Paying off credit cards

[MickeysMommy]

What are your "tricks" to paying off your credit cards? I have a couple of cc's with balances on them. How do you pay them off quickly?

 

[tonilea]

We did the "snowball" method.

We listed our debts from largest to smallest. We then listed the minimum payment for each debt. Once we decided how much we could put toward debt payment, we pay the mininum on everything but the smallest and throw all the extra toward it. Then when each debt is paid off we take what we were paying on the one below and move it all up to the next one.

Example:

Debt #1 - $3000 - Minimum $100
Debt #2 - $1555 - Minimum $ 45
Debt #3 - $1033 - Minimum $ 40

Our total monthly debt minimum payments $185, we decide to pay $500 per month toward debt.

Month One:
Debt 1 - $100
Debt 2 - $ 45
Debt 3 - $355

 

[Atchley]

Some cc will "knock off" some of the balance if you set up automatic payments on your account. I think they just make sure that they get the principal amount back and forget the interest. I think you have a certain time to get it paid off that away though.

 

[seashoreCM]

Generally:

Which card balance has the highest interest rate (finance charge rate)?

Put all of your extra payments towards that card and just minimum payments towards the others.

Exception:

Credit card #1 has a promotional balance at a low rate to which payments apply first and also another separately kept balance at a high rate. Credit card #2 has just one balance at a medium rate. It takes some math knowledge I don't have to figure out the best way here. For simplicity I would call this case a toss up.

Disney hints: http://members.aol.com/ajaynejr/disney.htm

 

[disneysteve]

The best method is as seashoreCM suggested. Pay the minimum on all but the card with the highest interest rate. Once that one is paid off, move to the next highest rate until they're all gone.

Of course, you also need to cut out all unnecessary spending and free up as much as you can to put toward debt reduction.

 

[nelson84]

Why don't you just call the credit card company with the lowest intrest rate to raise your limit and put all of your other card balances on the lowest intrest rate card and make one single payment. Or at least load up the lowest interest rate card the most you can, and pay off the other cards first.

If you rent just declare bankruptsy, but first take all of your money out of your accounts before you declare. The credit card companies will loot your bank accounts and leave you to starve to death.

If you are going to stick it to the man, just be smart about it. Your money is only safe in your own hands.

 

[Crazoo]

I heard if you call and threaten to cancel your card (transfer balance to another card) they will lower the rate for you... no experience doing this myself though.

 

[disneyfreakk]

Why don't you just call the credit card company with the lowest intrest rate to raise your limit and put all of your other card balances on the lowest intrest rate card and make one single payment. Or at least load up the lowest interest rate card the most you can, and pay off the other cards first.

If you rent just declare bankruptsy, but first take all of your money out of your accounts before you declare. The credit card companies will loot your bank accounts and leave you to starve to death.

If you are going to stick it to the man, just be smart about it. Your money is only safe in your own hands.

Please dont do this. This is a very BAD idea.

Go with what CM said.

 

[Angela&Kayla]

I agree with the PP who said to pay the minimum balances on all accounts with the exception of the one with the highest interest rate. On this credit card, put all available extra money towards it until it is paid off. Repeat cycle as needed until all your credit card debt is gone.

One thing that has helped me...as soon as you have the money, make a payment towards the credit card. That way, you won't be tempted to spend the debt reduction money towards something you do not need. Feel free to make multiple payments per month on a credit card if you need to. And take advantage of online bill paying offered by most major credit card providers! It makes making a payment quite painless!!!

 

[grlpwrd]

You might also want to check out www.creditboards.com for credit info and to stay on track.

GL!

 

[klineyqueen]

I heard if you call and threaten to cancel your card (transfer balance to another card) they will lower the rate for you... no experience doing this myself though.

This is true! You could consolidate it onto one loan with a fixed rate and a fixed payment. Not one that decreases the more you pay off. Then you have a real date that it will be paid off. You put your extra on your loan...then you will have it paid off early. Oh yeah...stop using your cards!

 

[tonilea]

I know that logically it seems like paying the one with the highest interest rate first would make the most sense, but when you get a few of the smaller debts out of the way, it gives a real psycological boost. So for us, smallest debt to biggest debt has definitely been the way to go.

 

[Crazoo]

I know that logically it seems like paying the one with the highest interest rate first would make the most sense, but when you get a few of the smaller debts out of the way, it gives a real psycological boost. So for us, smallest debt to biggest debt has definitely been the way to go.

Good point... usually the cards don't differ that much in rates anyways...

 

[JuneChickie]

[quo.

 

[aka-mad4themouse]

CC companies compute your interest each day. So, if you carry a balance, it's a good idea to pay the bill as soon as it arrives rather than to wait until just before it is due.

Also, if you can make weekly payments instead of one monthly payment, you'll save on the interest...especially if the debt is a large one.

If your bank has free automatic bill payments, take advantage of it and set it up so that the money for your cc gets deducted and sent on time every month. You'll avoid any possible late fees and you can't withdraw the money if it's not there.

Lastly, cut up the credit card (or at least freeze it in a block of ice). You don't want to add to your debt while you're paying down the balance. It kind of defeats the whiole purpose.

Good luck paying off your cards. It can be such an uplifting feeling to accomplish it.

 

[JonS99]

Pay them off based on interest rate, paying them down based on balance doesn't make sound financial advice, not sure why people would suggest that..

Right now we have about $3000 on a card thats at, GULP, 32% and another $1200 on a card thats zero interest.. It would make no sense if we would pay off the smallest one first.. However, if I had a couple of store cards with balances of a $300, I would pay off those first just to get them out of the way..

 

[ameraumi]

I am doing the snowball method right now and I am seeing a huge difference. The one thing I do is pay online as soon as I have a little extra, normally at the end of each week. This cuts down on the amount of interest that accrues daily.

As for snowballing the lower balance first over the highest: I know Dave Ramsey says it is for the satisfaction of seeing your balances go away quicker so you are more motivated. In my case, the higher rate one is our lowest balance.

 

[seashoreCM]

Be careful of balance transfers.

1. Sometimes there is a fee for doing them.

2. If you transfer a balance to a card account that already has a high rate balance. the existing high rate balance will not be whittled down until the transferred-in balance (if that has a lower rate) has been paid off.

3. If you use the card whose account received the balance transfer at a low rate, the new purchases with a high interest rate will not be whittled down until the transferred-in balance has been paid off.

4. Don't forget to make at least the minimum payment on the old account until you see on the next bill that the transfer-out has happened. Depending on timing, this may result in a negative balance which you can use up by using the card some more, or wait a few months for a refund.

 

[Marie17]

I think the "reason" why some people suggest paying off the lowest balance first is due to the fact that MOST people who carry balances are in one sense or another not living within their means.

It is more a discipline thing than anything.

If you pay-off the lowest you are still going to paying on the highest one too BUT you will see that balance go away much faster (usually within a few months) and then hopefully this will spark a change in behavior to get all their debt cleared.

Once you pay them all off, you should have an idea of what you need to actually "charge" each month and be able to PAY OFF each month. Plus, while you are clearing your debts you have a tendency to realize and classify as wants, needs, desires and must haves.

After you finishing re-training your brain (and your wallet) to pay off your debt, then just remember what it felt like to have debt and for plenty of people that helps to keep them out of future debt.

 

[Stein]

The only trick I know of is setting up a good written budget and living on less than you make. The tighter the budget and more focus you have, the sooner the debt will be gone. Unless you have a ton of debt, the order you pay them doesn't make much difference money wise. We went smallest to largest and it worked for us.