What to pay off first!

I am with you , girl! I need to leave my cards at home, too... I really do. I just can't seem to control myself when it comes to shopping!!
I have a three year old son and he's the one I really can't stop shopping for. When I go to places like Baby Gap or Kids Foot Locker, I don't come out for a while! =0) So I guess I'm in debt while my son looks good...LOL

 

Typically, paying the balances with the highest APR is where you want to go. However, there are many who believe that you have to carry a balance (20-25%) utilization. I think this only raises your internal rating with the creditor though, I am not quite sure what this does for your credit score.

I think your move to pay off the part of your Household balance that is at 22.9% APR is a good one. I don't know what you rates are on your other cards, so I am not sure about paying off the Discover and Providian balances.

Have you thought about merging your GM and Household cards and getting that promotional rate applied to those entire balances?

With respect to the shopping, I empathize with you....I LOVE LOUIS VUITTON.....Yet $8k later in card debt and nothing to show for it except treated pigskin this is what works for me.....

Leave your cards at home. Take one emergency card (your card with the lowest limit) and debit cards. If you don't have them with you, you can not charge. For me, spending cash is a lot harder than charging it to my Amex.

Are you still at MBNA? I need some advice on how to deal with the Exec Office there. I have a gold option installment account with major delinquencies (although I am now current). How do I go about approaching them to 1) remove the delinquencies from my report and 2) give me a second chance with respect to lending (The New Beginner's Program is for credit cards only)? You can drop me an e-mail through creditnet if you prefer, mine is on.

 

PSU Girl,

Do you have an emergency fund.?I think it is important to have a cash reserve to use as an emergency instead of a credit card. You'll not accomplish much by paying down some cards and then, something unexpected happens with your car or whatever and you have to put the bills on the cards. Also, do you have a job lined up after graduation? If not, it may be prudent to have some money saved for living expenses until a regular paycheck starts to arrive. I think you'll be in much better longterm shape with savings as a source of funding as opposed to credit cards. Until the e-fund is established and, future job prospects are defined, I'd suggest paying miniums on the cards.

 

PSU Girl,

I have adifferent opinion about savings and emergency funds. All I can say is I hope you never have an emergency where your only source of cash is the credit cards. If that's the case, you'll be much worse off over time. The trick to getting out of debt is to first of all make sure you place yourself in a position where you won't add to the debt if something unforeseen occurs. Once you've established yourself, then you attack debt aggressively. Use cash for emergencies not credit.

 

You have alot to learn.

 

PSUgirl, let me play the "hardass" for just a moment.

You happened to refer to your "credit addiction," and I'm a former substance abuse counselor. The first thing we would do if you came to treatment for, say, an addiction to alcohol would be to confront your denial. While working in the chemical dependency field, I always noticed that even the people who presented for treatment willingly and who readily admitted their problem still seemed to have a shred of denial here or there that would eventually manage to get them drunk again -- even though they had the best of sincere intentions to quit at the beginning. For that reason, sometimes the "mean" counselors (the "hardasses," lol) are the ones that may eventually save somebody's life because they're not shy about pointing out anything and everything. If you'll indulge that metaphor, I'll give that approach a whirl with you. Let's begin with "confrontation" (the usual first step in addictions treatment).

1) You seem very casual (or, to put it differently, very "parties, love, and happy valley" lol) about the fact that you're $13,046 in debt while still a student. I realize that you're counting on the probability that you'll have a nice job after graduation, but frankly $13,046 of debt with no current full-time job is something that would have me running scared if I were in your situation. We psychologists would hypothesize that you are "minimizing" the problem when you mention, for example, cards with no balances in same breath as the others ("NY and Company, 300 limit, 0 bal") or when you discuss possible solutions in terms like "Then as the semester progresses, if I happen to come across some money..." Given the extent of your debt load, that is really dangerous thinking. You may not happen to come across some money. Even worse, you may not get or keep the job you're expecting. Now, hopefully, of course, all good things will come to pass, but there is always the other possibility.

2) Even though you very carefully and methodically listed each card with its balance, when it comes time to carefully and methodically listing each source of real money (i.e., cash on hand) your math gets a bit sketchy. The "mean" addictions counselor inside me views that as a tiny patch of cloth that could grow into a full ream of relapse down the road. If you plan on paying a semester's worth of rent (4 months), car payments (5 months), and car insurance (5 months), then you've already committed $3,998 of the "around 5000 + some other moneys (from paychecks and so forth)" you mentioned. Now, assuming that you do have the full "around 2500 left" you discussed, that would leave $10,546 of leftover debt assuming you put the full amount toward that debt -- which would leave nothing for personal spending (only $20 every other week??), food, hair care, gas, or rental insurance.

3) It's great that you acknowledge being a compulsive spender ("I AM A SHOP-A-HOLIC.....I LOVE TO BUY THINGS"), but addiction counselors will tell you that this overt behavior is just the tip of the iceberg. What's even more important is what's underneath that causes the behavior we can see. This will require a lot of personal growth -- more than you can possibly acquire by simply waiting for somebody's answer on a computer bulletin board. Some of the tough questions you'll need to address: What inside you is empty enough that you need to fill it with "stuff"? (Author Dave Ramsey calls the problem "stuffaholism," which matches the metaphor you used as well.) How do you feel after you've acquired the "stuff"? Is the actual ownership of material items as exciting as the acquisition, or is the thrill the actual act of buying? Under what circumstances would you be fulfilled enough just as you are without having to acquire more "stuff"? How would others view you, and how would you view yourself, if you didn't keep up with "the latest fashion trend" as you put it? You can see that these questions can be somewhat threatening because they require you to look far past questions like "What should I pay off first?" and instead focus on what's going on inside yourself that perpetuates the addiction you mentioned.

4) Addictions just don't go away because you get a job, by the way. Instead, shop-a-holics tend to adjust the level of spending to meet the new, higher income. Without fundamental change inside yourself, it's conceivable that you would simply increase your debt load and end up in the same place down the road or worse. Instead of the $383/month rent, you'll deal with a $3,000/month mortgage; instead of the single $395.74 car payment, you'll deal with two $455 car payments; instead of $13,046 in debt, there may be 3 or 4 or 5 times that amount (not including the mortgage). This isn't unusual, by the way. The very best people can easily slide into these situations -- it has nothing to do with how smart you are, or how great your personality is, or how kind you are, etc. -- rather, it's a very common symptom of the consumer economy in which we live. (Author John De Graaf wrote a great book just this past summer called "Affluenza: The All-Consuming Epidemic" which illustrates just how prevalent overspending has become in our society.)

Ok, I know that's a lot to read, think about, argue with, struggle against, etc., but I hope you will at least give some serious thought to the challenging paragraphs I've taken time to write for you. I hope you realize that I like PSUgirl very much, LOL, and that I'm challenging you to do two things -- 1) take an icy cold, no-jokes look at your overt behavior, and 2) be willing to look deep inside yourself in order to become acquainted with the factors that truly created the problem -- only because I'm trying to help you avoid these situations in your future.

As for solutions, here are a few:

1) Consider selling some of your stuff to pay down your debt. (Dave Ramsey mentions this in his great book "Financial Peace," and I'm a believer. eBay works wonders, even with old clothes.)

2) Pay back as much as you possibly can. I like your idea about paying off the ones with the lowest balances first, because the psychological impact of being finished with one or more creditors is valuble. You'll be able to cross them off your list, and that may give you renewed energy to attack the bigger ones. I believe that this may be even more valuable to you than the more typical mathematical approach (i.e., paying off the debts with the biggest APRs).

3) Get as serious as you possibly can about the spending problem. Don't group it with other unpleasant issues in your life (like having to study -- "concentrate on school instead of what's the latest fashion trend"). Pairing the spending problem with tough tasks like all the studying you have to do may well PROPEL YOU RIGHT BACK TO THE MALL because, in that case, the mall becomes the escape from the more arduous task of study. This is much like the alcoholic lumberjack who says, "What I really need to do is stop drinking and get back to hauling these logs all day long," but who ends up craving a drink just to get a break from the logs. Instead, consider the shopping addiction on its own terms as something separate and apart from everything else in your life. If you MUST mentally pair it with something else, pair it with an alternate pleasurable activity that doesn't require much in the way of money -- i.e., "Whenever I feel like spending money, I go to the indoor swimming pool instead and enjoy an hour or two just relaxing" (or whatever else makes you happy).

Ok, I've devoted the better part of an hour attempting to help you with these "mean" words, and I could go on, LOL, so I think I should just stop. I hope you'll consider all of this in the loving spirit I intended.

Doc

P.S. The addiction to material items is something I personally understand very well. In the early 1980s when I was in my 20s, I absolutely NEEDED the $250 sweaters and the real Rolex watch. I ended up $20,000+ in debt and was hurting badly. I have an addictive personality anyway, and I love "stuff" myself. I remember the night I sat at a $3-a-cup cappuccino shop with a friend just crying about how the hell I would ever dig myself out of the hole I dug, and that was the night I began thinking seriously about what it was inside myself that kept me doing the self-destructive things I was doing. If someone had said any of this to me even the day before, I'd have debated each point (if I was in a good mood -- if not, I'd have bitten their head off). By the next day, though, I would have welcomed this approach -- because I had hit bottom. So, bottom line is I'll totally understand if you feel attacked or criticized, even though that's not my intention. I eagerly await your response, and I hope that at least something here was helpful to you in the long run.

 

PSUGirl,

I'm glad that you admitted you are a shop-a-holic. I was there too. I got myself DEEPLY in debt while in college, and saw my material things disintegrate before my eyes. The only way I got myself out of it was to get rid of the temptation. I cut up all of my cards, the creditors would close them eventually after me not paying them for 6 months or so anyways. I found that spending every night in the bar was the best thing since sliced bread and spent all of my money on that instead of the car note (repo), credit cards (derogs on reports), and insurance for the car (license suspended 3 consecutive times for insurance lapse).

So after all that, I had no money, no car and no license to drive one even if I had the money to. I remember walking to work, I think it was about 5 miles one way, in the snow with no sidewalks. I knew I had to get there, but didn't have a way and there was nothing closer. Then I found a job that paid slightly more and had to walk to the bus stop, around 2 miles. That really sucked because where I lived in the suburbs the bus only came by 2 times a day, morning and night. I'd have to get up at 4am to get ready and walk to the bus at 7am. I didn't start work until 8. Then I'd leave work and get on the bus at 5pm and not get home until about 7 at night. Then I'd sleep all night and do it all over again. I took away the temptation of the bar and the mall. No cards, no car, no license. The only thing I had was money. I started to pay off some outstanding debt, all in collections, and didn't know about payment for deletion, so I still have those notations on my reports.

The only thing I can say, I lived for 5 years without credit cards. If I didn't have the cash to pay for it, I didn't buy it. When I say cash, I mean cash in your wallet, not your checking account or savings account. I also made my ATM card not work my savings account so I could save some money. Remember to pay yourself first. Even if it is only $5 a week, but pay yourself first. You will be able to save for that something nice you want.

All I can say is, you will fall back into that pattern if you don't control yourself and set a budget. Maybe the best thing is to NOT pay all of it off, but put the money into a high APR account and earn some money. Pay the minimums each month. But remember to BUDGET, and include in there that Tommy Bag you want. You are rewarding yourself and paying your bills.

Whatever you decide, good luck. It will take hard work, but I know you can do it!

 

I was simply stating what happened to me, and thought that might help you. If it didn't then don't respond.

I also thought that maybe by placing your money into a high APR account you could make more money during the semester. If you don't want to do that, fine, again, don't respond.

 

PSUGirl,

When I was in college I racked up about $10000 in credit card debt (admittedly $6500 for an engagement ring) before I got out of college. I managed to get out with a good job and fortunately was able to deal with it effectively.

One of the things that helped me the most was a Plato education loan from Wells Fargo bank. They offer educational loans that you can use to pay tution, bills, etc. At the time I was able to get a $15000 loan from them at around 8% interest for a term of 20 years so the payments came out to around $175/month.

Spreading it out for 20 years made my debt much more manageable. Agreeably, the interest over 20 years is ridiculous. However, since I'm making 6 digits now, I will be able to pay this debt off much sooner.

Consider it... go to www.plato.org

It worked for me... but you also have to cut up your credit cards if you go this way.