$1300 to pay down some CC's. Which ones?

[TechBoyJK]

When I get my next paycheck, beyond my minimum budget (what I usually spend per month to get by), I'm going to have about $1300 and I want to put it all down on my credit cards.

I have 3

Guitar Center - $1000 (store only)
HSBC Mastercard - $800 (regular card)
Best Buy - $1300 (store only).

They're all pretty much maxed out. I'm tempted to just pay off the Best Buy card since I'd have just about enough to do it, and that's the biggest one. I'm guess I'll probably have another $600 next month to put towards them too. It's possible it could be even more, but unless something comes up (I budget for emergencies and have insurance) I'm thinking I could pay it all off in 4 months. If not, I'd at least get close so that if I did have another good month sooner than later maybe I can do it in 3. Anyways, here's my thoughts.

I do know that paying off these cards and closing them off may actually negatively affect my credit just as much as it helps. If I'm going to keep one of the cards open for a while, or at least stagger how I get rid of them so I don't trash my credit, the last to go will probably be the HSBC card only because I can use it for anything.

I was thinking I could pay about half of the balance on each store card, and a little bit on the hsbc card (since it's lower priority). This way I'm at least lowering the debt/creditLimit ratio dramatically. The following month I should have enough to basically apply the same formula. By the 3rd month, I should be able to pretty much pay off the two in store cards, and have close to half of the hsbc card paid down.

Card - $payment ($remainder)

Month 1

Best Buy - $650 ($650)
Guitar Center - $500 ($500)
HSBC - $150 ($650)

Month 2

Best Buy - $325 ($325)
Guitar Center - $250 ($250)
HSBC - $25 ($625)

Month 3

Best Buy - $325 ($0)
Guitar Center - $250 ($0)
HSBC - $25 ($600)

----------------------------------------------

Thoughts? Interest rates are all about the same.

 

[RPD]

Need to know the interest rate on each card to have any sort of meaningful input.

 

[Aikouka]

Need to know the interest rate on each card to have any sort of meaningful input.

Yeah... they'll most likely say to pay the one with the highest interest.

EDIT:

Also, your remainders appear to be ignoring the amount put toward interest. APR/12 * rolling balance

 

[Pr0d1gy]

Without knowing interest, I would say pay off the HSBC card and send $200 to each of the others, then take the rest to buy yourself a fun night out to reward yourself for being a responsible citizen.

 

[BoT]

pay the highest interest card of first. also i would pay one card after the other off completly while you make minimum payments on the remaining.
don't close the accounts. just pay them. keep the account open, don't use it or very lightly. most creditors will close the account themselves if there is no activity for a year or two.

 

[Schfifty Five]

I'm shocked that you would ask such a question when this has been a recurring topic in ATOT for years and years.

As others have pointed out, you left out one big detail which is the interest rates on those cards.

Also, paying off your CC's will not hurt your credit score afaik. I wouldn't close them however. Pay off card and then leave them alone for the rest of your life.

 

[Drako]

Wow :|

Pay off the highest interest rate first.

 

[Aikouka]

Also, paying off your CC's will not hurt your credit score afaik. I wouldn't close them however. Pay off card and then leave them alone for the rest of your life.

Since he said the cards are all maxed out, this should help him out quite a bit. The credit reporting agencies do lower your score if your revolving balances (i.e. credit accounts) are too high. I don't know their threshold, but I assume it's something around 60%. I've also read that you get your score slightly lowered if your accounts are all zero. However, I've also read that it's not wise to pay interest for the very small credit score boost that you'll gain from it.

EDIT:

Also, there's one other factor that might be important in the decision... any special offers currently on your cards. It's important to realize that if a store has a deal like "No interest on any item $1000 or higher!" that usually comes with a time stipulation. Typically if you do not pay off that specific debt before the time limit is up, all of your delayed interest will be tacked onto your balance. If you have any sort of deals like this, you may want to consider paying them first as the large interest hit may be worse than a month or two of a higher interest card.

 

[TechBoyJK]

Everything on the guitar center card is 0% for the next 5 months. It's late (the time tonight.. im tired). I'll look it up tomorrow but I think the Best Buy ($1300) is the highest rate. So maybe pay that one down to $1200 (leave $100) and make $50 payments on the other ones? Then the following month maybe tackle HSBC since the GC card still has time left with 0%?

 

[RPD]

Get the late one up to date, pay off the highest one first, in full. Then the next highest, etc.

 

[TechBoyJK]

Get the late one up to date, pay off the highest one first, in full. Then the next highest, etc.

The payment's not late. the time, tonight is.. Sorry, I'm tired and am about to go to bed. I wanted to start this thread and see the results in the morning when i get to work.

 

[RPD]

Oh oops, misread that.

Basically you really can't go wrong with paying down the one with the highest interest rate first, while making min. payments to the others, rinse and repeat.

 

[OutHouse]

All of you are wrong.
Pay off the lowest balance even if its the lowest interest. The reason is to elimate a bill and to give you a feeling of accomplishment of paying down a bill. Then take on the next lowest bill with the added money that was going towards the first bill you paid off.

http://www.daveramsey.com/article/get-out-of-debt-with-the-debt-snowball-plan/

 

[RPD]

Except he can pay off the highest interest card, already. So your example is rendered useless in his case.

 

[Atomic Playboy]

How is this even a question? Don't look at it as three separate cards. Just think "I owe this much at x interest, this much at y interest and this much at z interest." You're paying all that off eventually. So get rid of the highest interest as soon as possible. Better to pay off $1800 at 12% and 6% as opposed to 30%, 12% and 6% (percentage rates pulled out of nowhere).

 

[Aikouka]

All of you are wrong.
Pay off the lowest balance even if its the lowest interest. The reason is to elimate a bill and to give you a feeling of accomplishment of paying down a bill. Then take on the next lowest bill with the added money that was going towards the first bill you paid off.

http://www.daveramsey.com/article/get-out-of-debt-with-the-debt-snowball-plan/

I was wondering how long it would take someone to bring up Ramsey. He may have a decent point psychologically, but fiscally, it's not even good enough to be considered hogwash!

Honestly, the reason why that advice is worthless to the OP is because of the differences between his balances. His lowest is $800 and the highest is $1300. It's not like we're talking about $500 vs. $10,000!

 

[hans007]

All of you are wrong.
Pay off the lowest balance even if its the lowest interest. The reason is to elimate a bill and to give you a feeling of accomplishment of paying down a bill. Then take on the next lowest bill with the added money that was going towards the first bill you paid off.

http://www.daveramsey.com/article/get-out-of-debt-with-the-debt-snowball-plan/

This all depends on if you actually need a psychological push like that. Pay off the one with highest rate.

Math will tell you to make the right choice not having a card that says 0. Feel good about that.

 

[JackBurton]

Have you thought about putting it all on black?

 

[SandEagle]

heh, you're lucky. i'm down to my last three cards too, 9k tot. i have 13k in emergency savings, that's it. i'm wondering if i should just pay it all off, have 4k left, 0 debt, and start over. or just keep straggling along for a year trying to pay it off? my problem is when i have debt i keep piling it on. just dropped $400 on cut co knives from a sales rep yesterday. i should break this down and just create two new threads. fml

card1 - $600
card2 - $3500
card3 - $4900

 

[Vdubchaos]

Pay off the one with highest interest first.

You don't have much debt. Just don't fall for more after you pay it off and cancel the store cards, they are extremely high interest.

 

[TechBoyJK]

heh, you're lucky. i'm down to my last three cards too, 9k tot. i have 13k in emergency savings, that's it. i'm wondering if i should just pay it all off, have 4k left, 0 debt, and start over. or just keep straggling along for a year trying to pay it off? my problem is when i have debt i keep piling it on. just dropped $400 on cut co knives from a sales rep yesterday. i should break this down and just create two new threads. fml

card1 - $600
card2 - $3500
card3 - $4900

I have a $6,000 debt consolidation loan I just paid off.. It was a 3 year loan at $197 per month (about 9% interest). I had it paid down to $1800 and paid it off last month. The reason I picked this over the cards is that the cards have a lower minimum payment. If I paid off 2 cards, yes I would have saved some in interest, but I would have only removed about $50 in minimum payments. Paying off the loan saved me $200 per month.

I also have another personal loan out that I owe $5k on. It's the lowest interest (besides guitar center which is 0% for another several months). I'm going to pay this off last, but it's also my motivation to get the cards paid off.

 

[sdifox]

I can't fathom people with voluntary cc debt.

 

[TechBoyJK]

I can't fathom people with voluntary cc debt.

I had a rough year.. I went from making about $50-80k a year to about $35k per year for the past 2 years. It took me a year to slim down my life style and I ended up racking up about $14k in debt. (the entire time I was thinking I'd get a break just around the corner so that $2k new debt I could pay off soon.. things kind of stacked up a bit).. Things are picking back up at work so I'm starting to see the commissions I was used to. I've been able to discipline myself to live on about $1600 per month (rent, car, gas, living) so anything after that I'm trying to be disciplined enough to pay it all towards debt. It was nice when I was having $2-$3k extra each month (especially when I didn't have any debt).

I figure another 4-5 months and I'll have everything knocked down pretty good. After that I'll probably only owe on the one loan, and at that point I can start (hopefully) putting $1k+ per month down on it until its done. If I have just one really, really good month at work, I could possibly pay everything off in 6 months.

 

[Mermaidman]

Did you finance your new Kia? If so, then it's another possible place to send the extra income. Otherwise, BB card would be my choice.

And a reminder for everyone on those 0% loans: IIRC, some of them charge retro-active interest if they are not paid on time, especially the store cards.

 

[sdifox]

I had a rough year.. I went from making about $50-80k a year to about $35k per year for the past 2 years. It took me a year to slim down my life style and I ended up racking up about $14k in debt. (the entire time I was thinking I'd get a break just around the corner so that $2k new debt I could pay off soon.. things kind of stacked up a bit).. Things are picking back up at work so I'm starting to see the commissions I was used to. I've been able to discipline myself to live on about $1600 per month (rent, car, gas, living) so anything after that I'm trying to be disciplined enough to pay it all towards debt. It was nice when I was having $2-$3k extra each month (especially when I didn't have any debt).

I figure another 4-5 months and I'll have everything knocked down pretty good. After that I'll probably only owe on the one loan, and at that point I can start (hopefully) putting $1k+ per month down on it until its done. If I have just one really, really good month at work, I could possibly pay everything off in 6 months.

Pre spending money you don't have in hand is what I am talking about.

Guitar center and BB are not essential spending, yet you owe them 2300 bux.