Credit Card Debt Repayment Plan

Submitted by Clean_Picture_8295 t3_1002h3v in personalfinance

Hi all, I'm writing this post in search of methods to pay off all of my CC debt.

I currently have 2800 in checking/cash, although my debts (5380) are:

BOFA 2800 @ 24.74% (around $58 in interest/month)

CFU 1000 @ 0% until 09/23

AMEX 780 @ 25.24% (around $28 in interest/month)

CSP 800 @ 26.74% (around $29 in interest/month)

Monthly Take-Home: 3600 - 1200 in fixed expenses then 2400 goes towards savings & debt repayments

Been stuck in CC debt since taking some weekend trips in June 2022, but now I'm trying to maximize my savings rate. I stopped using debit cards to start gaining CC rewards and quickly got caught up in lifestyle inflation, eating out, etc. Looking to eliminate all debt as soon as possible - I was considering using the 2800 to bring my total debt down to 2580, then taking out a loan but interest rates are way too high atm. Did a pre-qualification check with Discover and they quoted - ($90 monthly, 17.99%, 36 months) to ($57, 20.99%, 84), (if I took the loan, I can still put towards my savings and pay down the loan at the same time). I get paid bi-weekly, (1st and 15th), but already received my 1st check prior to Christmas and will only be receiving 1800 for the month of January.

I also have 1600 in savings and ~1900 in long-term stocks, but I'm not looking to pull out of any of those. Also down about 19% YTD on the stocks as I started investing last year, so yeah not touching that as of yet. Although if necessary, I could possibly tap into the savings - that's my last option. Much appreciated everyone, thanks.

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[deleted] t1_j2f46v0 wrote

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Clean_Picture_8295 OP t1_j2f5hk2 wrote

Paying off the AMEX and CSP is #1 for me, will most likely do this. Cash flow is important to me as well as I don't want to be left with $0 each month. Thank you for your comment!

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ahj3939 t1_j2f3uhs wrote

For sure I would pay off CSP 800 & Amex 780 ASAP.

CFU @ 0% no rush to pay back. Is that 0% on purchases? What you can do is put expenses on that one, pay minimum, and then put all yoru cash to BOFA 2800 account.

That way your debt balance is shifted from 25% interest rate to 0%.

Keep some emergency savings, do not drain.

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Clean_Picture_8295 OP t1_j2f5w4r wrote

Definitely, I agree with paying off the AMEX and CSP and making it my first priority, then start lowering the balance on the BOFA. Having savings is crucial to me, and it didn't even cross my mind to start putting my purchases on the card with 0%. Thank you for your response!

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ahj3939 t1_j2f74cx wrote

I agree but don't go too crazy with your savings either when you have debt charging 25% interest. It was more to counter the people who are inevitably going to post extreme suggestions to start eating only rice and beans, drain your savings to $0, sell your car, cancel your Netfix, etc.

I think you should pay off both of the small balance accounts in full within the next 2 weeks.

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93195 t1_j2f42y7 wrote

Use your cash to pay off what you can.

Then put yourself on a spending diet, don’t buy anything you don’t need to survive until the debt is gone.

While you’re doing that, consolidate the debt to as low of a rate as you can get. Ideally, a balance transfer card with a 0% promo rate. If you don’t qualify for those, while you dismissed the personal loan rates as “too high”, they’re still lower than the 25% you’re currently paying. So lower that rate. 0% if you can get it, but if you can’t, 18% is still less than 25%.

Regarding your $1600 in “savings”, you don’t have any savings. You have $5300 in debt. You have negative savings, and it doesn’t make sense to pay 25% interest while earning only 3%.

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Clean_Picture_8295 OP t1_j2f6h8j wrote

Just re-read your statement on the savings part - I recently started getting into personal finance, so now I understand to look at my finances from a business/net worth perspective. Thank you once again, I will use this information going forward.

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Clean_Picture_8295 OP t1_j2f5eeb wrote

Almost posted with my main account, oops, but I've been getting a lot of CC pre-approvals coming in the mail with 0% balance transfers. I didn't want to open another card but a good option to think about. Def have to cut spending down in order to max my monthly take home towards the debt. Also true about the loan, still considering this as my primary option, thank you for your advice!

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93195 t1_j2f5k3q wrote

0% trumps everything. Open the account, transfer your high interest debt, cut up the card.

On $5380 of debt at 25%, the first $113/mo is just interest. So if you pay $500, your debt goes down by $387. If it’s at 0% and you pay $500, your debt goes down the full $500. Which sounds better to you?

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Clean_Picture_8295 OP t1_j2f7335 wrote

For sure the second option - I'm going to look through the offers I received. Although, I am worried about not getting a high enough limit. Thank you for the comment!

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ahj3939 t1_j2f7a6b wrote

Main thing to look for is balance transfer fees. I haven't seen any with no fee since late 2019 or early 2020. These days it's either 3% or 5%.

Obviously you want the ones offering the lower 3% fee.

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