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Dealing with credit card debt

A_Albe

New member
I accumulated credit card debt when I had just graduated from college and hadn’t found my first job. Now that I am more financially stable I am looking to pay it off in the best way possible. I don’t have a lot of disposable income so paying off in lump sums or greatly increasing the monthly payments on all the cards isn’t an option. What approaches have helped you? Any good resources or tools?
 

anniel

New member
One strategy that has really helped me is setting up an auto-payment from my checking account to my credit card every month, even if it's small. I treat this like a bill-- it has to get paid every month. I use debit or cash for all of my other expenses. This combination means that I can only spend the amount that is left in my account each month (or, hopefully, less). I don't use credit cards unless I absolutely have to, like in the case of an emergency.
 

JBee

New member
I accumulated credit card debt when I had just graduated from college and hadn’t found my first job. Now that I am more financially stable I am looking to pay it off in the best way possible. I don’t have a lot of disposable income so paying off in lump sums or greatly increasing the monthly payments on all the cards isn’t an option. What approaches have helped you? Any good resources or tools?
Albe, you can try paying off the card with the lowest balance, and then pay off the next lowest, and so forth. I'll try to explain. For example:

Major Credit Card Balance: $1000, Monthly Payment : $50
Shopping Card Balance : $500, Monthly Payment : $25
Other Credit Card Balance : $200, Monthly Payment : $10

So here you would have $85 of credit card debt you are paying off each month. With the interest tacked on, your monthly payments are not going toward the principal amount if you are only paying the minimum- which will result in you paying more than you owe AND it will take longer to pay off. Since you are unable to make lump sum payments at the present moment, you would need to commit to setting aside extra money to go towards your lowest credit card. This will require sacrifice. I would say, set aside $25 at min. Or try to do $50 ( $25 per check or something). The more, the better.

So in this example, we are going to go with saving $50. So instead of paying $10 toward the $200 balance, pay $60 - and continue to pay the min balance on the others (ON TIME lol). At this rate you should have the $200 card paid off in 3-4 months, if you can't sooner. After that card is paid off, you take that $60 a month you were paying and tack it on to the min payment of the next card - which in this example is the shopping credit card. So instead of paying $25/month, you would pay $85 (as you are no longer needing to pay anything on the previous card). The $500 should be paid off in 5-6 months . Then take that $85 and add that to the $50 payment for that last card and the balance should be paid off within 8 months!

(Some prefer to pay off the cards with the highest interest rates first. That would also work)

You just have to sacrifice a LITTLE bit. Maybe skip eating out a few times a month or buy generic for a little while. Figure out where you can save and keep that commitment to yourself. I was swimming in debt :-( and when it came time to buy a home i was at a stand still. So I had to do something about it. I was able to make some lump sum payments, but when I didn't have that bonus money, I used this method and it worked well for me.
 

Nick Torn

New member
I think the best way of dealing with it - it's to pay the more you can in a month. I have had debts before, but now I don't give myself to do it. Anyway, before you can start to have savings, you need to pay all your debts. I think you need to budget all things in your life and then understand how much money you can give for debts. You CAN'T do what you want when you have debts. I mean you can't buy a phone or laptop when you have some debts. It's all will help you I think, because I have had very big loans, now I don't have them.
 

John S

New member
JBee described something along the lines of the Dave Ramsey debt snowball method, just not as intense. Good ideas though as paying the lowest balance first shows progress which helps to keep you motivated. After all, succeeding is partially about having the ability to change your behavior.
 

jay05

New member
New credit cards with zero-interest balance transfer promotions were a big help to me in the same situation a few years ago. The obvious caveat here is you can't go sign up for the new credit card and then run up debt on that too. I was very disciplined with the new card; I used it literally once (to establish a history of use for the card), paid that transaction off immediately, then transferred a sizeable debt from a high-interest card. That bought me 18 months (this was a generous balance transfer offer) to pay down that debt interest-free, all for a one-time fee of 3% of the transaction. The debt I had was sizeable, and so 18 months wasn't enough. What did I do? Got a third card with a great zero-interest balance transfer offer, used it once and paid that immediately, then transferred the remaining debt onto that card. Yes, I had to pay a fee both times, but that fee, which ended up being equal to about 3 months of interest on the first card, "bought" me 30 months to pay off debt with zero interest. It was a very effective way to do that. Added bonus: once I got the debt paid off, I had multiple cards I could use for different mileage/points deals, and the total credit available to me upped my credit score.
 

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