So, I’ve got a credit card, and on this card I’ve worked up about $7,000 in hock over the course of the last year or so, due to a few big purchases (camera, laptop, and a desktop to replace the laptop when I realized it was no good for my needs (the laptop became a Christmas present for my mother) and a long list of smaller ones (looking at the shelf above my computer, I imagine DVDs are high on this list, and I eat out too often).
So, I don’t forsee myself buying another computer or camera any time in the near future, and with most of my friends soon to be transfered to other bases (yay military lifestyle), I can see myself eating out a lot less in the future, and I’ll just have to stop buying DVDs at least until I’ve caught up on the ones I’ve bought (so, at the rate I watch DVDs, until they replace Blu-Ray).
This just leaves the little concern of my $7000 credit card debt, alongside about $5,000 in student loans I’m paying off ($150 a month go to the student loans), I make about $1200 a month after allowances and deductions on my paycheck, and then I have internet and phone bills, which add up to about $120 total, so figure give-or-take about $300 a month unavoidable expenses (wow, I make more money than I thought already), and my APR on my credit card is 15.99%
So, it goes without saying that I should pay this off, and stop using the credit card, but what’s the best way to go about paying it off? Just chip away at the balance on a month-by-month basis, see about getting a lower-interest loan from my bank, or what?
If you can get a substantially lower interest rate on a loan, you can use it to pay off the card. However, remember that a personal loan is amortized over a particular time period, and you’ll have to make a certain, probably much larger, minimum payment per month. If you can afford the payment, go for it. You’ll end up paying a lot less interest than if you maintain a balance on your card.
ETA: This assumed you have the self-discipline to pay off the card and not run it up again.
Does your base have a credit union? On average, credit unions charge lower interest rates than banks, and savings and loans. Consider transferring your bank accounts to the credit union and get your pay electronically deposited as well. That might earn you a bit more off on the interest rate. And, the credit union should be able to automatically deduct your loan payments off the top.
Oh, yeah. Put that credit card in a paper cup full of water and put it in the freezer. You’ll still have access to it if you are desperate, but for all intents and purposes, don’t use the card again until the loan is paid off.
Living beyond your means is easy. Living within is a pain, but only at the beginning.
The big question is, what is the interest rate on the CC? If it’s over 15% or so, (and your credit is good, as well as your history with that cc company) I would start by calling them and asking them if they can lower the rates. Wheather or not they say yes, the next thing to do (if you don’t want to mess with a loan) would be to check out some other credit card companies and see what they are offering on balance transfers. It’s not unusual for balance transfers to be below 5% for anything from 6 months to the time it’s paid off. Often times there’s an even better rate for new customers.
From what I’m seeing, Chase and Discover are offering 0% on BT for the first year (I assume it back accrues after that, but I didn’t look that deep)
American Express doesn’t list it on their front page, but I can see they are currently offering me, a member, ummm, nothing. Well, I can transfer a balance to my AMEX card and it will accrue interest at my current rate until it’s paid off.
PS, I just logged into Chase an in addition to what I mentioned they are also offering 2.99% for the life of the balance.
So, IMHO I would call about getting your rate lowered and then maybe check out some other options first. It might be easier to transfer the balance then to get a LOC.
Like I said, the interest rate on my current card (the only one I’ve had that wasn’t tied to a parents’ account since I started using credit cards) is 15.99% I opened a bank account with USAA a few weeks ago and was offered a credit card with them with a 9% APR, but the balance is only $6,000, a bit less than what my other card has charged to it, and I’d rather not have two cards I have to be making payments on if I only transfer part of it over.
I could always just shop around the other cards to see what i can transfer on them (Hey, I have an AMEX offer that includes a frequent flyer bonus, but I have no idea how many flyer miles it takes to go to, say, Houston, Texas from San Jose, California.) It sounds like my first step is to call Bank of America and find out what they can do about my interest rate.
Duckster, my base isn’t even big enough to have a Burger King, let alone a credit union. The closest military-related credit union is the Navy Credit Union, at another installation across town. I’m going to ask my sergeant on Monday if he knows who I should talk to to get more specific advice on this kind of thing, and I’m also gonna poke around on the USAA website to see what they have available.
Maybe start with them. Call them, tell them you were thinking about transferring a balance over to their card and are they running any balance transfer specials. If they are, tell them you’d like to move over $7k, but only if they’ll raise the limit to $8K (leave your self some wiggle room). See what they say.
I got a consolidation loan to pay off my credit cards once. Guess what? PRetty soon I had a loan and credit card debts.
Got another loan. Soon the cards went up again.
Then last year I got a severance package and somehow it hurt more paying off the credit cards when I realized “You know, if I didn’t have these goddamned credit card debts, what I coulda done with all this money.” Or maybe it just took me awhile to catch on.
If you get a loan to kill off credit card debt, get rid of the credit cards.
I got in an argument over this once with Wells Fargo. I opened a store credit card which turned out to be backed by WF. A few weeks later they call me and “just want to know if there’s anything else they can help me with.” The first line out of my mouth was “I’m not interested in consolidating my debt.” He actually told me I was ‘stupid’ not to. It’s a long story, but I told him only two of my debts are worth consolidating (everything else was on a no interest plan) and if I transfer them to him, I’ll just run them up again. Thanks, but no thanks.