My approach to getting out of debt is very simple: make as much money as possible so that I can put as much money possible toward my debt. None of my accounts were in bad standing, so I didn’t take any consolidation loans. I haven’t sought out no-interest credit cards to transfer my balances. I basically just stopped in place and started paying off the lowest balance first (the snow ball method).
In a sense, it’s not the most strategic plan. In another sense, though, it is, because the point is actually finishing and not just having the best start. I’ve taken the Dave Ramsey approach of doing this the most legitimate way possible instead of the most savvy.
I must admit, t00, that I am generally suspicious of any of these financial deals. And, rightly so. Even my own bank is constantly trying to get me to sign up to receive Credit Advising for free (except for the monthly fee they’ll start charging after the trial is over). And then there is my own psychological trap of taking the easy way out in order to continue on with my bad habits.
But, there’s no sense in being stupid about this. If I see a good deal, it might be worth taking, even if I’m a tiny bit suspicious still. Wells Fargo (my bank and holder of the card I’m currently paying off) just sent me an offer. The deal is that if I call them before March 5th ready with a one time payment of at least 10% of my total credit card balance, they will reduce the interest rate for a 6 month period. So, basically, I will be doing what I’m already doing (making large payments) and for doing that one time, they will temporarily reduce my APR.
The only thing that makes me hesitate at all is that they will then reduce my credit limit by that amount (not entirely sure how this works). It’s silly, but available credit gives me comfort, especially in the process of paying off my debt. But, ultimately, I do want my credit limits to be lower, because they are too high for the amount of money I make and after I am out of debt and having some money in savings, I won’t need that available credit.
So, now the only thing is figuring out how much I can possibly put toward that card before March 5th, because the more I put down, the lower my interest rate will be reduced for this six month period (in which I hope to pay off the entire balance). I’m not sure if the $500 I just put toward my card a few days ago will count toward this one time payment (but I think so). If I can put another $750 toward my debt this month (and I can) then that should reduce my APR from 19.5% to just 8%. If I can possibly swing more money toward my debt (I do get paid by Job #2 on the 5th, but that would be cutting it close), then I could reduce my APR to as low as 4%. That would save me so much money in interest and allow me to pay off this card extremely quickly. I will report back with the results.
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I would say no, don’t do it. Only because of two reasons: #1, if they’re cutting your available credit, that screws with your credit score. Mainly because of the whole available credit to credit used ratio. And yes, you want your available credit down but I wouldn’t mess with it right now. And #2, what if something happens (some random huge expense that you weren’t able to foresee) and you can’t put as much money as you want towards the card, which means that after 6 months… well, what would happen to your interest rate? It could go up to where it is now or it could go even higher.
That’s just my two cents though. Do with it what you will.
Over the weekend I received a call from a collection agency. Usually they ask me where their money is and how soon I can pay them, but this call was a little different.
I had a credit card that I never paid (not even a minimum payment) in six months because I had a lot more important things to pay for (i.e. rent, food, heat!). Needless to say, the credit card company was going to slap me with a lawsuit unless I took immediate action to rectify this. They wanted $4,000 RIGHT NOW and because I suck at budgeting my money, I don’t have $4k saved up, so I had to liquidate 2 of my mutual funds to pay this off in order to avoid the lawsuit.
I have had about 2 panic attacks and nearly cried my eyes out in the last day and a half, but I know it was my own stupidity and I had to suffer the consequences. But you can bet I definitely learned my lesson on this one — always pay your credit card every month (even if it’s only a minimum payment) and never ever use a credit card ever again!
Good luck with paying off all of your debt. I’m hoping I can pay the rest of my debt ($1,500) off by the end of this year!
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