Which one should I pay?

[leelaughs]

Hello All,

I posted a month or so ago about needed to move out of my house by June.. that is still true. ONE of my problems is that I have a bunch of credit cards (stupid, I know). So the monthly payments hurt me. I came into a little money, some I put in my EF/Moving fund and I have about $1000 to use on my credit cards. My question is which one should I pay? Probably the the one with the highest interest rate, but I would love to be able to pay off at least two and if I do that, it won't happen.. Thoughts? Flame if you have to.. I've had poor judgment in the past and I trying to do better...

card#1 -$170.47 22.99%
card#2 -$408.44 22.90%
card#3 -$466.87 0/24.90%-zero for about 4months...i think
card#4 -$534.63 23.90%
card#5 -$789.50 29.99%
card#6 -$414.93 23.99%
card#7 -$648.65 26.99%

[philly1]

1,2 and 6 if it was me.

[Plain Old Petunia]

The interest rates are all high, so I think if you want to pay off #1, #2, and #6, I think that is a fine plan.

The thing about having multiple cards with balances is you have to do a lot of juggling, especially if money is tight. Late payments are VERY expensive.

I'm glad your finances are improving! Keep at it, you'll get there.

[Savoir Faire-Demogague in NJ]

I agree with the others to eliminate as many payments as you can. At that point, you can use what would otherwise have gone to those cards and add it to other payments on the remaining cards.

[Tiny]

I'm wondering what all the minimum payments are on these debts? I suspect many of the them have hit the "minimum" minimum payment (like $10.00). That means even if you pay off a couple of them you aren't gonna 'free up' much money to add to your budget.

Have you set a total $ amount that you have committed to allocate towards these debts every month? I'm guestimating if you are making minimum payments ONLY that you are paying a total of about $140 a month (and will spend the next 7 or 8 years paying off these debts).

It really would be to your advantage (since it sounds like these might be long term debts - since moving out isn't gonna give you MORE money to pay towards these) to pay off the High Interest debts first.
I'd pay off Card#5 and then put whatever's left to Card#7. Since you aren't gonna free up much cash no matter what you do... going forward I would take the $140 or whatever you've committed to paying and pay the minimums on all the cards and put whatever's left toward Card#7. It will be slow and maybe alittle painful but you'll pay less AND get done paying these off faster.

[Gardening Grandma]

I'd pay off #5 for several reasons: it's the largest at the highest rate of interest, so is costing you the most. It also probably has the largest monthly pmt. By paying it off, you can redirect that payment to another.
Then I'd take the $211 left and pay off card #1. I'd put the remaining $40 on card #7 as well as the monthly payments currently going to card #5 and #1.

And karma for having the courage to post this....

[RoadToRiches]

card #5 first and the rest on card #7

[Tiny]

I'd maybe play alittle 'make believe' using the credit card calculators at bankrate dot com and see where you will be 12 months from now if you pay off cards in various orders (with the 1K and then monthly payments). That might help you decide where and when to take the 'pain'.

[Clever Username]

Apr 19, 2011 10:45:04 GMT -5 @leelaughs said:

Hello All, I have a bunch of credit cards (stupid, I know

Meditate on this quote from your text until the gravity of the situation sinks in.
Cut up all of your cards.
Period.
Yes.
Now!

Some people can carefully use credit, skimming off perks, ease of use and float the payment for the grace period.

Some people look good in a fedora.

You are neither of these types of people.
The sooner that sinks in the better.
Take off that stupid hat and quit using credit cards.

I hope the payment is hard to make.
That's because using the credit card was a bad idea in the first place.

I'm glad you're paying a ton of interest.
Hopefully it hurts enough that you'll stop using credit cards.

Once you've got the full payoff for all of your cards totalled up, all together. Then pay it.

Because I know you. Paying a few will ease your budget, with a couple extra bucks in your pocket, you're going to rev up that spending engine again. And we all know your favorite tool once that gets going. CREDIT CARDS!!!!

[thyme4change]

I would also pay off card 5, and then card #1 also. It gets rid of your highest balance and your highest interest rate, and then another min payment.

I would then pick another one under any criteria you want - highest interest rate, lowest balance, ugliest logo. Whatever makes you happy. Put the extra $50 towards that card, and next month put the min that you were paying to 5 and 1 and pay that to the target card also.

[thyme4change]

Also - did you get a tax refund this year? If so, did you adjust your W4 withholdings accordingly so your monthly income would go up a bit. Don't wait until next April to pay off another one - get the money now and start small payments every month. With those interest rates, time is important - very, very important!

[qofcc]

Check with all of the cards and see if any have balance transfer offers. Pay off the ones with the best offers and transfer as much debt as you can to those cards. If none will offer you balance transfers, then pay off 5 and 1.

[Bluerobin]

I'd go with 1,2 and 6. Then next month, increase your payments to the highest balance card. Do that until you get rid of that then go on to the next highest. If you don't cut up the paid off cards, at least don't use them.

[resolution]

How much do you have in your EF/moving fund? Do you have enough to cover deposit, first month, last month, moving expenses and with some left over for emergencies?

[ohmomto2boys]

I would pay #5 & #1.

Good luck! Hopefully you can set up a plan to get the rest of them paid off quickly.

[8 Bit WWBG]

With the information provided, I would pay off cards 5 and 1, thereby eliminating two obligations, one of which happens to be your highest balance and highest interest rate.

If you want the absolute best mathematical answer, then you need to also post what the actual minimum payments are, as well as what you currently pay per month. The answer could change slightly depending on whether you are truly snowballing (paying minimums on everything except either the quickest to payoff or most expensive debt) or whether you are just sort of paying a flat $50 to each card even if the minimum is less.

I have to ask if you've solved whatever problem got you into debt in the first place. If it was over-consumption or being overextended, have you made cuts so you don't need to run cards up again?

[leelaughs]

The minimum payments are:
Card #1 15
Card #2 15
Card #3 15
Card #4 25
Card #5 30
Card #6 20
Card #7 28
I usually pay the minimum plus $5 or $10 extra on each every month.

I realize that paying off one or more of the cards will not free up a lot of extra cash in hand, but it will make me feel like I'm really doing something towards paying off my debt and maybe making my credit score a little better. I see what everyone is saying about paying off #5.. i know it probably makes the most sense to pay that one off.. but a part of me likes the idea of paying 3 cards so that i can say.. "I paid off 3 credit cards today!!"..

I think that I have done very well in stopping the use my cards.. I have only charged on 1 -1 time since before Christmas. One has a $59 annual charge which just went thru last month.. I am working hard on curbing my spending.. still a work in progress.

Sorry.. i have $1500 in my EF/Moving fund.. not quite enough but I am hoping for a bonus from work at the end of this month..

[daisylu]

If paying off three will encourage you to keep the ball rolling, pay off 3.

[qofcc]

I usually pay the minimum plus $5 or $10 extra on each every month.

Put all of the extra to the one card with the highest rate, don't spread it around.

One has a $59 annual charge which just went thru last month

Ask them if they can refund the annual fee and switch you to a different program. Ex. they might have a rewards card with a fee and a non-rewards card without a fee.

Don't forget to look into the balance transfers. At your current interest rates, you'll be paying over $500 in interest this year. Even with a 3-4% fee, you could save $400-500 in interest in one year.

If they won't give you balance transfers, then ask if they can lower your rate by switching to a different program in their card portfolio.

It's the interest rate, not the balances that are killing you.

[thyme4change]

Let's say you pay an extra $40 per month in addition to min payments. Here is how I would do it:

May - pay off card 5 and card 1, and then take $140 and send to card #2. Pay min on 3, 4, 6 and 7.
June and July - pay $100 to card #2. Min on 3, 4, 6 and 7. The $100 is the $30 min from 5, the $15 min from card 1, the $15 min on card 2 and the extra $40 you send everywhere else.
August - pay off card #2, and pay min on everything else. You should have around $20 left over. If you want to send it to another card, great. Personally, I'd buy a beer to celebrate.
Sept, Oct, Nov - pay $120 to card #6 and min on 3, 4 and 7.
December - pay off card #6. You will have about $100 left over - I would use that for Christmas money.
Jan, Feb & March, pay $135 to card #3. March will be your final payment. You might have $10 left over. Enjoy!
April and May - pay $160 to card #4.
June - pay off card #4 and put $120 towards the last card.
July and Aug - pay $188 to card #7. You will pay it off with the August payment.

Of course, if you get any extra money during that time - put it towards whatever card you are working on, and just move everything up.

The key is to make sure you really have $188/month to dedicate to this. If you don't - find it. If you can find more, even better!

Good luck!

[resolution]

i have $1500 in my EF/Moving fund.. not quite enough but I am hoping for a bonus from work at the end of this month..

If you are still planning on a $750 apartment, you do not have enough money to pay first last and a security deposit. If you feel the move is needed to protect your child, I would recommend keeping the cash to guarantee you can move on schedule, and then if you get the bonus use that on the debt. I know this is bad money advice but it is practical.

ETA it looks like you have made some good progress both on reducing the debt and building up the move fund since you posted last month.

[SVT]

Apr 19, 2011 10:45:04 GMT -5 @leelaughs said:

My question is which one should I pay?

You should pay all of them

[wodehouse]

To minimize your total dollar cost in interest (which will also minimize the number of months for which you'll be paying off the cards), pay the most on the highest interest rate cards.

But if you want to pay off the most accounts in one month, regardless if this will actually cost you more money in the end (and the cost premium will be very small for your case), then pay off the smallest balance, the next smallest balance, the third smallest balance, etc.

[shanendoah]

There's nothing wrong with the instant gratification of paying off 1, 2, and 6. It provides an emotional reward that is worth more than the interest you're saving.
However, even with the extra $50 you would then have to put toward card 5, it will take you 10 months plus to pay off card 5 and get your next 0. You will then have $80 extra/month to apply to 7, which should mean it takes right around 6 months to pay off for your 5th 0.
So that's 5 zeros in ~16 months, with (using current balances) $1,000 still owed.

Paying off 1 & 5, then hitting 7, 3, and 4, I'm still thinking your looking at ~16 months to 5 0s. However, in this case you only have about $800 still owed.

[Plain Old Petunia]

Remember, if you don't have much available credit, paying down 1k will boost your credit score and you may then be on firmer footing when it comes to balance transfers and/or asking for a lower rate.

The worst that can happen is the answers are all no, good luck.

[RoadToRiches]

Hey lee, check this out

cgi.money.cnn.com/tools/debtplanner/debtplanner.jsp

Plug in your numbers and see what works best. That's what I used and I am following that schedule. I went "fastest route possible". I was going to do the "instant gratification" way, but am glad I went highest APR card first.

Do this, look at the statement of your highest APR card and see how much out of your monthly minimum payment is going to the interest. That's what motivated me to start paying highest APR cards first. My instant gratification is, not to pay $50 out of $80 minimum payment on the interest.

See my sig? GE Money card had 2700 balance at 22%, My Amex (next one up) is small balance at 17%. Then BMW card at 8%. I could easily pay off Amex and BMW Card instead of GE Money card. But went ahead and started to plug in away at the $2700 mountain. I tell you, it feels GREAT. The though that I am done with the 22% card gives me enough boost.

Plug in your numbers in the link I gave above. You can play with different scenarios.

Good for you for wanting to get out of debt. You will get there! Just keep thinking ahead!

[share88]

I would also look at canceling the one with the fee. If you paid 5 and 1 that is still nearly a third of your total debt even if it is "only" 2 cards.

[leelaughs]

Thanks for all the great suggestions.
indebt- thanks for that debt planner.. its awesome!!

So I did it. I paid off Card #1 and Card #5 !!!! two down 5 to go!! It made more sense to pay off the higher interest card in the long run. I'd rather be paying the principle than the interest.

[thyme4change]

Woo Hoo!

Which one are you going to tackle next? I figure you can pay off just about any of them in a few months if you just really concentrate your efforts (and by efforts, I mean money!)

[leelaughs]

THANKS thyme4change!!

I think that I will work on #4 next because I just hate that card!! lots of stupid rules there..

Now that I paid of #1 .. its the one with the $59 annual charge, should I just let it sit for the next year since they just charged the fee or should I try to get them to transfer it to a different type of card?