I have 2 credit cards and they're not even that much. I've been paying every month to reduce the balance but after interest charges, it seems to go straight back up. I recently checked my credit score, and it's in pretty OK shape. I know if I get another credit card, my credit limit will be enough to cover for both debts. My plan is to just get a new credit card with no interest for one year and pay them off then cancel my other 2 credit cards.
Is that a safe idea? Will it affect my credit score (negatively) that much to do so?
Thanks.
2007-10-11 11:11:44 · 8 answers · asked by Reggie 2 in Business & Finance ➔ Credit
If you have the option of transferring the balances from the other high interest credit cards to one with o interest for one year then do so.You will be saving a ton of interest payments.Do not however cancel the other two credit cards even if you never use them again in your life.They way they go about calculating your credit score is based on how much credit you actually have versus how much you owe.Every card has a credit amount and it goes up as years go by.
2007-10-11 11:26:02 · answer #1 · answered by evrthingnice 3 · 0⤊ 0⤋
If you're only paying the minimum, it will take a very long time to pay off those cards. The minimum payment is probably just a little more than the monthly interest.
Transferring to a 0% interest rate is a good idea provided you don't just run the balances back up on the first two cards. However, if you don't have one of those special offers in hand, you may have some trouble finding one. There aren't quite so many.
In the meantime, you could use the snowball effect to pay down those 2 credit cards. Throw every penny you can squeeze out of your budget on the highest interest rate card, while making minimum payments on the other. When the highest rate card is paid off, throw everything at the 2nd card.
2007-10-11 11:42:56 · answer #2 · answered by bdancer222 7 · 0⤊ 0⤋
Actually some of these comments are in error. Actually having more credit cards or applying for more will have an effect on your credit score. That being said, as long as you are responsible enough to pay off the new credit card and the transferred balance before the 12 months are up, the positive will outweigh the negative. Just make sure that you follow through with all of these goals without adding additional debt and you should be in good shape.
2007-10-11 11:25:44 · answer #3 · answered by Anonymous · 0⤊ 0⤋
Do not withdraw money from your 401K. Alternatively, you can take a loan, but I don't think you should take the loan from your 401k either. Technically speaking you can only do a loan if its a financial hardship or you're making a home purchase. You don't fit these cases. As for the comments regarding paying taxes, you only pay taxes on the money if you do not pay the loan back on time. There are no taxes on the loan itself. If you do decide to this, be sure to increase your contributions to your 401k once you've repaid the loan. I've taken loans from my 401k in the past and it really helped me but I had a plan of action on how to replace the funds. Also, remember if you lose your job before the loan is paid back and you can't repay the loan, you'll end up paying penalties and taxes on the money so tread lightly. I would suggest you contact Macy's and see if they'll lower your interest rate for say 3-6 months. Then continue making your monthly payments or more if you can. I don't think you're in enough debt to justify taking out this loan. Here's the info regarding the taxes from cccs. The Facts About 401k Loans For those considering borrowing against their 401K retirement plan, here are some facts to consider. The law limits you to borrowing 50 percent of the account's value or $50,000, whichever is less. Unlike just about any other loan, there's no credit check. Borrowers have five years to pay the money back. If the loan has been used to purchase a home, the law allows up to 30 years for repayment, but many plans limit the time to 10 years. You'll be charged an interest rate that's considered competitive with other lenders. That's an IRS requirement. Often plan administrators set the rate at prime plus 1 percent. You won't pay taxes on the amount that you borrow. Taxes come into the picture if you don't repay your loan on time. Then you would pay a 10 percent penalty as well as ordinary income taxes on the withdrawn money. Usually a payroll deduction is used for repayment. Obviously this makes it less likely that you'll miss a payment. But it also means that you won't be seeing the money in your paycheck. If you need it for groceries, it won't be there. You'll also need to remember that you can't deduct your interest expense on 401k loans. That might make a home equity loan look more attractive.
2016-05-21 23:25:37 · answer #4 · answered by ? 3 · 0⤊ 0⤋
The answer will mainly depend on the terms of service on your new card: if the rates on the new card are higher than the combined rates of the old one's, than after a year, you'll be in a worse position than you are at the moment.
However, if the rates are similar, then having a single card to pay off is much easier, and what you propose is a great idea.
As far as credit score, you'll only be negatively hit if you fail to make payments. Check the terms of service carefully!
2007-10-11 11:19:10 · answer #5 · answered by Anonymous · 0⤊ 0⤋
Credit card balance transfer is one of the preferred ways to get rid of credit card debt and is used by many people to get immediate relief. Credit card balance transfer essentially means that we transfer our outstanding balances from a high APR credit card to a credit card which offers low APR's. A 0% Intro APR credit card is the preferred credit card to transfer balances, but because of the widespread misuse of such credit card offers, credit card companies have withdrawn all such offers.
Indeed balance transfer saves a lot of money and can save things from going worse, but many people simply don't know the right way to do balance transfer. This article takes a look at the correct process to initiate and complete the balance transfer.
The first thing to look out, when a person wants to transfer his balances is a credit card which offers the lowest apr rates and lowest balance transfer fees. Many online credit card companies offer credit card comparisons. It is indeed a good practice to search for the credit cards using their services and decide on a credit card which offers the maximum savings. It is important to note here that balance transfer APRs depend on a person's credit history. If the credit card in question offers the lowest rates, it is definitely for those with the best credit ratings. There are different balance transfer apr's for people with lower credit ratings. So, it becomes imperative that one chooses the credit card which offers the lowest apr and balance transfer fees for his credit ratings. Read more from: http://www.credit-card-gallery.com/article/414,The_right_way_to_credit_card_balance_transfers
2007-10-12 00:06:08 · answer #6 · answered by caleb b 2 · 0⤊ 0⤋
I don't have a credit card but listening to my friends and family complain about them I've come to the conclusion that credit cards are evil. I don't know the solution but i don't think getting another one and using it to pay off other cc debts is a very smart idea.
2007-10-11 11:16:34 · answer #7 · answered by Ruthie 7 · 1⤊ 0⤋
IF you can get a card with 0% interest for one year, then do it.
2007-10-12 06:10:18 · answer #8 · answered by Steve R 6 · 0⤊ 0⤋