Question about credit card debts and ***tty APRs

[6forwardgears]

OK, so I've been trying to live pretty frugally and pay off some of my debts... right now I have 2 credit cards, a student loan, and a personal loan. I won't go into the details but my 2 credit cards have very high APRs. One of the cards has a somewhat low balance, the other one is about $2000 and I'm getting socked pretty hard on the finance charges.

I work fulltime but don't make much money, and I'm trying to pay off everything as fast as I can. Is there anything I can do to try to knock down these credit cards a little faster? I know one possibility is by getting a new credit card with 0% (or very low) APR with 6-12 months and free balance transfers, and moving everything over to that card. The problem is that I doubt I'll get approved for the kind of limit I would need to do that. My credit rating is "fair" but I don't have that much credit history and I usually don't do too well when it comes to credit card or loan applications (not that I apply for such often, but the few times I have, I never get good news).

It looks like I'll have to use my tax returns and profit sharing check from my work to put towards this, but even that won't take care of all the credit cards. What sucks is that I put as much I can towards the credit cards but about half of that is gobbled up in the damn finance charges... So just looking for some helpful thoughts I guess...

[GRAMPS SS]

Molly, you covered just about it all on what to do.....the thing i would try...which i knew can be done , because my buddy did it with his cards.....he called and asked for a lower rate card with the credit limit of his card debt plus a little...he paid on time with his cards and they gave him a new card with a higher credit limit...he then took his credit card debt and put it on the new card and got things under control...he had Capital One....don't know if that helps.......as far as your student loan and private loan...do what your thinking...put your tax returns towards them....JMO.....

we've all been in debt...there is light at the end of the tunnel.................

[UnderPSI]

Here is what you do. (what I did) I called the credit card company. Canceled the card. Then it became a loan, no longer a line of credit. Interest rate at 6%. They told me 7% and I offered to do automatic payments if they lowered it down to 6% and they said sure. I am saving a ton of money.

[Mr. Brett]

Your best bet is to transfer both credit card balances to a card with zero interest balance transfers. If your credit is indeed fair, you should have no trouble getting approved for a card with a limit sufficient to cover both. I would recommend WaMu. They are pretty lenient at the moment and are offering a card with zero percent for 12 months on balance transfers. This would allow you to get caught up a lot faster since you wouldn't be throwing away money on finance charges.

[Slow Joe]

I worked with Landmark CU on getting a credit card to have 'em all transfered to. Interest rate is locked in at 8.9%.

Don't close the card only because it lowers your credit score.

0% Cards are a route to go if you can pay it off in 12 mo, if not you'll be right back in the same situation.

[Reverend Cooper]

first thing i would do is just call the credit card companies and ask for a reduced rate or youll leave them

[y2kws6]

You are already on the right track into knowing that interest rate only payments will get you no where.

I would start on doing an inventory on what you direct income is on an average. Minus the standard loan payment and any other continuous payments (gas, electric, water, rent); don't count the credit cards.
What you have left you need to decide what your weekly charges might be for pleasure and fine tune it. Make a budget from that and stick to it.
Minus all of that and what you have left is what you could put towards the cards to get them paid off.

Now I would put $50 - $100 in savings per month to build up your account.
Only use the credit cards from now on for items that you could pay off on the next payment.

Once the cards are paid off, continue only charging what you can pay off per month and put a few extra dollars on the loan amount will really help. It take $$ right off the principle which inturn drops your interest amount for future payments.

Hope this helps
Dan

[Z28Roxy]

I told you how to do a lot of this already (some good answers in this thread).

Also don't charge new shit to your credit cards! Since you are already carrying a balance, you get double charged.

Example: credit card where you don't carry a balance (meaning you pay in full every month). You charge shit, you get the bill, you pay it on time and in full, you get charged $0.00 in finance charges. In the end you basically get a 1-2 month "free loan".

Now, if you carry a balance? Well, your new purchases start getting charged interest immediately! So if you charge something on December 16th, even if you pay your bill, not only is the old shit getting charged interest, but even that thing you bought today is starting to get interest charged on it.

Also, something to consider re: balance transfers. Sometimes you get hit with a 3 or 4% fee on them. So that's actually a couple month's worth of interest, so keep that in mind.

Moreover, if you do balance transfer, DO NOT charge anything on your NEW credit cards - because they always apply your payment towards the lowest interest items first. Example: $2000 (balance transfer) at 0% interest and then you go buy something for $100 - purchases at 24% interest. Every month they'll keep charging you 2% on that $100, until you pay the entire $2100 off.

Lastly, if you're going to apply for credit, do all your applications in the same week or two (or even the same day, if possible). This is because you do get a small hit (3 points I think) on your credit score if you apply for a loan or credit card, however if you apply for a whole bunch they view it as "shopping around" and only apply the 3 point hit once. Why do you think I got all those credit cards that gave me $100 or $250 checks for applying all at once? :rolf

http://creditcards.com/balance-transfer.php

[Z28Roxy]

Also don't charge new shit to your credit cards! Since you are already carrying a balance, you get double charged.


Oh to further elaborate on this one:

Even if don't get a 0% APR balance transfer card, you can still save a ton of money by just getting a new credit card and putting your new purchases (gas, groceries, etc) on it. Then those new purchases won't get interest..... assuming you can pay the card in full each month...

[formul8]

I told you how to do a lot of this already (some good answers in this thread).

Also don't charge new shit to your credit cards! Since you are already carrying a balance, you get double charged.

Example: credit card where you don't carry a balance (meaning you pay in full every month). You charge shit, you get the bill, you pay it on time and in full, you get charged $0.00 in finance charges. In the end you basically get a 1-2 month "free loan".

Now, if you carry a balance? Well, your new purchases start getting charged interest immediately! So if you charge something on December 16th, even if you pay your bill, not only is the old shit getting charged interest, but even that thing you bought today is starting to get interest charged on it.

Also, something to consider re: balance transfers. Sometimes you get hit with a 3 or 4% fee on them. So that's actually a couple month's worth of interest, so keep that in mind.

Moreover, if you do balance transfer, DO NOT charge anything on your NEW credit cards - because they always apply your payment towards the lowest interest items first. Example: $2000 (balance transfer) at 0% interest and then you go buy something for $100 - purchases at 24% interest. Every month they'll keep charging you 2% on that $100, until you pay the entire $2100 off.

Lastly, if you're going to apply for credit, do all your applications in the same week or two (or even the same day, if possible). This is because you do get a small hit (3 points I think) on your credit score if you apply for a loan or credit card, however if you apply for a whole bunch they view it as "shopping around" and only apply the 3 point hit once. Why do you think I got all those credit cards that gave me $100 or $250 checks for applying all at once? :rolf

http://creditcards.com/balance-transfer.php

What you are trying to explain is called "compounding interest". When you carry a balance and get charged an interest fee, when you carry the balance over the next month, you are then paying interest on the interest charge from the last balance.

This is why making the minimum payments is nearly impossible to pay off a hefty balance. Getting into debt is incredibly easy, but getting out and staying out is hard work.

I agree with trying to get a card with a 0% rate in balance transfers and also keeping the old cards open. Things that help your score is age of the accounts, payment history and total credit usage. Keeping the total of all balances under 30% (0% is what it should be) of all your total credit limits will keep your FICO score high.

It takes discipline, smart financial planning and knowledge. I highly suggest getting a program like MS Money or Quicken, if have not already. This will show you where your money goes. This was one of the BEST things I have ever purchased.

Here are a few great blogs about money management:

http://www.thesimpledollar.com/
http://www.thedigeratilife.com/blog/
www.genxfinance.com

[GRAMPS SS]

the key is paying off what you buy in full at the end of the month...i do that...they make no money on me,becuse they get no interest and finance charges from me, but they up my credit amount every 6 months to a year.....i have 4 cards....all up to date...
at one time i was where you are molly...i just got things under control and my credit back up to the higher numbers again....it took time...but i did it....that was like 20 years ago...now i have all low interest rate cards....
you do fine..it will just take time, and you'll have more credit then.....

[6forwardgears]

Thanks for the tips everyone, it is appreciated.. I am going to find out about getting a 0% APR/balance transfer card I think.

Also, I have not used either of these cards at all for a while now, and I won't be (unless an absolute emergency comes up)

[Z28Roxy]

What you are trying to explain is called "compounding interest". When you carry a balance and get charged an interest fee, when you carry the balance over the next month, you are then paying interest on the interest charge from the last balance.

This is why making the minimum payments is nearly impossible to pay off a hefty balance. Getting into debt is incredibly easy, but getting out and staying out is hard work.

I agree with trying to get a card with a 0% rate in balance transfers and also keeping the old cards open. Things that help your score is age of the accounts, payment history and total credit usage. Keeping the total of all balances under 30% (0% is what it should be) of all your total credit limits will keep your FICO score high.

It takes discipline, smart financial planning and knowledge. I highly suggest getting a program like MS Money or Quicken, if have not already. This will show you where your money goes. This was one of the BEST things I have ever purchased.

Here are a few great blogs about money management:

http://www.thesimpledollar.com/
http://www.thedigeratilife.com/blog/
www.genxfinance.com

No that wasn't what I was trying to explain. Yes there is compound interest (interest on the interest) as well, but AFAIK credit card companies will start charging interest on new purchases right away too, if you're carrying a balance (average daily balance).

[BAD LS1]

They are pretty strict on who they give 0% intrest cards out to for balance transfers. Its pretty credit rating dependent. However they are a good answer if you simply just need to buy a little time to get it under control. Its worth a shot IF you can get one and then knock it down in 12 months like Wayne said.

[formul8]

No that wasn't what I was trying to explain. Yes there is compound interest (interest on the interest) as well, but AFAIK credit card companies will start charging interest on new purchases right away too, if you're carrying a balance (average daily balance).

Most cards have a grace period on purchases. The interest charge doesn't start on that purchase until the next statement.

Some cards do have dual billing cycles which shortens this grace period. Those are the cards to avoid whether you pay the entire balance every month or not.

[Breecher_7]

Here is what you do. (what I did) I called the credit card company. Canceled the card. Then it became a loan, no longer a line of credit. Interest rate at 6%. They told me 7% and I offered to do automatic payments if they lowered it down to 6% and they said sure. I am saving a ton of money.

This is the best thing to do if your credit card compay will allow it. Not all do. Then just open a few accounts, atleast 3 and keep the bitches locked up somewhere. You do not need to carry a balance at all to build credit, just have open accounts.

Credit cards are the devil!

[formul8]

Credit cards are the devil!

Money can be a powerful master or a faithful servant. You choose.

Credit cards are great if you play the game to your advantage. I had a GM card with a pretty high limit and 0% for one year. I had much more than this limit sitting in an ING savings account. I charged up things I was going to buy anyways, made the minimums and put the money into the account earning 5% interest. When the 0% was up, I paid the entire amount off from the money. I actually timed it wrong and had to cough up $40 for one month of interest at 16.9% APR, but using well over $10K of credit at ZERO interest- I still see the $40 charge as a bargain.

Another thing you can do, and this involves some discipline, is arbitrage. You take the entire amount of credit at 0% and move it into a safe interest bearing account or a CD. When the 0% is up, pay the amount off and you pocket a profit off their money.

Credit card companies HATE people like me. :devil

[Z28Roxy]

Money can be a powerful master or a faithful servant. You choose.

Credit cards are great if you play the game to your advantage. I had a GM card with a pretty high limit and 0% for one year. I had much more than this limit sitting in an ING savings account. I charged up things I was going to buy anyways, made the minimums and put the money into the account earning 5% interest. When the 0% was up, I paid the entire amount off from the money. I actually timed it wrong and had to cough up $40 for one month of interest at 16.9% APR, but using well over $10K of credit at ZERO interest- I still see the $40 charge as a bargain.

Another thing you can do, and this involves some discipline, is arbitrage. You take the entire amount of credit at 0% and move it into a safe interest bearing account or a CD. When the 0% is up, pay the amount off and you pocket a profit off their money.

Credit card companies HATE people like me. :devil

Not to mention 5% cashback on BP gasoline (chase visa)

5% on automotive maintenance - yes summit/thunderracing/etc counts (discover)

3% back on groceries/gasoline/fast food (chase freedom)

Cards that give you checks or gas cards (up to $250 worth) for signing up with them and making one purchase (fill up your tank, buy your groceries, etc).

[formul8]

Not to mention 5% cashback on BP gasoline (chase visa)

5% on automotive maintenance - yes summit/thunderracing/etc counts (discover)

3% back on groceries/gasoline/fast food (chase freedom)

Cards that give you checks or gas cards (up to $250 worth) for signing up with them and making one purchase (fill up your tank, buy your groceries, etc).

Oh, I see they hate you too! :devil

[Z28Roxy]

Oh, I see they hate you too! :devil

Indeed, I am a deal whore with this kind of stuff :)

[PB86MCSS]

If your student loan is a federal one and like mine and many others, its at a ridiculously low rate so its last on the priority list of debt. Good tips here, good thing is at a worse case scenario your tax return could be within a few months only..not sure how far that will get your debt down but it should take a big chunk I assume.

[6forwardgears]

If your student loan is a federal one and like mine and many others, its at a ridiculously low rate so its last on the priority list of debt. Good tips here, good thing is at a worse case scenario your tax return could be within a few months only..not sure how far that will get your debt down but it should take a big chunk I assume.

Yeah you are right, my student loan is the last to be paid off because of the interest rate. And yeah my tax return and profit sharing should help a lot.

[tgabe213]

I think it was already mentioned, but do not close those cards when they are paid off. You lower your FICO score. There is a thing called a Credit to Debt Ratio. The lower the ratio, the better. I think 30% is "best" when carrying a balance. Part of your fico score is based off of this.
Balance: 2500. Limit: 5000. C to D ratio: 50%. Very simple. By closing a card, you lower your overall limit thus lower your C to D ratio.

[lordairgtar]

A FICO score is just a number that tells how much you like debt. Learn to live within your income. I know sometimes things come up and you need those cards but I am getting rid of mine one at a time to just one. I would listen to Dave Ramsey on WISN at 11PM every night. He espouses the debt free life style and helps people to achieve that goal. It is far easier to save up for things than burning up the plastic.

[formul8]

Yeah you are right, my student loan is the last to be paid off because of the interest rate. And yeah my tax return and profit sharing should help a lot.

You know you can write off the interest on your student loans for up to 5 years after your graduate?

BTW, your FICO is just a gauge of your financial responsibility.

[Z28Roxy]

You know you can write off the interest on your student loans for up to 5 years after your graduate?


^^^ he means on your tax return Molly.

I don't know if it would help her though, is student loan interest seperate from the standard deduction?

[formul8]

I don't know if it would help her though, is student loan interest seperate from the standard deduction?

Nope. Standard deduction is just that. All write offs are additional deductions.

Including the $452 "donation" you made to the Boy Scouts this year... ;)

[Z28Roxy]

Nope. Standard deduction is just that. All write offs are additional deductions.

Including the $452 "donation" you made to the Boy Scouts this year... ;)

Then it's probably not going to help her :goof