Paying off credit cards....?

Question

I have three credit cards (yikes).

Here's a breakdown: (CC=Credit Card)
CC1: 1300 balance at 32% interest rate.
CC2: 300 balance at 0 interest for another 4 months.
CC3: 290 balance at 24% interest.

What would be better...paying off the smaller ones ASAP first, or paying them all down at the same time. I was thinking about tackling the 0 interest one first, and then going after CC3, all while making payments about twice that of my mininum pymt due in my CC1. In other words, I'd be paying off the small ones before really, really tackling the big one.

Looking at it all, I can't believe I'm almost 1900 in debt. That's scary. On top of my 6K in student loans (luckily in deferment since I'm still in school).

Answer 1

Sister girl, you NEED an emotional boost and a financial one.

Pay off the $200 balance first and get the emotional lift of one card being paid in full. You will also get a financial benefit, but you NEED to SEE the results of your efforts quickly to get into the HABIT of this program.

This emotional lift will provide you with the motiviation you need to continue your debt diet.

Then pay off the $1300 balance at 32%.

After that is handled, then attack the 0% APR balance.

While this is not necessarily the "optimal" financial solution in terms of savings -- it is the one that is in aligment with our primal instinct to be rewarded and validated for good behavior/ good habits.

To make any plan work in the long-term, humans need that validation.

Good luck.

Answer 2

I miss those day when $2000 was a lot of money, My debts now range between 800 thousand to 1 million with 750k in mortgages and 50k-250k in credit cards depending on what i choose to invest in on a monthly/quaterly basis.

Both of the stratgies mentioned in this thread make sense depending on the situation and desired out come.

To pay off the credit cards as cheaply as possible pay off CC1, then CC3 then CC2. Now if the process will take greater than 4 months you will have reevaluate it once CC2 promotional rate increases, so pay the minimum on all the cards except the one with the highest interest rate and then move on to the next highest and so on.

The other method of paying your lowest balance cards first will cost you more in the long run, delaying you getting out of debt, but it will simplify your startegy as you will have less cards to pay over time. Since it is only three cards i suggest saving money and paying the highest interest rate card first. Here is one caveat, if the CC2 or CC3 will like give a new promotional offer once the balance is paid in full then pay off that first so you can transfer some or hopefully all of cc1 to it to reduce its rate.

Regardless of which startegy you choose only pay the minimum to all the cards except the one you are targeting first, but do pay the minimum on time as it will save you money in the long term as the cc's will give you lower terms and better promotional offers.

If it wasn't for cc's i never would have been able to start investing and building my financial future.

Also call up the CC1 and CC3 and ask them if they would reduce your rate since you have been with for X months/years and have been paying on time. Some time just a simple call can cause them to reduce your rate by 5% which saves you a lot of time and money.

Answer 3

I would worry about the bigger one first simply because it is 32 cents on the dollar to finc. that is 32%. while the one is giving you 4 months to pay at no interest. I would make the minimal payments on the smaller ones and more on the bigger one. to knock it down some, that is just my study. Seems more logical to me. once I got one paid off I would not use them unless emergency purposes. and get rid of the 32% and keep the 24% as long as you keep it a small balance because in the long run the longer you have you card the more limits you get and the cheaper the rates go down. It builds your credit until you can get them down then, when you find a smaller % credit card to get you should not have any problems . Just remember to be on time that is the key to building it! Pay it off with your income taxes... right!

Answer 4

Pay down the big one (CC1 @ $1300), it's costing you almost $35/mo in interest, while CC3 is only costing you $5.80. Since CC2 is 0% interest for the next four months, there is no need at this time to worry about that one.

As you pay them off, cut them up, except for one, which will be used for "emergency purposes" only.

Answer 5

i would be inclined to pay off as much as you can on cc1...you are being charged heaps of interest....if you can do that with in the next 4 months then tackle cc3 and leave the card not being charged interest until last....
another option is to see a bank and ask them to consolidate your debt so that you have one repayment to make instead of three and the interest rate will be substantially less....
whichever way you go...make sure you destroy 2 of the cards and only keep 1 of them in case of an emergency.....

Answer 6

I'd suggest going to a banker and getting a loan to pay off your credit cards all together. Bank interest is much lower. Throw away any cards that have an interest rate above 11%, those 20-30% ones are rip off rates!

Answer 7

Are these your only credit cards? If you have any other cards with a zero balance, do a balance transfer to lower rates. If not then pay off the ones with a low balance and transfer at zero or lower interest, make sure you read the small print and try not to pay any 'fees'.

Answer 8

Wowzers...i'm right behind you...1200 in debt...sophomore in college. thank God i have a scholarship. Pay off the one with the highest interest and just make the minimum plus a little more on the 24% one. Never pay just the minimum b/c your finance charges will be greater. And of course never miss a payment Good Luck!

Answer 9

Pay the high interest one first. And, if you can control your spending from here on, consider talking to your banker about getting a loan or line of credit to reduce the interest rate you're paying. (perhaps down to 7 or 8%)

Tho, if you run up your credit cards again... it defeats the purpose.

Answer 10

Pay off the biggest loan to lower your interest. Pay off all of them each month. Don't use credit card anymore as it will add your debt and don't over spend your means.