Clippers of Nfl Posted August 4, 2015 Posted August 4, 2015 (edited) I have small credit card debt. One card has 1300 debt on it. 19% interest on it. One card has 600 debt on it. 9% interest. Which one gets eliminated first? Assuming a combined payment of $200 each month for both cards. (not 400) Minimum payments are $25 for one and $20 for the other one. The only reason I have this much is because I just bought a bed over the weekend. Anyway finance gurus, which one should I kill first? Edited August 4, 2015 by Clippers of Nfl
KD in CA Posted August 4, 2015 Posted August 4, 2015 Financial guru answer: you should have slept on the floor until you could afford the bed. You need to kill the one with the mob-level interest rate ASAP so put all the $ there. This would be a good time to play the transfer balances game with either the lower rate card or a new 3d card since presumably you'll be able to clear this debt in the next year.
thebandit27 Posted August 4, 2015 Posted August 4, 2015 Some folks will tell you to get the lower interest rate down first...I do not agree. My experience says to always pay the smaller debt down first, while making the minimum payments on the larger. During this time, make as large a payment on the smallest debt as you can comfortably make. That way, once the smaller debt is paid off, you can take the payment you were making on it and add it to the minimum payment to the larger debt. This is how I paid off over $15k in debt in about 13 months several years back.
Clippers of Nfl Posted August 4, 2015 Author Posted August 4, 2015 Financial guru answer: you should have slept on the floor until you could afford the bed. You need to kill the one with the mob-level interest rate ASAP so put all the $ there. This would be a good time to play the transfer balances game with either the lower rate card or a new 3d card since presumably you'll be able to clear this debt in the next year. That means that I will have 2 cards with balances this way for 6 months. And at the same time forking out minimum payment on the one with lower balance.
WotAGuy Posted August 4, 2015 Posted August 4, 2015 Honestly, if you need to ask this question you shouldn't really have a credit card.
Clippers of Nfl Posted August 4, 2015 Author Posted August 4, 2015 Some folks will tell you to get the lower interest rate down first...I do not agree. My experience says to always pay the smaller debt down first, while making the minimum payments on the larger. During this time, make as large a payment on the smallest debt as you can comfortably make. That way, once the smaller debt is paid off, you can take the payment you were making on it and add it to the minimum payment to the larger debt. This is how I paid off over $15k in debt in about 13 months several years back. see i like this. I thought about doing this. This was my first thought.
May Day 10 Posted August 4, 2015 Posted August 4, 2015 (edited) you pay the higher interest rate 1st while minimum on the lower rate. Overall you come out on the other side with less money lost to interest. all equal Itll be like $20.50 a month for $1300, like $4.50 for the $600. Paying the smaller debt first is a mistake Edited August 4, 2015 by May Day 10
Clippers of Nfl Posted August 4, 2015 Author Posted August 4, 2015 Honestly, if you need to ask this question you shouldn't really have a credit card. Very funny. It's called stimulating the economy. Actually all joking aside. That's what the mattress guy told me. "Thanks for contributing to the economy"
thebandit27 Posted August 4, 2015 Posted August 4, 2015 see i like this. I thought about doing this. This was my first thought. If I'm reading your first post correctly, then you have approximately $400 to make payments with. That means you'll have the $600 debt paid off in a month-and-a-half. At which time you can start making $425/month payments on the $1300 debt
Clippers of Nfl Posted August 4, 2015 Author Posted August 4, 2015 you pay the higher interest rate 1st while minimum on the lower rate. Overall you come out on the other side with less money lost to interest. all equal Itll be like $20.50 a month for $1300, like $4.50 for the $600. Paying the smaller debt first is a mistake See just when I was convinced the other way. Now your logic makes more sense. Hate that I will pay 2 cards each month. But your way is better.
May Day 10 Posted August 4, 2015 Posted August 4, 2015 the obvious advice is to never carry a balance on credit cards, especially ones with 19% interest. I went through a lot of poor decisions through college and the 1st half of my 20s. I was able to cut through about $50K in CC, Student Loan, and Car Loan debt after reading a few books on personal finance. Yes, highest interest first.
Clippers of Nfl Posted August 4, 2015 Author Posted August 4, 2015 If I'm reading your first post correctly, then you have approximately $400 to make payments with. That means you'll have the $600 debt paid off in a month-and-a-half. At which time you can start making $425/month payments on the $1300 debt Sorry. Clarification. $200 COMBINED for both. I'll edit the 1st post.
May Day 10 Posted August 4, 2015 Posted August 4, 2015 (edited) Here Very roughly (doesnt take into account 1st month or final month interest) month 1 Pay $400 to card 1, $25 to card 2 Card 1 $900 Balance, $14.25 in interest Card 2 $575 Balance, $4.31 in interest Month 2 Card 1 $514.25 Balance, $8.14 in interest Card 2 $554.31 Balance, $4.16 in interest Month 3 Card 1 $122.39 Balance, $1.94 in Interest Card 2 $522.47 Balance $4.00 in interest Month 4 Card 1 Paid off Card 2 $225.80 Balance, $1.69 in Interest Month 5 Card 2 paid off with $227.49 payment $38.49 paid in interest Option 2: Pay $25 to Card 1, $400 to Card 2 Month 1 Card 1 $1275 Balance $20.18 in interest Card 2 $200 Balance $1.50 in interest Month 2 Card 1 $1070.18 Balance, $16.94 in interest Card 2 Paid Off Month 3 Card 1 $662.12 Balance, $10.48 in interest Card 2 Paid Off Month 4 Card 1 $247.60 Balance, $3.92 in interest Card 2 Paid Off Month 5 Card 1 Paid Off with $251.52 $53.02 Paid in interest The effects are minimized because you are paying over 20% of your total balance every month edit: Never mind, $200 a month makes it more crucial to attack the 19% first and minimum payment the 9%. Edited August 4, 2015 by May Day 10
thebandit27 Posted August 4, 2015 Posted August 4, 2015 the obvious advice is to never carry a balance on credit cards, especially ones with 19% interest. I went through a lot of poor decisions through college and the 1st half of my 20s. I was able to cut through about $50K in CC, Student Loan, and Car Loan debt after reading a few books on personal finance. Yes, highest interest first. I did the same by paying lowest-amount first. Definitely glad your method worked for you; also glad my method worked for me. I did the math on my situation, and the difference in the money paid to interest was close to negligible, and effect on my credit rating of closing out revolving debt was noticeable, so that made the smallest-debt-first strategy the right choice for me.
HereComesTheReignAgain Posted August 4, 2015 Posted August 4, 2015 You have $1900 in debt. You have $200 to pay on it each month. The total debt will not be paid off any sooner just because the card with $600 is totally paid off first and you only have one card with a balance. Always pay off the higher interest rate card first.
DrDawkinstein Posted August 4, 2015 Posted August 4, 2015 you pay the higher interest rate 1st while minimum on the lower rate. Overall you come out on the other side with less money lost to interest. all equal Itll be like $20.50 a month for $1300, like $4.50 for the $600. Paying the smaller debt first is a mistake This
Clippers of Nfl Posted August 4, 2015 Author Posted August 4, 2015 Here Very roughly (doesnt take into account 1st month or final month interest) month 1 Pay $400 to card 1, $25 to card 2 Card 1 $900 Balance, $14.25 in interest Card 2 $575 Balance, $4.31 in interest Month 2 Card 1 $514.25 Balance, $8.14 in interest Card 2 $554.31 Balance, $4.16 in interest Month 3 Card 1 $122.39 Balance, $1.94 in Interest Card 2 $522.47 Balance $4.00 in interest Month 4 Card 1 Paid off Card 2 $225.80 Balance, $1.69 in Interest Month 5 Card 2 paid off with $227.49 payment $38.49 paid in interest Option 2: Pay $25 to Card 1, $400 to Card 2 Month 1 Card 1 $1275 Balance $20.18 in interest Card 2 $200 Balance $1.50 in interest Month 2 Card 1 $1070.18 Balance, $16.94 in interest Card 2 Paid Off Month 3 Card 1 $662.12 Balance, $10.48 in interest Card 2 Paid Off Month 4 Card 1 $247.60 Balance, $3.92 in interest Card 2 Paid Off Month 5 Card 1 Paid Off with $251.52 $53.02 Paid in interest The effects are minimized because you are paying over 20% of your total balance every month edit: Never mind, $200 a month makes it more crucial to attack the 19% first and minimum payment the 9%. Actually I kinda lied. $200 was all that I wanted to do. Since realistically it's not a real big debt either. I can do $400 a month. And with both your options it's not even a $20 difference. I prefer having debt on just one card. So im doing option 2. Thanks guys. That was quick and painless.
May Day 10 Posted August 4, 2015 Posted August 4, 2015 I just ran it based on excel based on $200 a month and assuming both cards are $25 minimum. Paying $175 to 19% and 25 to 9%... Card 1 will be done in 8 months and Card 2 will be done in 11. $130.76 in interest paid to the man. Paying $25 to 19% and $175 to 9%... Card 1 will be done in 11 months and Card 2 done in 4. $162.49 in interest paid to the man.
Clippers of Nfl Posted August 4, 2015 Author Posted August 4, 2015 the obvious advice is to never carry a balance on credit cards, especially ones with 19% interest. I went through a lot of poor decisions through college and the 1st half of my 20s. I was able to cut through about $50K in CC, Student Loan, and Car Loan debt after reading a few books on personal finance. Yes, highest interest first. By the way yes you are right. HOWEVER, you gotta live a little and no. Im not THAT guy. Just 3 months ago I was talking to mom and we both shared to each other that we had our cards clean. Zero on them. Debit all the way. Well my mom hasnt carried card debt since probably 2002. So she doesnt count. But I remember 3 months ago, my debt was ZERO, ZILCH, NADA. I just ran it based on excel based on $200 a month and assuming both cards are $25 minimum. Paying $175 to 19% and 25 to 9%... Card 1 will be done in 8 months and Card 2 will be done in 11. $130.76 in interest paid to the man. Paying $25 to 19% and $175 to 9%... Card 1 will be done in 11 months and Card 2 done in 4. $162.49 in interest paid to the man. Damn that's a lot of interest.... Wow. I dont know why. I guess I didnt use my dumb head. I didnt figure it would take that long at $200 a month. 11 months is a long time... Thanks for the info Mayday.
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