Credit Cards

[Anonymous]

DH and I have about $6K in credit card debt. We are strapped at the moment, however, and are unable to pay anything more than the minimum payments on each. In January, we will have a car loan paid completely off which will be $450 that we will have to put towards the credit card debt. We plan to not even have the money that is currently being directly deposited to the car loan even touch our checking account, since we know that we would blow it if it did. We are going to use the Dave Ramsey strategy and pay off the smallest card first since we both need to see something happening and not get discouraged. Even though $6K doesn't seem like a lot to many folks for us it is since we are not in high paying careers. We want the debt gone. I've already cut up the damn cards!

The cards we have are Target, Walmart, Khols, TJ Max/Marshalls & an American Express. Each of them have high interest rates. We are not savvy at playing the interest rate game but have heard many people opening up 1% or 0% cards and transferring balances, then paying off. Is this a good thing to do? When I did the math, paying $450 per month on $6K would take us a little over a year to pay off. Thoughts?

[Anonymous]

If you don't have any emergency savings, I would establish some. Personally, I'd put $250 extra towards debt and $200 toward savings until I saved at least 1K. That way you don't have to use your credit cards again when unexpected expenses come up (and they always do).

I'm not a fan of transferring to 0% cards since there is usually a fee involved and it is tempting to run the old cards back up again. Just concentrate on paying the cards you have down. And remember, once you pay off one card you can use that money (minimum + $450) towards the next card.

[Anonymous]

Anonymous wrote:If you don't have any emergency savings, I would establish some. Personally, I'd put $250 extra towards debt and $200 toward savings until I saved at least 1K. That way you don't have to use your credit cards again when unexpected expenses come up (and they always do).

I'm not a fan of transferring to 0% cards since there is usually a fee involved and it is tempting to run the old cards back up again. Just concentrate on paying the cards you have down. And remember, once you pay off one card you can use that money (minimum + $450) towards the next card.

Thank you!

[Anonymous]

If you apply for a new credit card with a 0% offer, it may not have such a high fee. If you can be disciplined, only borrow what you need and don't throw in extra just because it is free, I think it is a good idea. You can pay it off over a year and save interest.

[Anonymous]

What always got me with balance transfers is that I'd end up running up the original card again. The idea behind Dave Ramsey's plan is to ignore interest rates for the most part and focus on the behavior change that is required to get on a budget and pay off your debt.

If you feel like you need some discipline/support, come over to the Dave Ramsey forums (www.mytotalmoneymakeover.com). People are extremely supportive and helpful.

I also agree with the PP that you should first ensure you have a small emergency fund - DRs baby step 1 is $1,000 in the bank for a "baby emergency fund". I'd do that first. Then start working on the credit cards.

[Anonymous]

Anonymous wrote:DH and I have about $6K in credit card debt. We are strapped at the moment, however, and are unable to pay anything more than the minimum payments on each. In January, we will have a car loan paid completely off which will be $450 that we will have to put towards the credit card debt. We plan to not even have the money that is currently being directly deposited to the car loan even touch our checking account, since we know that we would blow it if it did. We are going to use the Dave Ramsey strategy and pay off the smallest card first since we both need to see something happening and not get discouraged. Even though $6K doesn't seem like a lot to many folks for us it is since we are not in high paying careers. We want the debt gone. I've already cut up the damn cards!

The cards we have are Target, Walmart, Khols, TJ Max/Marshalls & an American Express. Each of them have high interest rates. We are not savvy at playing the interest rate game but have heard many people opening up 1% or 0% cards and transferring balances, then paying off. Is this a good thing to do? When I did the math, paying $450 per month on $6K would take us a little over a year to pay off. Thoughts?

Why would you blow it, if it was earmarked for debt repayment?

[Anonymous]

The same reasons lots of people do: they feel rich, like it's a windfall, little or no willpower, etc.

I have looked into the 0% cards and there are only one or two that don't have some sort of fee associated with them. I wouldn't waste time looking into those. Plus you also have to remember to pay them off once the grace period ends, and that can be difficult for people who aren't great savers already. I would focus on the emergency fund and then pay back one card at a time, and see if you can cut even a small amount of spending.

[Anonymous]

I agree with others abt the emergency fund. And, if the rates are all about the same, pay off the lowest balance first. That way, you will feel like you accomplished something and then plow right into the next lowest balance to get another one knocked off quickly.