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Posted: 9/28/2005 11:57:29 AM EDT
What is the quickest, most efficient way to use $2000 to pay off CC debt of about 5k?

I have a handful of CCs with balances between $500 and $1500. My current plan is to use the entire amount to pay off the two cards with the highest rates, then apply the money that I was paying on those to a single card until it is paid. Then apply all three payments to another card, and so on...

Is there a smarter way?

Jake
Link Posted: 9/28/2005 11:58:35 AM EDT
Sounds like a good plan to me.
Link Posted: 9/28/2005 12:00:11 PM EDT
[Last Edit: 9/28/2005 12:02:59 PM EDT by Gunner1X]

Originally Posted By jake1978:
What is the quickest, most efficient way to use $2000 to pay off CC debt of about 5k?

I have a handful of CCs with balances between $500 and $1500. My current plan is to use the entire amount to pay off the two cards with the highest rates, then apply the money that I was paying on those to a single card until it is paid. Then apply all three payments to another card, and so on...

Is there a smarter way?

Jake



That pretty much covers it.


ETA: After you pay off the credit cards, put half of your total payments in a good mutual fund family
each month and forget about it. Worked great for me. I've been debt free now for 16 years.

Link Posted: 9/28/2005 12:05:04 PM EDT
That might work. Also, see if you can consolidate all of your cards into one, with a loan at a lower rate. But whatever you do, pay them off as soon as possible. Those credit card rates rates are killers!!

Good luck.
Link Posted: 9/28/2005 12:06:10 PM EDT
First, call all the companies and have them lower your rate...

I need to do that...
Link Posted: 9/28/2005 12:06:36 PM EDT
Instead of the highest rates first pay off the one with the lowest balance first. Then take that money and start on the next one with the lowest balance.
Link Posted: 9/28/2005 12:07:38 PM EDT
One thing to add, when you pay one off, cut it into pieces. Visa has a good rollover plan now. I work with a guy that has been in deep shit TWICE from plastic, i tried to learn by his mistakes and have one card and zero balance. Hope to keep it that way too.
Link Posted: 9/28/2005 12:08:10 PM EDT
You've got it with a +1 on the lowest balances applying the paid off payment to the next card in line.
Link Posted: 9/28/2005 12:10:24 PM EDT

Originally Posted By BenDover:
You've got it with a +1 on the lowest balances applying the paid off payment to the next card in line.



Yeap, kills the lowest on first, which allows you to free up money for the next, and so on and so on.

Paying off the highest first means they all linger around longer.
Link Posted: 9/28/2005 12:16:17 PM EDT
Make sure the debt doesn't get any larger because the CC Industry wrote the new bankruptcy bill that goes into effect here in 3 weeks...
Link Posted: 9/28/2005 12:16:37 PM EDT
Paying off the lowest balance cards early gives you a warm feeling of accomplishment, but it doesn't save as much money as paying off the cards with the highest interest rates first.
Link Posted: 9/28/2005 12:18:34 PM EDT
The most important step is to cut the cards into little pieces and stop using them.
Link Posted: 9/28/2005 12:19:03 PM EDT

Originally Posted By thompsondd:

Originally Posted By BenDover:
You've got it with a +1 on the lowest balances applying the paid off payment to the next card in line.



Yeap, kills the lowest on first, which allows you to free up money for the next, and so on and so on.

Paying off the highest first means they all linger around longer.



The only route that makes sense is to pay off the cards with the highest interest rates first.

When two cards have the same interest rates, you won't pay off any faster or slower by paying the higher or lower one first, your debt (and the rate at which your debt increases) will be the same. That being said, paying off the small ones will probably be more satisfying, since it'll be one fewer payment you make.
Link Posted: 9/28/2005 12:20:34 PM EDT

Originally Posted By AeroE:
Paying off the lowest balance cards early gives you a warm feeling of accomplishment, but it doesn't save as much money as paying off the cards with the highest interest rates first.


+1

It might make you feel good, but it will cost you more money that way.
Link Posted: 9/28/2005 12:25:17 PM EDT
Win Lottery

Pay off Debt.

Simple, huh?
Link Posted: 9/28/2005 12:25:31 PM EDT
[Last Edit: 9/28/2005 12:28:30 PM EDT by uglygun]
I'd see if you have any cards with a special promotional rate, like 2.99 percent until paid off on transferred balances or even 12 months at a special promotional rate.

Transfer the balances to that card hopefully nuking the balance on those smaller cards. Then apply your big lump payment and all subsequent payments to the card with the one balance.


Beware though, this is exactly the trap that credit card companies want you to fall into. So as you get one card paid off or transferred, destroy it and call the card company to tell them you are nuking the account.

Kinda funny to hear them try to keep you interested in maintaining an account.

Link Posted: 9/28/2005 12:26:33 PM EDT
Link Posted: 9/28/2005 12:27:03 PM EDT
Call each CC company and ask for settlement on the amount. If they won't settle, tell them that you will quit paying and the debt can go into charge off status and they'll never see the money. At that time they usually straighten up and start talking. I work with CC companies all day and settle for between 50 and 60% of the balance and turn the 2000 dollars you have and buck up the extra 500 to pay off the cards totally.

My .02.
Link Posted: 9/28/2005 12:28:48 PM EDT
It seems like I get offers daily for credit cards that have zero interest rate for the first six months to a year on balance transfers. I would apply for a couple of those cards and then pay off all the others that are charging interest. If you don't have the balance on the new card paid off within six months to a year then switch to another card offering zero interest until they are all paid in full. Hell, I'll use interest free money for as long as someone wants to offer it to me.
Link Posted: 9/28/2005 12:29:54 PM EDT

Originally Posted By j-fonz:
Call each CC company and ask for settlement on the amount. If they won't settle, tell them that you will quit paying and the debt can go into charge off status and they'll never see the money. At that time they usually straighten up and start talking. I work with CC companies all day and settle for between 50 and 60% of the balance and turn the 2000 dollars you have and buck up the extra 500 to pay off the cards totally.

My .02.


So you get the credit card with the terms and conditions readily available to you. You use said credit card and run up a balance. Then you tell the company you're not going to honor the terms and conditions you agreed to, and they better take what they can get.

Mental note: Don't do business with people who can't keep their word.
Link Posted: 9/28/2005 12:30:00 PM EDT

Originally Posted By dport:

Originally Posted By AeroE:
Paying off the lowest balance cards early gives you a warm feeling of accomplishment, but it doesn't save as much money as paying off the cards with the highest interest rates first.


+1

It might make you feel good, but it will cost you more money that way.



He said 'quickest' not 'cheapest'.

Everything has a price.
Link Posted: 9/28/2005 12:31:15 PM EDT
It is a lot easier to get out of debt if you never let yourself get into debt.

Don't treat your credit cards as credit cards. Treat them as debit cards that improve your credit rating. In other words, if you do not have enough cash in the bank AT THAT MOMENT then don't charge it.
Link Posted: 9/28/2005 12:32:03 PM EDT

Originally Posted By BenDover:

Originally Posted By dport:

Originally Posted By AeroE:
Paying off the lowest balance cards early gives you a warm feeling of accomplishment, but it doesn't save as much money as paying off the cards with the highest interest rates first.


+1

It might make you feel good, but it will cost you more money that way.



He said 'quickest' not 'cheapest'.

Everything has a price.


The quickest is the cheapest. If you don't pay on the high intrest cards first then you'll be getting charged more money than you would with the cheaper ones. With interest time is money. If you are being charged more money then it's going to take you more time to pay off the debt.
Link Posted: 9/28/2005 12:33:50 PM EDT
If your plan is to save the most money, then your plan is perfect.

Throw money at the card with the highest interest rate until its balance is zero. Cancel the account, and destroy the card with extreme prejudice.

Then take what money you have left and repeat the above step until you run out of cash or cards.

P.S. Is this $2000 all the cash you have? It is always wise to keep some cash in reserve in case of emergency. If you don't have at least a few hundred in emergency cash reserves already, I'd put about $200-400 of that $2000 into a bank account and let it draw interest. It'll cost a tiny bit more in the long run, but knowing you have that cash available is good peace-of-mind.

Good luck!!
Link Posted: 9/28/2005 12:35:44 PM EDT

Originally Posted By BenDover:

Originally Posted By dport:

Originally Posted By AeroE:
Paying off the lowest balance cards early gives you a warm feeling of accomplishment, but it doesn't save as much money as paying off the cards with the highest interest rates first.


+1

It might make you feel good, but it will cost you more money that way.



He said 'quickest' not 'cheapest'.

Everything has a price.



Quickest = cheapest. Paying off the highest interest rates first is the fastest way to drop the debt, and it's also the least expensive.
Link Posted: 9/28/2005 12:36:21 PM EDT

Originally Posted By dport:

Originally Posted By j-fonz:
Call each CC company and ask for settlement on the amount. If they won't settle, tell them that you will quit paying and the debt can go into charge off status and they'll never see the money. At that time they usually straighten up and start talking. I work with CC companies all day and settle for between 50 and 60% of the balance and turn the 2000 dollars you have and buck up the extra 500 to pay off the cards totally.

My .02.


So you get the credit card with the terms and conditions readily available to you. You use said credit card and run up a balance. Then you tell the company you're not going to honor the terms and conditions you agreed to, and they better take what they can get.

Mental note: Don't do business with people who can't keep their word.



Big+1

All this crap about how the CCs screw everyone, then you see this.

You took the money in exchange for an agreement to pay back more than you borrowed, the interest, over time.

Pay it back.
Link Posted: 9/28/2005 12:36:28 PM EDT

Originally Posted By jake1978:
What is the quickest, most efficient way to use $2000 to pay off CC debt of about 5k?

I have a handful of CCs with balances between $500 and $1500. My current plan is to use the entire amount to pay off the two cards with the highest rates, then apply the money that I was paying on those to a single card until it is paid. Then apply all three payments to another card, and so on...

Is there a smarter way?

Jake



You forgot the part about not using the cards anymore. That is where you will have your toughest battle. Trust me, you will have the debt paid of for about a week when you see something you simply cannot live without. Having just paid them all off will give you every excuse to charge it. Resist.
Link Posted: 9/28/2005 12:36:38 PM EDT
DAVE RAMSEY RULES!!!!!!
Link Posted: 9/28/2005 12:37:35 PM EDT
[Last Edit: 9/29/2005 5:01:29 AM EDT by Admiral_Crunch]

Originally Posted By out4trout:
It seems like I get offers daily for credit cards that have zero interest rate for the first six months to a year on balance transfers. I would apply for a couple of those cards and then pay off all the others that are charging interest. If you don't have the balance on the new card paid off within six months to a year then switch to another card offering zero interest until they are all paid in full. Hell, I'll use interest free money for as long as someone wants to offer it to me.



Um, I'm pretty sure pulling that kind of crap will destroy your credit rating. It's also very dishonorable.

ETA: Crap! Sorry, I quoted the wrong post for my reply. It was meant for the suggestion to "settle" with the card companies for less than what you owe.

Nevermind the idiot posting from behind the curtain! (runs away)
Link Posted: 9/28/2005 12:38:34 PM EDT

Originally Posted By j-fonz:
Call each CC company and ask for settlement on the amount. If they won't settle, tell them that you will quit paying and the debt can go into charge off status and they'll never see the money. At that time they usually straighten up and start talking. I work with CC companies all day and settle for between 50 and 60% of the balance and turn the 2000 dollars you have and buck up the extra 500 to pay off the cards totally.

My .02.





Link Posted: 9/28/2005 12:39:24 PM EDT
That's the point though. If you have a lower balance card with a lower interest rate, retire that one apply the payment to a higher balance card.
Link Posted: 9/28/2005 12:46:30 PM EDT
[Last Edit: 9/28/2005 12:51:11 PM EDT by jake1978]

Originally Posted By uglygun:
I'd see if you have any cards with a special promotional rate, like 2.99 percent.





Believe me, if I was in a position to do that, I would.

I don't have problems paying bills now, but when I was younger, broker, and dumber, I went for quite sometime without paying on a certain card, and to show for it, that card has a [embarrassing rate]31%[/embarrassing rate] rate, and a balance $400 OVER its limit. Since I got my shit together, I've been paying more than the minimum, but not nearly enough to make a dent.

So, I'm using money I had set aside as a motorcyle down payment to be responsible and smart and pay my debts off.

As for negotiating a settlement amount, I would like to try that, but I doubt I'm in much of a position to try that, plus I suck at negotiation.

I've got one card that has a $100 balance on it, so it will be gone instantly, but the others all have around 500-600, with the exception of the above mentioned clusterbomb. I do want to pay them quickly, but efficiently is more the goal, so I think the outrageous interest rates have to go first. And, of course, once they are paid, they will be nuked from orbit. It's the only way to be sure.

ETA I agree that telling the CC companies to lower my rate or not get my money is somewhat dishonorable, but what about the companies that raise your rates at their whim?
Link Posted: 9/28/2005 12:57:35 PM EDT
31%?!?

Pay THAT bitch off immediately!
Link Posted: 9/28/2005 1:00:26 PM EDT
If you ever want to pay off your CCs, don't friggin' ever get married!
Link Posted: 9/28/2005 1:01:20 PM EDT

Originally Posted By BenDover:
That's the point though. If you have a lower balance card with a lower interest rate, retire that one apply the payment to a higher balance card.


That might be true if you're talking fixed payments. However, credit card minimum payments vary based on the balance. If you get a large chunk of the high interest card payed off and keep the paying the same amount then you are aggressively attacking the principle and limiting the amount of interest charged to your account.

If you pay off the lower interest rate first, then you still have interest being charged against the initial large balance, and you'll be paying it off little by little, all the while collecting the higher interest rate.
Link Posted: 9/28/2005 1:06:03 PM EDT
A potential exception to paying a card off completely would be if you were ever late. Your credit report may show 48 months of history. To erase that late payment, you would have to maintain monthly payments until that late payment becomes 49 months old. If you pay it off in total that late payment may appear there for 7 years.

I suggest you check your credit report to make sure before paying it off. You can pay it down so that 48 months of minimum payments will pay it off.

good luck
Link Posted: 9/28/2005 1:09:28 PM EDT

Originally Posted By chooper:
If you ever want to pay off your CCs, don't friggin' ever get married!



Too late!

Luckily my wife has always had her head on her shoulders money-wise.

Link Posted: 9/28/2005 1:11:28 PM EDT

Originally Posted By drrocket:
A potential exception to paying a card off completely would be if you were ever late. Your credit report may show 48 months of history. To erase that late payment, you would have to maintain monthly payments until that late payment becomes 49 months old. If you pay it off in total that late payment may appear there for 7 years.

I suggest you check your credit report to make sure before paying it off. You can pay it down so that 48 months of minimum payments will pay it off.

good luck



That brings up another question...when I get the bastards paid, is it wiser credit-wise to close the accounts or leave them open with ZERO balances?
Link Posted: 9/28/2005 1:13:55 PM EDT

Originally Posted By dport:

Originally Posted By j-fonz:
Call each CC company and ask for settlement on the amount. If they won't settle, tell them that you will quit paying and the debt can go into charge off status and they'll never see the money. At that time they usually straighten up and start talking. I work with CC companies all day and settle for between 50 and 60% of the balance and turn the 2000 dollars you have and buck up the extra 500 to pay off the cards totally.

My .02.


So you get the credit card with the terms and conditions readily available to you. You use said credit card and run up a balance. Then you tell the company you're not going to honor the terms and conditions you agreed to, and they better take what they can get.

Mental note: Don't do business with people who can't keep their word.


I never said it was honest - but it is what a lot of people do. I wouldn't recommend it because it will ruin your credit. However most of the people that are doing this have bad credit anyway. It goes along the same lines as people who file bankruptcy on a cycle - run up alot of debts, don't honor those debts, and then file.
Link Posted: 9/28/2005 1:14:19 PM EDT
I just went through this same thing.

For your situation:
To save money pay off the highest interest card first, then work your way down the interest rates till you get to the bottom of the pile.

To pay off the cards the quickest way, pay off the lower amount cards first, then as you pay them off apply the payments to the next higher amount card.

You can let your lower rate cards "float" by paying off the interest but none of the principal and apply that principal amount to the card you wish to pay off first.

The best advice I can give you is to STOP USING THE CARDS!!

I am out of CC DEBT!

It's great being able to spend $500-$800 cash a month on guns and ammo instead of racking up a credit card bill.



Link Posted: 9/28/2005 1:20:01 PM EDT

Originally Posted By j-fonz:
Call each CC company and ask for settlement on the amount. If they won't settle, tell them that you will quit paying and the debt can go into charge off status and they'll never see the money. At that time they usually straighten up and start talking. I work with CC companies all day and settle for between 50 and 60% of the balance and turn the 2000 dollars you have and buck up the extra 500 to pay off the cards totally.

My .02.



Looting is really cool too.
Link Posted: 9/28/2005 1:22:51 PM EDT

Originally Posted By Gunner1X:

Originally Posted By j-fonz:
Call each CC company and ask for settlement on the amount. If they won't settle, tell them that you will quit paying and the debt can go into charge off status and they'll never see the money. At that time they usually straighten up and start talking. I work with CC companies all day and settle for between 50 and 60% of the balance and turn the 2000 dollars you have and buck up the extra 500 to pay off the cards totally.

My .02.



Looting is really cool too.


Let's get something straight - I don't agree with this behavior. I am merely stating an option that no one else offered on the board.
Link Posted: 9/28/2005 1:26:07 PM EDT

Originally Posted By jake1978:

Originally Posted By drrocket:
A potential exception to paying a card off completely would be if you were ever late. Your credit report may show 48 months of history. To erase that late payment, you would have to maintain monthly payments until that late payment becomes 49 months old. If you pay it off in total that late payment may appear there for 7 years.

I suggest you check your credit report to make sure before paying it off. You can pay it down so that 48 months of minimum payments will pay it off.

good luck



That brings up another question...when I get the bastards paid, is it wiser credit-wise to close the accounts or leave them open with ZERO balances?


I recommend keeping the oldest ones with a zero balance. Use them every once in a while to keep 'em open. Your credit score takes into account how long you have the line of credit and your current balance to limit ratio.
Link Posted: 9/28/2005 1:28:15 PM EDT

Originally Posted By dport:

Originally Posted By jake1978:

Originally Posted By drrocket:
A potential exception to paying a card off completely would be if you were ever late. Your credit report may show 48 months of history. To erase that late payment, you would have to maintain monthly payments until that late payment becomes 49 months old. If you pay it off in total that late payment may appear there for 7 years.

I suggest you check your credit report to make sure before paying it off. You can pay it down so that 48 months of minimum payments will pay it off.

good luck



That brings up another question...when I get the bastards paid, is it wiser credit-wise to close the accounts or leave them open with ZERO balances?


I recommend keeping the oldest ones with a zero balance. Use them every once in a while to keep 'em open. Your credit score takes into account how long you have the line of credit and your current balance to limit ratio.


True - you should never close an account once you open it (the damage is already done). The longer the tradelines are open the more it juices your FICO score.
Link Posted: 9/28/2005 1:34:26 PM EDT

Originally Posted By j-fonz:

Originally Posted By dport:
Mental note: Don't do business with people who can't keep their word.


I never said it was honest - but it is what a lot of people do. I wouldn't recommend it because it will ruin your credit. However most of the people that are doing this have bad credit anyway. It goes along the same lines as people who file bankruptcy on a cycle - run up alot of debts, don't honor those debts, and then file.


Didn't mean to imply you did. As I read your post, you have experience through your job with people who do this. That's why I said "people" and tried not to point fingers at you.
Link Posted: 9/28/2005 1:41:01 PM EDT

Originally Posted By dport:

Originally Posted By j-fonz:

Originally Posted By dport:
Mental note: Don't do business with people who can't keep their word.


I never said it was honest - but it is what a lot of people do. I wouldn't recommend it because it will ruin your credit. However most of the people that are doing this have bad credit anyway. It goes along the same lines as people who file bankruptcy on a cycle - run up alot of debts, don't honor those debts, and then file.


Didn't mean to imply you did. As I read your post, you have experience through your job with people who do this. That's why I said "people" and tried not to point fingers at you.


No problem - no offense was taken. It's an increasing occurence (this situation). I will be glad to see the CH 7 regulations tightened to make it more difficult to file.
Link Posted: 9/28/2005 1:49:15 PM EDT
Some good rules of thumb:

If you open a tradeline, keep it open even if there is no balance.

On revolving accounts keep balances below 30%. Going over 30 lowers your credit score. A lot of people will redistribute debt before purchasing a home or car to "juice" their credit score to get a better rate. I do recommend this.

Most Interest Rates can be lowered with a phone call to the company. They love your business and would like to continue to service your account. Most are indexed with prime so ask if you can go from prime +4pts to prime +2.

Don't open any more CC accounts than you have to. Each inquiry into acquiring more credit will lower your score if you are doing inquiries every month or so. Inquiring once per year will not hurt you (if it does, it's very minimal).

There are a bunch of others, but these are probably the big three.
Link Posted: 9/28/2005 1:58:49 PM EDT

Originally Posted By Admiral_Crunch:

Originally Posted By out4trout:
It seems like I get offers daily for credit cards that have zero interest rate for the first six months to a year on balance transfers. I would apply for a couple of those cards and then pay off all the others that are charging interest. If you don't have the balance on the new card paid off within six months to a year then switch to another card offering zero interest until they are all paid in full. Hell, I'll use interest free money for as long as someone wants to offer it to me.



Um, I'm pretty sure pulling that kind of crap will destroy your credit rating. It's also very dishonorable.



I cannot imagine how that is dishonorable. The card companies set the rules, he proposes to follow those rules exactly...where is the dishonor?

Jim
Link Posted: 9/28/2005 2:01:06 PM EDT

Originally Posted By jake1978:

That brings up another question...when I get the bastards paid, is it wiser credit-wise to close the accounts or leave them open with ZERO balances?



I was once advised to close the accounts when I paid them off. Then I found out that was very negative when I applied for a new car loan.

I had paid them off and closed the accounts specifically to prepare to apply for and take on a new car loan.
Link Posted: 9/28/2005 2:11:36 PM EDT
Stop buying SHIT you cant AFFORD.
Link Posted: 9/28/2005 2:12:05 PM EDT

Originally Posted By Gunner1X:

Originally Posted By j-fonz:
Call each CC company and ask for settlement on the amount. If they won't settle, tell them that you will quit paying and the debt can go into charge off status and they'll never see the money. At that time they usually straighten up and start talking. I work with CC companies all day and settle for between 50 and 60% of the balance and turn the 2000 dollars you have and buck up the extra 500 to pay off the cards totally.

My .02.



Looting is really cool too.



Get off your friggin' high horse and spare us all the pompous bullshi'ite. I'm sure YOU have no debt whatsoever and have never been fuqed over by a cc company. Let the one without sin cast the first stone.

To Jake1978, listen to j-fonz, he speaks the truth. The rest are just kibitzing.

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