How’s your credit rating? Can you get another card?
If so, go find a credit card that will give you 0% interest with no transfer fees and no yearly fees for a set poriod of time. Here are some options. Not sure if they’re available in Canada or not, but you get the idea.
Transfer all your balances to that card, and put all your monthly cash on it. You’re no longer paying interest, and you have good incentive to pay it off before the time limit is up.
Edit: Also, close the other cards once you transfer the money, no need to have them around for temptation.
Look, I really hate to sound like someone who asks for advice but is unwilling to take it. I wasn’t going to disclose all my pathetic problems in this thread and I really would rather not. But here is a brief outline.
I have been off work for over a year and a half. For some of it I was receiving sick pay, and employment insurance and some disability. I sold my house (which I had planned to before all this happend… I moved across the country from my house)and put my small profit in my retirement plan.
When I have been living on was not riches, but we have lived quite well for the last year and a half on my income plus whatever my visually impaired husband makes. Sometimes he does well, sometimes not so much. My Income has always paid for the main things and his income the extras in life. We had some savings that we used on some larger expenses rather than putting on the credit card. I have expected to replenish my short term accessible savings when I returned to work, which I expected to be sooner rather than later. I have always utilized my credit by putting utilities and big expenditures on my credit card then paying them off immediately.
This summer my insurance company cut my benefits and sent me back to work. My employer sent me home saying I’m unfit for work. So I’ve been trying to keep things going for a few months on very little income. I reduced discretionary spending. Other than produce there are few grocery items I buy unless they are a loss leader. (Not just on sale). We cut back on our cable, our internet, I suspended memberships, I used sweat equity to pay for my son’s camp and school fees, and other creative survival methods. We put a move on the credit cards, in three months the difference in reduced rent and other fees has paid for itself. WE rent out a room in our house for additional income. We have sold or traded extra items in our house, and I have dropped my auto insurance to pleasure use only. We switched banks to reduce bank fees.
We’ve made it. I’m getting money again, although not any back pay… (my union is appealing that for me). I just have two credit cards with a balance totalling $7000.00. The one I prefer to use has a smaller balance than the other one. The interest rates are the same. I just wondered if the extra payments should go to the bigger balanced one, the smaller balanced one, split the payments, or alternate months to pay each. I plan to pay this off quickly now that money is coming in. I have already reduced my household expenses more than 400 /month, and I basically plan to eat slightly better food and use the rest to pay down debt. And my bills will go up a bit for hydro since it is now darker and colder outside.
Yes it sucks that I had to use my credit cards. But it isn’t the worst thing that has happened to me this year, or in my life. People who want to lecture me about wants vs needs need to re-read my OP. I never wanted to rack up 7K in credit card debt but i haven’t been late on a bill or a payment, we’ve eaten, we’ve managed to get dental work, medications, treatments and keep insured.
I asked for a better way of paying off my cards, not a condemnation for using them. There is light at the end of the tunnel, I just want to get out as soon as I can not beat myself up for being in the tunnel in the first place,
Athena, the above was not directed to you. That, or a consolidation loan is what I want to get, but for the last little while without an actual income I couldn’t really apply for anything. I am also looking at asking for an interest break from the credit card companies, but I am not sure I am eligible. I will see. I do want to cancel Capital One when I pay it off, although some say I should keep that one because I have had it longest.
I’m currently in a position that a medium emergency, put on a card, could be paid off in one month. This is a relatively new thing. Years ago, sudden car repairs could be multi-month pay-offs. Sorry, I’m going to keep at least two going even though I’ll only be using the one, barring emergencies.
So credit cards are never sensible ways to borrow money? What if a three-year auto loan is 6% interest, but your credit card will give you 0% for the first year and 9% after that? What if a home equity mortgage will have $1,000 of closing costs attached just to open it? How about a pay-day loan at 600% APR? Or loan sharks? They not only want the 600% APR, but they’ll smash your knee caps when you’re late. Or you could always opt to be evicted and then live at a homeless shelter while you build up your credit score.
So it actually turns out that credit cards may be quite sensible when short-term consumer debt is determined to be the best course of action.
I’m going to second this, as a strategy. When I married, my spouse (unbeknownst to me) had been maxing out a number of credit cards with high interest rates. She brought with her a ton of CC debt. I shopped for and found a card with “transfer your balance and get 12 months 0%, then 3.99% on the remaining balance forever” (these deals don’t really exist anymore). All the debt went on that new card, and we paid a flat monthly amount well in excess of the minimum until it was all retired.
As I said, that exact deal doesn’t seem to exist anymore - the closest I can find will give you 12 month at 0%, but there is usually a 3% transfer fee (so, if you can pay it all off in 1 year, it only costs you 3%). Any balance after 12 months reverts to their regular rate (which would mean 3% + 18whatever%).
So, overall it sounds like you have a good plan, you are just looking for the best way to maximize. I think it’s worth looking into available balance transfer deals to lower your interest. Oh, and once you transfer the balance - don’t use that card for regular purchases, just as a debt management mechanism.
If you have access to Microsoft Excel, I’m a fan of this free debt reduction calculator. (If you don’t, they appear to have a version for Google Sheets as well). It will help you answer these “what if” questions. Basically, you enter the balances and rates for your cards/loans and it will calculate your total cost depending on any of several strategies you choose. Over the long term, it almost always costs less to use the “avalanche” (highest rate first) method.
$7000 in debt isn’t very much. It may seem like it to you right now but it’s really not. My advice would be to see if you can get a line of credit at your bank to pay off the cards. A line of credit has a wayyyy lower interest rate. Keep the Canadian Tire one (because it has rewards, unlike Capital One which gives you jack shit) with a small limit ($500-$1000) for when you need it (hotel reservations, for instance) and also to keep your credit rating. As you’re paying down the line of credit keep calling the bank to have it reduced. Say you start with $7000, make 4 payments at $300/month - call and have the line of credit reduced to $6000. Repeat as each grand gets paid off. This worked for my husband’s debt and is currently working for mine.
let me sum up:
Long-term, there’s nothing wrong (and a lot of advantages) to having a credit card that you use for purchases, as long as you pay it in full every month – You pay zero interest, but get the advantages of a credit card (don’t have to carry cash, can charge back transactions, makes rental places happy, a small amount of rewards points, etc.). I think you know this, so the question is how to get there:
If you can get a new card with no interest on transfers for six months or whatever, go for it. Transfer everything there. Pay off as much as you can each month. Simple.
If that’s not an option, since you’re looking at more than a year of repaying, try and get a bank loan/line of credit to pay off the credit cards. You will pay much, much, much less interest on a straight personal loan than on a credit card. You can show the bank that the cc debt is due to one-time issues and that you’re a good bet to pay the loan bank, so you have a decent shot at getting a loan. If you’re a member of a credit union, go there tomorrow to see what they can do. Otherwise, talk to a few banks in your area.
If all else fails, I suggest first paying off the card with the lowest balance, so you’ll have a card you can pay off each month to use for regular shopping. Plus you might feel good about getting one thing done, but that’s just a bonus: the main point is having a card you can use without racking up interest on the month’s purchases. Then pay off the remaining card with the highest interest rate.
And, I’m sure you realize how much interest you’re paying on these cards. It’s worth a lot of sacrifice now to stop paying that interest.
It doesn’t sound like you have money management issues so much as a recovery from a bad situation.
Since they have the same interest rate the only determination around how to pay is purely psychological.
If you can find a zero interest credit card offer that’s the best bet but I haven’t seen one in a while so I’m doubtful if that’s an option.
If it will motivate you - pay off the low balance one first. If the total numbers is more of a motivation to you, pay off the one you’ve already removed from your wallet first - once it’s empty it will stay that way.
Also if you have any regular purchases at Canadian Tire, I got a flyer from them yesterday - anything over $200 is interest free for 18 months, so if there is anything else coming up, it’s worth keeping that in mind (after Dec 31st it goes back to 12 months instead of 18)
If there isn’t a fee on the credit cards I wouldn’t bother canceling one, and I wouldn’t reduce your limits. This is not a regular problem for you so you don’t need to treat yourself like a credit addict.