Financial Question - how best to go about this...Paying down CC Debt.

[The Stigenator]

So I took a combinations of advice from you guys and paid down the two largest cards which coincidentally had the larger interest rates. I have now taken them out of my wallet, they will stay in my reserve but not in my wallet.

My credit score isnt bad, it dropped from 735 last year to 715 a week ago. I would say the drop was associated with my credit utilization which now is going to come down real fast. A few months and it should be mostly eliminated then I can restart on my rebuild of savings.

I had forgotten I had another savings account at Citi, so I have some savings... 🙂 I usually use cash for 99% of my transactions but like I said last year was a unique one.

 

[UglyCasanova]

715 is a good credit score. Don't let it go down further, but when you go hunting for a loan you shouldn't have any problems.

Highest I've ever seen was 810 I believe.

 

[richardycc]

pay off CC#2, #3, and #4 with your $9k, should have money leftover, and do a balance transfer on CC#1 with a 0% interest card.

 

[SagaLore]

CC#1 - $63xx
CC#2 - $32xx
CC#3 - $20xx
CC#4 - $19xx

...

If I use all of the liquid cash I only have 9.3K roughly paid.
Anyway if I snowball it, then logic states I hit the biggest card with the 6K first, then the 3K then the 2K and 1.9.

Actually, if you're going to go on just balances alone, I suggest going the other way. Pay off #4, then #3, then #2, etc. Given you have 9K cash, then go ahead and pay the 3 cards off, and some of the balance of #1. Pick which of those 4 cards is your least favorite, and close it.

But I think what is more important to consider is the APR. Instead of listing these out by balance, list them out by interest. Pay off the highest interest card first, then the 2nd highest, etc. That compounded interest is what will hurt you if you don't take care of it early on.

 

[StarTech]

First, do not even think about touching your 401K, not even to draw a loan from it. If you do so and loose your job, you would have to return the loan on the spot or it would be considered as a plan withdrawal, with a 15% penalty plus taxes.

On the other hand, drawing from your non tax deferred (401K, IRAs) accounts is probably the cheapest and best option. As multiple people have said, look at the interests you are paying on the cards and what you get payed on the savings. I would calculate what the current minimum monthly payment for the cards is, and add to it as much as you think you could handle on a regular basis to accelerate payment of the cards. Then pay off the cards from those savings accounts (9K plus set aside for house), and set an automated transfer to savings for the amount you determined you can handle.

Tear two of the highest rate cards, but do not close them until you get that dream house.

My wife and I have just retired, and the following strategy has paid off for us. Make a life commitment to never carry a protracted CC balance for ever, as unfortunately most Americans do. Make sure that any living expenses paid with a CC are cleared monthly and that exceptional CC expenses will have a payment strategy in place as soon as they are incurred in. Never draw from your home equity (big trap). Reasonable home improvement loans are fair game if payments can be worked in automatically. Never trade your "functioning car" until it is paid for. Never touch IRAs / 401Ks. If we could go through it again, we would have loaded in ROTH IRAs in the early years, which unfortunately we did not, meaning that most of our savings will be taxed as income.