STYLETHREAD -- LET'S TALK SHOP!

laken1 · Hermes

What to pay off first? *update

luckylily · Gucci

RE: What to pay off first?

NCshopper · Hermes

I've also read Young, Broke, and Fabulous, and Suze pretty much always suggests paying off the higher interest card first. But she has an interesting way of doing it. (Let me see if I can explain it.)

You pay the card with the highest rate down first while you pay the minimum balance on the other cards. For an example, let's say that you pay $100 a month toward the card with the highest balance and you have 5 other credit cards with a minimum payment of $20 a piece. So you pay $100 towards the card you're paying off first, and an additional $100 a month towards the other cards.

Once the first card is paid off, then you move on to the second card. You pay what you were paying toward the first card ($100) plus the minimum payment that you had been paying ($20), so you then are paying $120 a month toward your second card and paying $20 a piece as a minimum payment on the other 4 cards.

Once the second card is paid off, you take the original $100, plus the $20 minimum from the second card, plus the $20 minimum payment and put that whole sum ($140) towards the third until it's paid off. And on and on.

I think she'd also recommend seeing if you can consolidate some of the credit cards into one credit card. If you have good credit, you should be able to get a pretty good rate too.

Hope this helps. I'll look at the book again tonight and see if she recommends anything else.

laken1 · Hermes

I feel so stupid - it didn't occur to me to put all the balances on one lower rate card. That's so embarassing - I used to loan people money for goodness sakes!

NCShopper - I know exactly what you mean paying them down like that but to be honest, I have proved that I'm not disciplined enough to do that - it just seems like it's always something else that eats that money. That's why I'm trying to plan ahead with the lump sums - I seem to do better with that! I'll try though (I promise)

NCshopper · Hermes

Hahaha...too funny! Eh, sometimes you can look right past the obvious, you know?

Anyway, I know what you mean about being disciplined. I've been dealing with paying off my credit card for awhile and it's been a roller coaster ride. It's hard to stay focused when your goal is a long way off, but now that the end is in sight, I'm super excited just to get it paid off finally!!!

Andrea Julia · Coach

I would pay off the smaller ones with higher interest because

1. You are paying more to keep a balance on them than that same amount is costing you on the bigger bill.

2. It is annoying to pay a bunch of small bills.

3. Although you would be paying the exact same sum, I think it would feel like more of an accomplishment to pay off a few bills than just one.

Once you pay these, you can put the money you would have spent on them toward the big bill and it will start dramatically decreasing.

-- Edited by Andrea Julia at 19:32, 2005-11-28

Deuce · Dooney & Bourke

I agree pay off the higher rates first. Then you only have 1 balance to concentrate on as well. A timesaver. You can also (1 time/year) request an interest rate reduction if he has been keeping current. I cannot remember if he owns his home or not but if so what about a home equity line of credit, the interest rate is pretty low and can be tax deductable.

Cortney1982 · Chanel

It is more important to pay off the highest interest first. I think if you just paid the one with this highest balance first, it would be more tempting to put purchases on it since there would be more room to do so.

laken1 · Hermes

Cortney1982 wrote:

It is more important to pay off the highest interest first. I think if you just paid the one with this highest balance first, it would be more tempting to put purchases on it since there would be more room to do so.

I do PROMISE not to do that, we don't have cards for any of these accounts anymore. Plus we haven't charged anything since we've met (2+ years) due to the fact that we both did have pretty high balances, so we are on a budget that includes payments on them & doesn't include charging at all - which was really hard at first, but really such a relief now that they are going down. I SO want this to go away.

But I know exactly what you mean. Pinky swear I won't.

Thanks so much for all your help ladies. I have decided that I'll pay down as much as I can starting with the highest rate until the money is gone then I'll transfer whatever is left to a lower rate card - or request a reduction. He has a great credit rating so that shouldn't be an issue, then I'll still only have to pay one bill (which was my "convenience" point - that is exactly what I was thinking AJ) - so it will all be solved! I guess I was just waffling because the rates are literally only 1 - 2% difference (all high!) Then I can get my beetle in April / May.

YAY!!!!!!!!

-- Edited by laken1 at 08:47, 2005-11-29

Alikat · Kate Spade

I'm not sure if this helps, but I wanted to transfer some debt to a lower interest card and called one of my credit cards that I wasn't using to cancel them - and they offered me an awesome deal to transfer and not cancel (1.99% for lifetime of transfer!).

Good luck! BTW that book sounds great - I'm adding it to my Christmas list.

blubirde · Chanel

I'd try to put them all on one card with a low interest rate (you can get good transfer deals) and then put the lump sum towards that one card. That way you get everything down to one payment - convenience factor - and you put the entire lump sum towards actual balances, not interest payments.

I'm so jealous of you! I want a lump sum to pay off my credit card.

laken1 · Hermes

RE: What to pay off first? *update

luckylily · Gucci

Oh, that sucks, Laken! I'm so sorry.

I know how you feel. It seems like whenever I'm about to get ahead financially something bad happens that costs a ton of money...car problems, sick pets, etc.

NCshopper · Hermes

Oh sad!!!

I hate when stuff like that happens! Grr! I feel frustrated for you!

blubirde · Chanel

laken1 wrote:

UPDATE: Well, my car broke down on me last night & i was already lost so I had no clue as to where to tell my hubby to come get me. And it's $1,000 to fix it. So there goes that much of the money! WHY WHY WHY WHY WHY WHY?????????????!!!!!!!!!!

Look on the bright side - at least you had the chunck of money to pay for the car. Imagine if your car broke down when you didn't have it. More credit card debt... It does seem to be a vicious cycle, doesn't it?

laken1 · Hermes

blubirde wrote:

laken1 wrote:
UPDATE: Well, my car broke down on me last night & i was already lost so I had no clue as to where to tell my hubby to come get me. And it's $1,000 to fix it. So there goes that much of the money! WHY WHY WHY WHY WHY WHY?????????????!!!!!!!!!!
Look on the bright side - at least you had the chunck of money to pay for the car. Imagine if your car broke down when you didn't have it. More credit card debt... It does seem to be a vicious cycle, doesn't it?

I know - my MIL would say that was the universe providing for an upcoming event....but IT WASN'T IN THE PLAN. I guess the lump sum wasn't in the plan until yesterday, but you know I already had it earmarked & spent. Ugh. I just hate it.

Part of me wanted to say forget it, because of course it started right up after we had it towed to the shop. But they are doing a tune up & lots of maintenance so then I'll be safe & hopefully in good shape until the spring. I mean really, what choice do you have? It's just so disappointing.