WWYD? Savings vs. paying off credit card debt

MrsT0514 · August 2014

So we have 2 credit cards that we are desperately trying to get paid off. Money has been ridiculously tight, partly bc of the outstanding credit cards, but also bc my job has been horribly slow which means my take home $$ has been negligible and we're relying all on DH's income (which he recently took a pay cut back in march...work prospects in the construction union are slim right now so him making a move isn't really an option).

We only have about 1300 in our savings account which is kept there strictly for emergencies. We have 1 credit card with a balance of $650 with an interest rate of 23.99% (I think). The other credit card has a balance of $3000 at an interest rate of 15.99%.

We always pay more than the minimum, but things are seriously tight right now and we just got out yearly car tax bills that need to be paid by the end of this month as well. So my question is, would you take the 650 fromsavings to pay off the higher interest card and then continue paying down the other card? Or is our savings too small to take a risk like that? My mentality is that we just racking up more in finance charges by making paymrnts rather than just paying the damn thing off.

Suggestions?

[Deleted User] · August 2014

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MrsT0514 · August 2014

MrsBadKat said:
Can you qualify for a balance transfer with 0% APR? If so, I would transfer both of the balances to a new card with 0% APR for 12 months (or the longest they offer) and then pay off the card that way.

i recently tried applying for a 0% Apr card to do a balance transfer bit was denied. We could try applying in MH's name, but his credit has never been stellar, so I doubt we'd get approved.

MrsT0514 · August 2014

MrsBadKat said:
Chase Slate has 0% APR on Balance Transfers for 15 months with no annual fee. You could work on paying off the card during the introductory period. It will at least buy you 15 months of no interest while you work out your finances.

thats the one I got denied for.

RayRay007 · August 2014

MotherOfPearl85 said:

No, you have to keep an emergency fund. You don't want to have to charge the cards again if something comes up.

So in the meantime you're paying 23.99% interest??

OP, how long will it take to pay off your high interest c.c. at the current rate you're paying?

I would probably pay off the high interest c.c., keep a little in savings and keep chipping away at the lower interest c.c. Maybe see about getting a bank loan to pay them off.

[Deleted User] · August 2014

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[Deleted User] · August 2014

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MrsT0514 · August 2014

SweetSouthernMomma08 said:
Couple questions -

will the savings cover a month's rent if you take money from it?

What are the minimum payments on each card?

Are you consistently adding to savings?

At this point, if we took from savings to pay one card off, no ot would not cover the mortgage.

Minimum payment on the lower balance card is like 11 bucks. We usually pay at least 100. Minimum on the other is like 50. We try to pay 200 at least (but our car insurance is the onething that get auto charged to that card each month, which I suppose I could take off auto pay, but that may raise our monthly installments).

No, we'ce been awful about saving lately.

MrsT0514 · August 2014

uconnhuskie007 said:

MrsT0514 said:

SweetSouthernMomma08 said:
Couple questions -

will the savings cover a month's rent if you take money from it?

What are the minimum payments on each card?

Are you consistently adding to savings?
At this point, if we took from savings to pay one card off, no ot would not cover the mortgage.

Minimum payment on the lower balance card is like 11 bucks. We usually pay at least 100. Minimum on the other is like 50. We try to pay 200 at least (but our car insurance is the onething that get auto charged to that card each month, which I suppose I could take off auto pay, but that may raise our monthly installments).

No, we'ce been awful about saving lately.

Why don't you pull your car insurance off the high rate CC and have it auto paid out of your checking account?

Like I said, money's been pretty tight here lately, so I dont f eel comfortable have anything auto withdrawn from our account Right now.

[Deleted User] · August 2014

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[Deleted User] · August 2014

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NeneCakies · August 2014

MrsBadKat said:
Can you qualify for a balance transfer with 0% APR? If so, I would transfer both of the balances to a new card with 0% APR for 12 months (or the longest they offer) and then pay off the card that way.

We did this. It eliminated a huge chunk of our debt. Just read the fine print to make sure there are no hidden fees or disqualifying events in the terms (paying early, paying late, etc). There would be a transfer fee though. Also I made the last payment early to be certain no days carried over into the next billing cycle.

MrsT0514 · August 2014

CrazyCornball said:

MrsT0514 said:

SweetSouthernMomma08 said:
Couple questions -

will the savings cover a month's rent if you take money from it?

What are the minimum payments on each card?

Are you consistently adding to savings?
At this point, if we took from savings to pay one card off, no ot would not cover the mortgage.

Minimum payment on the lower balance card is like 11 bucks. We usually pay at least 100. Minimum on the other is like 50. We try to pay 200 at least (but our car insurance is the onething that get auto charged to that card each month, which I suppose I could take off auto pay, but that may raise our monthly installments).

No, we'ce been awful about saving lately.

Which card has the auto pay insurance going to it? Can you set up an account that is solely used for your car insuracne, and have it auto paid from the account, not a credit card? I would pay the minimum on the lower IR card and have the rest of the money going to the high rate card. Don't have anything automatically being paid out of the high rate card, change it to another source.

The auto insurance gets auto paid on the Lower balance credit card (ive had ot set up this way for years). In the mean time I may try to shop for Lower auto insurance rates as well.

bcbuzzafsu · August 2014

I second calling and asking for a lower rate on both cards. Can you pay off the higher interest rate card with the other card?

MrsT0514 · August 2014

bcbuzzafsu said:
I second calling and asking for a lower rate on both cards. Can you pay off the higher interest rate card with the other card?

nope, 3000 is the credit limit on the other card.

A big part of me is so embarrassed by this stuff. Ive always been able to pride myself on being good with money...until now obviously.

[Deleted User] · August 2014

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MrsT0514 · August 2014

Ok, so I'm guessing that general consensus here is that I'm on the right track by not pulling from savings.

Im thinking we could probably swing at least 200-250 this month on the higher IR card and another 200 on the lower rate card. In the meantime I'm gonna try finding cheaper car insurance rates and take it off auto pay, even if its a couple bucks more each month.

I never knew you could get an unsecured loan from a bank. And I always thought that trading unsecured credit card debt for a secured loan is a no no...am I right?

bumpuser9058414 · August 2014

MrsT0514 said:

Couple questions -

will the savings cover a month's rent if you take money from it?

What are the minimum payments on each card?

Are you consistently adding to savings?
At this point, if we took from savings to pay one card off, no ot would not cover the mortgage. Minimum payment on the lower balance card is like 11 bucks. We usually pay at least 100. Minimum on the other is like 50. We try to pay 200 at least (but our car insurance is the onething that get auto charged to that card each month, which I suppose I could take off auto pay, but that may raise our monthly installments). No, we'ce been awful about saving lately.

I'm not an expert either but doesn't Dave Ramsey say to pay the minimum on all debts except the one you're currently trying to pay off? So I'd go with paying the $50 minimum on the low interest card and take the extra $150 you were paying on that and apply it to the high interest card. So pay $250 on the high interest card and that one is paid off in three payments. Someone correct me if that's not right.

[Deleted User] · August 2014

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MrsT0514 · August 2014

Yeah. I've definitely gotta call my can insurance company and get that off auto pay. But ive heard great things about Dave Ramsey's snowball plan, so its worth a shot.

fitmama418 · August 2014

*raises hand*

Do most CC's have a limit to the total you can balance transfer, or is it all based on the credit line you're approved for?

thebanich · August 2014

CrazyCornball said:

CTGirl30 said:

Also, I would be switching that car insurance payment to your checking account versus puttnig it onto a credit card account...you need to get used to working within the money you actually have and not using CC's as a buffer for necessary bills.

We have a separate, bare minimum checking account that we put all our autopay bills into. We don't have access to get cash out of the ATM from it or have a debit card associated with it. We just transfer money in, and it gets taken out when the bill is paid. That way, it's separate from our spending accounts and we don't have to worry if we'll have enough money in there when the bill comes due.

That is an awesome idea @crazycornball

thebanich · August 2014

Also whenever @crazycornball posts all I can think of is this:

[Deleted User] · August 2014

While opening and closing credit cards can ding your credit, it's not a long term hit to your score. Actually the more credit cards you have open can actually benefit you as long as you don't max them all out. You want to look at your credit to debt ratio when it comes to credit cards.

If you have 1 credit card with a $5000 limit and you have $4500 on it, that doesn't do your credit score any good.

If you have 10 credit cards with a total of a $50000 limit and you have $4500 total on them, that is actually better for your credit....as long as you are paying it off in a timely manner.

I open and close cards, do balance transfers, and raise my limits all of the time and I have excellent credit.

I agree with PPs in that you need to call to see if you can get the APR lowered, at least pay off the high interest rate CC, or try to get a balance transfer card.

MrsT0514 · August 2014

@DragonBlood13‌ our debt to credit ratio is what may be fucking us right now.

[Deleted User] · August 2014

MrsT0514 said:

@DragonBlood13‌ our debt to credit ratio is what may be fucking us right now.

Can you call and see if they will raise your limits? It might start to help your credit.

That could be a slippery slope though if you take advantage of the higher limit. It's just about how much control you have.

MrsT0514 · August 2014

DragonBlood13 said:

MrsT0514 said:

@DragonBlood13‌ our debt to credit ratio is what may be fucking us right now.

Can you call and see if they will raise your limits? It might start to help your credit.

That could be a slippery slope though if you take advantage of the higher limit. It's just about how much control you have.

The control part isn't so much an issue now. We've been doing well not using the cards. Its just the living on such tight budget constraints and getting te balances down that sucks. They denied my last request for a limit increase bc the balance was too high.

And capital one can suck it. Its MH's card and im an authorized user...but they won't negotiate a lower apr with me bc they need to speak with him. Ridiculous. He doesn't know the first thing about our finances half the time bc I pay all the bills for the household.

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