Credit Card Debt

[taragarza1]

Can anyone give me tips on how to get out of debt. I know the main things. No more credit cards, budget and so on. I am looking for info on how to pay them off. I have 3 cards on at 23%, one at 14% and the other is around 18%. GOt a thing from chase today for balance transfer for 0% till 5/2010. I know that I would not be able to pay all them off by then but would that make sense to change to that? Or the other offer of 2.99% till 11/2010, again would not have them paid off by then either. PLEASE help I really want to get this gone and NEVER do it again. TIA Also anyone ever go to someone for counseling or help in getting a budget set up and managing money?

 

[carley]

personally id transfer them all to the one credit card at 0% and get it all on one card... pay down as much as u can while its 0%. although you may not get it all paid off by the time the interest kicks in you will have paid only to what you really have oweing

once you do that id get rid of the credit cards

 

[hanutedmansionmomma]

Dave Ramsey has written some good books about this; The Total Money Makeover is one.

We are starting with the lowest balance to pay off first, so we can see it go away fast and get results. Pay the minimum on the rest while you're doing it.

I did transfer to lower % cards. Watch out for fees with transfers tho.

 

[Duckyiam71]

I would recommend Consumer Credit Counseling. They will analyze your debt to income ration and help you set a budget. If the Debt Management Plan is the best option, they will help you with that too. The DMP is where you consolidate your money with them. They work out with all your creditors set fees and interest rates. You have one payment and then they will distribute. The DMP is the last resort for you and for them. They are a non profit organization. I unfortunately was in a bad spot and a shopaholic two years ago and did the DMP. If you miss a payment with CCC, you jepopardize your contract and companies could reinstate late fees and very high interest rates. It works for me but like I said it was the last resort and may not be the way you need to go. Good luck!

 

[Duckyiam71]

Sorry...just had to add I recommend CCC for counseling purposes. I really like Dave Ramsey and the Total Money Makeover. Again good luck. If you have any questions about CCC, just let me know.

 

[GenieCat]

http://www.cccsatl.org

If you use credit counseling, be sure it's a non-profit agency. They can also usually be contacted through your local United Way. They do not advertise on TV or radio.

There are many unscrupulous credit card consolidation companies which charge a fee for their "service". These are most often run by the credit card companies, and are basically a collection service.

 

[disneycountrygirl]

I would seriously look into Dave Ramsey's stuff....google him. Read his book - Total Money Makeover. His specialty is getting out of debt.

We have always lived by his principles (way, way before reading his book) and have never been in debt, and not cause we make lots of money, but just because we live by his principles - and they worked no matter what payscale we've been on through the years. They really are no brainer principles - unless you've never been exposed to living in that sort of way, and then it's just a matter of getting educated and living by it.

His plan may be tough and the initial sacrafice may be hard, but it's excellent advice that is almost guarenteed to work IF followed. We are proof of that.

Life really is so much more enjoyable when living within your means. Not only that, but I always say that you are actually richer when you live within your means because you have money put away so that you CAN buy the big ticket items and pay for the emergencies without your world crumbling or digging a bigger hole and getting in even deeper (and paying thousands a year in interest).

When you are in debt, money is the master and you are the slave. They don't call it Mastercard for nothing .

 

[Simba22]

I just found out recently that if you have a 401k, you can take out a loan from that with no fees and the interest that you pay on it, actually gets put into your 401k. So it's borrowing from yourself and paying yourself back, with interest.

Good luck, I've been there twice and I know what it feels like.

 

[crisi]

I just found out recently that if you have a 401k, you can take out a loan from that with no fees and the interest that you pay on it, actually gets put into your 401k. So it's borrowing from yourself and paying yourself back, with interest.

Good luck, I've been there twice and I know what it feels like.

Most financial experts recommend against this. There are a lot of reasons why - double taxation comes up. Its also risky, since if you don't pay it back, you'll be penalized, and for most companies if you leave the company with a loan out (even if you get laid off) you must pay it back immediately. Also, I believe 401ks are protected from bankruptcy - but only the money you have in there.

 

[aka-mad4themouse]

Don't do a balance transfer unless you fully understand the terms. Most likely there is a fee to just do the transfers and it is usually a percentage of the amount tranferred.

Then there's the default interest rate, which could be higher than the rate that you're currently paying. This default rate will kick in at the end of the incentive period but it may kick in earlier if you're late with a payment on that card or any other loan or CC. Oh, and any new charges to that card would incur the default rate immediately but will not be paid first when you send in a payment...the 0% APR balance would get it first.

Dave Ramsey would recommend paying the minimum on all of your cards until you have a $1000 emergency fund.

Then list your debts from smallest to largest and then pay the minimums on all but the smallest. You throw everything that you can at the smallest debt until it is paid off. When you're done with that one you close the account and move on to the next smallest and attack it with the same zeal.

Oh...and cut up your credit cards so that you don't add to your debt while you're paying it down. That would be counterproductive.

Good luck, OP! It takes determination but once you're debt-free you won't want to live any other way!

 

[minnie1928]

What are the fees associated with the balance transfers? That would also factor into my decision if I were looking at the 0% vs. 2.99%.

Assuming all things are equal, I would transfer everything over the the 0% card and work like nuts to get as much paid off as possible. Sell things if you have to. Get the Total Money Makeover book, read it and use it for inspiration. The real key to this is to make sure that you STOP using the cards!

 

[NYCDiane]

I would steer clear of those Consumer Credit Counseling Service places.... they're going to charge you a fee every month as well as an up front fee. They will also destroy your credit rating since you will not be paying anything on your cards for 2 months until they start negotiations. They do this intentionally to get you in a bad position --- 2 months of late fees, etc on your cards.--- that you can't get out of. Additionally, anything they can do for you, you can do yourself. It will take some work on your part, but it's something you can absolutely do and you'll protect your credit in the meantime.

First, decide if you want to keep or get rid of your cards. From what I've read and heard from "financial gurus", they say NEVER cancel a card since it will make it look like you're running away from them or can't handle them.

Second, list all your cards, account numbers, percentage rates and current balances.

Third, check out these credit card calculators: http://www.bankrate.com/calculators/credit-cards/credit-card-payoff-calculator.aspx

You can enter in the info and it will tell you how long it will take you to pay the cards off OR how much you will have to put toward each card every month to get them paid off in a specific time frame.

OR.....

If you decide to cancel the cards, you can call the credit card companies yourself. Speak to an ACCOUNT MANAGER ** NOT ** A CUSTOMER SERVICE REP!!! Make sure you're speaking to someone in the UNITED STATES not India, Pakistan, or the Phillipines (as most companies have call centers in these countries and those reps can't do anything for you. If they give you a hard time, DEMAND to speak to an AMERICAN ACCOUNT MANAGER NOW) Tell them you're considering bankruptcy (it doesn't have to be true) but you would rather pay the card off rather than not pay it off. See if they will lower your APR or give you a 0% APR until the card is paid off. Tell them you want to honor your obligation to them and pay the card off. I will bet you that almost every company will be more than happy to work with you on this. Even if you can't get them to give you a 0% APR, they may just lower your APR to give you an opportunity to get them paid off quicker.

OR.....

You can list all the cards (highest to lowest APR). Work on paying off the highest APR first and pay the minimums on the others. Once the highest card is paid off, take that money and add it to the amount you were paying on the next highest card and so on.

OR....

You can try and get a new card and transfer all your balances. These days, though, it may be tough to get approved for a new card. Banks and credit card companies are being VERY conservative in their lending practices and you may not be able to get a new card with a very low APR for balance transfer purposes

OR.....

Add up all your debt, go to the bank, get a low interest, unsecured personal loan and use that to pay off your debt

OR......

I don't know what else.

Good luck and check out those Dave Ramsey books. I've checked out his site and he's very informative!

 

[metime]

If you go to the 0% transfer and you know you are not going to pay it off in time then you need to check the interest rate when the 0% time is up. Also a lot of the time the interest is retroactive meaning if you don't pay the entire amount of the balance before the 0% time limit you owe interest from day one.

I would call the CC companies for each card to see if you can negotiate the interest to a lower rate. Sometimes it works.

Going from smallest to largest balance works but only if you are really aware of your spending and are not a compulsive spender/shopper.

 

[minnie1928]

If you go to the 0% transfer and you know you are not going to pay it off in time then you need to check the interest rate when the 0% time is up. Also a lot of the time the interest is retroactive meaning if you don't pay the entire amount of the balance before the 0% time limit you owe interest from day one.

Another take on this would be to transfer only the amount that you KNOW you can pay off between now and then.

 

[pixie921]

Don't do a balance transfer unless you fully understand the terms. Most likely there is a fee to just do the transfers and it is usually a percentage of the amount tranferred.

Then there's the default interest rate, which could be higher than the rate that you're currently paying. This default rate will kick in at the end of the incentive period but it may kick in earlier if you're late with a payment on that card or any other loan or CC. Oh, and any new charges to that card would incur the default rate immediately but will not be paid first when you send in a payment...the 0% APR balance would get it first.

The other thing that struck me immediately is that your offer is with Chase. They've been hitting people (especially clients with low locked-in APRs that did balance transfers) with minimum payment increases. I've read of lots of people's minimums going from 2% to 5%. I wouldn't want to have any kind of a balance on a Chase card right now if I wasn't sure I could afford to pay 5% of my balance every month.

 

[disneyfreakk]

check out www.creditboards.com/forums . They give great advice.

I have heard that chase is sneaky with the balance transfers, but I don't remember the exact reason people on the creditboards say that....

 

[Tink-n-MrIncredible]

I agree with checking out Dave Ramsey's TMMO first. You can check it out at your local library for free.

 

[Tinker'n'Fun]

Here is the best advice I can give you....

Never ask how to get out of debt on a Disney Vacation planning board (um our goal is to get to Disney no matter what) and never ask on a credit planning/reducing board how to get the most out of your trip to Disney (Boring).

Definetely check out the forum link that disneyfreakk provided.

 

[Mary2e]

I just found out recently that if you have a 401k, you can take out a loan from that with no fees and the interest that you pay on it, actually gets put into your 401k. So it's borrowing from yourself and paying yourself back, with interest.

Wrong, wrong, wrong....

You are borrowing pre-tax money and paying it back with after tax money, which will then be taxed again when you withdraw it at retirement. If you lose your job the loan will have to be paid back immediately or you face taxes and penalties.

As well, your 401k/IRA is protected from bankruptcy.

There is never a good reason to touch any of the money in your 401k.

 

[bumbershoot]

Another Ramsey convert here.

There's a forum, livinglikenooneelse, and they can really help you.

One of the things that is suggested that, until you're out of debt, to stop contributing to the 401k. So instead of taking a loan from it, if you're contributing right now, stop contributing and use that money to throw at the debt.

And they do say to go lowest to highest *balance*, and ignore the percentage. Reason? To get balances demolished as fast as possible, and have "early wins" to help bolster your confidence that you can do it. It was easy for us, as after we smashed some ancient medical bills, our lowest balance was also the highest interest. Not as easy for others, to watch that interest pile up. But paying stuff fast really makes you feel good.

Good luck!