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Hey Ash can I borrow 1500? I swear I will pay back every penny.
When I get my tax return (it'll be close to 2,000) I am planning on paying off credit cards. What order should I pay them off in?
I have:
1) Capital One card that was opened close to 203/4 balance of 460ish with a limit of 500 with an interest rate increasing in a few months due to the recession. (I think 20-22%? Not sure)
2) A WaMU card that is switching over to Chase in less then a month, hasn't been open for less then a year (opened for an emergency) has roughly the same balance as the Capital One Card. (This one may be 14%ish?)
3) An Old Navy Card with a balance of $404 with an interest rate of 22% with a limit that was reduced from $500 to $450 a few months ago. This one was opened like a year and a half ago.
Oh and then student loans that are deferred due to job loss a few months back. I'll start paying those back in a few months.
So, what do you all think? I've heard pay the one with the highest interest, pay the oldest (or newest), highest balance, etc. What's the best way to go about this?
Hey Ash can I borrow 1500? I swear I will pay back every penny.
Can u put the credit cards all on one account at a lower interest rate?
in my lowly opinion, smallest balance to highest balance.
It does not make sense mathematically, but if said person was a mathematical genius they would not go into debt in the first place. Spending is all behavioral, and doing it smallest to largest sum will help you with the psychological aspect in creating a snowball effect that will keep you motivated.
Again, this will be bashed but who cares; it works.
Lowest balance first then use the payment you would normally send to the lowest one and apply it to the largest. Look up the Snowball effect.
Pay off Old Navy @ 22% and close it.
Pay off Capital One at 20-22% and close it.
Pay off the WAMU/Chase, keep it @ 14% and use it and make sure you are never late on a payment.
Bank the rest of the cash for padding.
I'm sure B2B will have the best, most detailed advice...
but I'm on board with paying off the lowest balance first which would leave you with two monthly payments in the fastest way possible.
Then this is just me, but I would pay the bare minimum on the highest card balance remaining while paying as much as I possibly could on that lower card each month to get myself down to just one card payment.
uhhh....guys...she owes $1200 and is getting back $2000...she can pay them all off, keep one card for regular use, and put the $800 back for emergencies. This will help her credit score by reducing her available credit.
Yeh, that confused me too. Why worry about the order when you can pay them all off?
I failed to use my calculator and I assumed due to the nature of the thread that she didn't have enough to pay it all off.....
weird thread.
lol...ok
Not that Ash ever listens but.....
Pretty much what CC said.
Unless there is some kind of mathematical error in your money it seems like you can pay them all off. Do so and see if they'll lower your super high %'s. If you don't plan on paying them all off pay off the ones with the highest % rate first regardless of balance. 20ish%'s are insane pay them off and either negotiate a lower rate or close the accounts.
I understand its good to have available credit but rates like that are financially doomed regardless of the potential for FICO help.
I'm assuming the high % cards have big annual fees IE half of your available...so even if you pay them off and plan on never using the card you're going to end up paying big time interest on annual fees. that.
When I get my tax return (it'll be close to 2,000) I am planning on paying off credit cards. What order should I pay them off in?
I have:
1) Capital One card that was opened close to 203/4 balance of 460ish with a limit of 500 with an interest rate increasing in a few months due to the recession. (I think 20-22%? Not sure) Pay the card down at least $160. Any credit card with a balance of more than 60% the limit takes a hit on your credit.
2) A WaMU card that is switching over to Chase in less then a month, hasn't been open for less then a year (opened for an emergency) has roughly the same balance as the Capital One Card. (This one may be 14%ish?) Don't know your limit but pay down to at least 60% as well. (Chase interest rates have been going up)
3) An Old Navy Card with a balance of $404 with an interest rate of 22% with a limit that was reduced from $500 to $450 a few months ago. This one was opened like a year and a half ago. Pay this off and leave the account open. It's good to show that you have open accounts with zero balances versus a closed account. Unless you have zero percent on retail cards, stay away from opening these accounts period.
"Oh and then student loans that are deferred due to job loss a few months back. I'll start paying those back in a few months. Student loans typically have super low interest rates compared to credit cards so don't do anything with these until the others are taken care of.
As far as the rest of the cash is concerned, either pay down the higher interest cards more, or put it in a savings/m.m. account and leave it there for a rainy day. It's good to keep balances on credit accounts to build payment history. By the looks of it your debt situation is very manageable, but at the same time your limits are fairly low for some reason. Oh yea, never miss a payment or default. One little thing can cost you a ton of money when buying a large ticket item using credit.
So, what do you all think? I've heard pay the one with the highest interest, pay the oldest (or newest), highest balance, etc. What's the best way to go about this?"
Close the Old Navy card for sure.
Consider closing one of the other two, that interest rate with Capital One is crazy, but at the same time I had a card with Chase and they wouldn't raise my limit over 200.00 and I'd had the card for two years, used it responsibly, and had a credit score in the 740 range. I called up Citibank and got a 3500.00 credit limit and closed the Chase immediately.
In other words, if you want to grow your credit Chase might not be that great, at the same time Capital One is screwing you on your interest rate, but Chase isn't...
I'd rather have a gas card than an Old Navy one, but I'm a man and you're a woman so maybe that's why.
countdown to B2B response.....
5.......4.......3......
you should always pay the ones with the highest interest that have balances closes to their credit limit since a)higher interest rates pile up more fees, b)the closer your balance to your credit limit the more it hurts your FICO score
You should also possibly think about opening a saving account and saving $500 to fall back on and only that, not to spend or anything. That way if you get in a jam you don't grab a credit card
If you are disciplined, you can keep all three cards after you pay them off. You just can't carry a balance.
I paid everything off a couple years ago after an accident settlement, but I kept all my cards -- use them sparingly, pay them off monthly, and interest rates aren't even an issue.
That offers some pretty good advice.
Nice tag, by the way.
At the purest economic sense, one starts by paying minimum payments on all but the highest interest debt, and putting any free cash into the highest interest debt until it is paid off then moving on to the next one. I can show you how that will, all other things equal, keep the most money in your pocket.
That answer fails the reality test however for some rather practical reasons.
I need to go, but will finish this hopefully later tonight.
I'm not even going to dissect it.
Well the real problem with the higher % rates is that there are likely high annual fees. So even if she doesn't use it she's gonna eat a ton of interest.
I'm willing to bet the average 400 dollar limit card has annual fees nearing 200 bucks....at 22% interest you can see how quickly that will pile up.
Also on that same note. Say she has a limit of 400...they'll drop that 200 dollar fee on her when she carries a balance over 200 so they can pop her with the over limit charge and potentially even higher rate.
I would flat not with anything over 12%. I would also not with anything over a 100.00 annual fee and thats if you really really really need the credit.
We can nitpick this to death but in simple terms.
She needs to pay the highest %'s off first and either negotiate a better % or cancel the card.
That's true. I wasn't thinking of the annual fees on the Capital One card when I posted.
Store credit cards don't have annual fees, though (at least, none of mine do) and are convenient to have if you don't want to deal with cash/check in the middle of a transaction or if you want access to certain sales prices. You just can't carry a balance on that , or you're screwed. The ones I have I use for convenience, but think of them like cash -- check's in the mail the day I get the bill.
I have a CAP 1 and I don't think it has annual fees, nor does my Citi...
My Cap One card has annual fees of only about $25, but I know people with fees that are much higher. Just depends on the deal when you set it up.
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