourself or cut down on trips to the mall.

Pay your bills on time to save on fees and penalties.
Credit card companies charge errant customers hefty fees for minor infractions. Pay your bill a day late and you could get slapped with a $29 fee. If the fee pushes you over your credit limit, bang, another $29 can hit your account. That's $58, for nada.

 

Great post, Kristy!