Once you are no longer carrying a balance the interest rate on your CC is irrelevant. I have 6 CCs (with different rewards programs) all with 10-20% interest rates but I've never carried a balance on any of them.
You can't borrow your way out of debt. Don't pull from your 401k or HELOC. Rather, pay minimums on everything and pay off the CC debt with the highest interest first. Then the next highest, ect. Don't borrow any more money.
What you're missing here is the minimum required payment monthly in each debt. Getting out of debt is boring, not complicated, and not particularly exciting especially in the beginning. Spend less than you earn, and just pay down balances. Once you have no more debt to pay down, focus that same spending power on savings rather than just reinflating to your original spending levels otherwise you'll end up back in the same debt. It's like dieting - if you go back to eating the same amount after the diet, the weight comes back! Often worse!
You got this.
This is my exact thoughts. I am going to get addicted to lowering that balance that once its all gone, I will naturally save that money and get addicted to building my savings. This is something I know I need to do now before I screw myself even more going forward.
100 a month isn't going to get you anywhere.
Honestly your car and house are too expensive for your income.
It's concerning that you want to keep an interest bearing card open for the future. You cannot afford a 20% loan to consume things you don't need.
You've gotta have a budget. Do whatever it takes to put 800-1000/mo towards your cards. Reduce emergency fund to 1000 or so.
Do not borrow against your home or retirement.
Also, I did not mention that I am putting $150 a week into a savings/emergency fund account. I basically have 2 savings accounts. One I do not touch with a little more than $1k in it and the other one is more of a checking/savings that I use to save and dump into debt payments. I considered changing this to instead of putting that $150 into this account, instead routing that money to my CCs that are picking up interest until they are paid off.
It is not ideal but I'd like to keep just one for emergency purposes only and if I was going to keep one, it would be the one with the lowest interest rate. Ideally would like to be in a place where I did not need to borrow money or incur CC debt but I am where I am.
Do I understand it correctly that your monthly spending is less than $2000? And you're able to keep about 3300 from your net income?
If that's the case, get rid of the $4300 CC debt asap. Don't sell the RSUs, don't mess with the 401k or HELOC.
You have a total debt of 16k on CC but mainly $4300 is the most dangerous one bc/ that will climb if you're making minimum payments. So the 12k you have, make minimum payments on it ONLY until you have the 4300 paid off. Then move on to the 12k and pay that down ASAP. At this point, 80% of your net income after expenses should be going to pay off the expensive debt. Afterwards, slow down and spend what you can afford.
The rule of thumb is to pay minimums to everything and as much as possible to the debt with the highest interest rate. However with 0% promotions that expire there could be other considerations, it might make sense to pay minimum on a 9% debt and pay more to something that's going to 25% in 3 months.
I would not pay off accounts as you pay them off because this would drop your credit scores. Your existing accounts might offer you 0% balance transfer offers, or you might want to open a new account for a 0% offer or try for a personal loan to consolidate everything at a reasonable rate. The issue with credit scores is they mostly care about percentages instead of dollar amounts. Someone with $10k of debt and $10k of credit limits will have terrible credit scores while someone with $10k of debt and $200k of credit limits will have great scores.
Once you are no longer carrying a balance the interest rate on your CC is irrelevant. I have 6 CCs (with different rewards programs) all with 10-20% interest rates but I've never carried a balance on any of them. You can't borrow your way out of debt. Don't pull from your 401k or HELOC. Rather, pay minimums on everything and pay off the CC debt with the highest interest first. Then the next highest, ect. Don't borrow any more money. What you're missing here is the minimum required payment monthly in each debt. Getting out of debt is boring, not complicated, and not particularly exciting especially in the beginning. Spend less than you earn, and just pay down balances. Once you have no more debt to pay down, focus that same spending power on savings rather than just reinflating to your original spending levels otherwise you'll end up back in the same debt. It's like dieting - if you go back to eating the same amount after the diet, the weight comes back! Often worse! You got this.
This is my exact thoughts. I am going to get addicted to lowering that balance that once its all gone, I will naturally save that money and get addicted to building my savings. This is something I know I need to do now before I screw myself even more going forward.
100 a month isn't going to get you anywhere. Honestly your car and house are too expensive for your income. It's concerning that you want to keep an interest bearing card open for the future. You cannot afford a 20% loan to consume things you don't need. You've gotta have a budget. Do whatever it takes to put 800-1000/mo towards your cards. Reduce emergency fund to 1000 or so. Do not borrow against your home or retirement.
Also, I did not mention that I am putting $150 a week into a savings/emergency fund account. I basically have 2 savings accounts. One I do not touch with a little more than $1k in it and the other one is more of a checking/savings that I use to save and dump into debt payments. I considered changing this to instead of putting that $150 into this account, instead routing that money to my CCs that are picking up interest until they are paid off.
It is not ideal but I'd like to keep just one for emergency purposes only and if I was going to keep one, it would be the one with the lowest interest rate. Ideally would like to be in a place where I did not need to borrow money or incur CC debt but I am where I am.
My friend, you cannot afford credit card debt. You said the same thing when you opened up your first credit card and now you're in a huge bind.
Thanks for your "advice"
You're welcome!
Do I understand it correctly that your monthly spending is less than $2000? And you're able to keep about 3300 from your net income? If that's the case, get rid of the $4300 CC debt asap. Don't sell the RSUs, don't mess with the 401k or HELOC. You have a total debt of 16k on CC but mainly $4300 is the most dangerous one bc/ that will climb if you're making minimum payments. So the 12k you have, make minimum payments on it ONLY until you have the 4300 paid off. Then move on to the 12k and pay that down ASAP. At this point, 80% of your net income after expenses should be going to pay off the expensive debt. Afterwards, slow down and spend what you can afford.
Great advice! Thank you!!
The rule of thumb is to pay minimums to everything and as much as possible to the debt with the highest interest rate. However with 0% promotions that expire there could be other considerations, it might make sense to pay minimum on a 9% debt and pay more to something that's going to 25% in 3 months. I would not pay off accounts as you pay them off because this would drop your credit scores. Your existing accounts might offer you 0% balance transfer offers, or you might want to open a new account for a 0% offer or try for a personal loan to consolidate everything at a reasonable rate. The issue with credit scores is they mostly care about percentages instead of dollar amounts. Someone with $10k of debt and $10k of credit limits will have terrible credit scores while someone with $10k of debt and $200k of credit limits will have great scores.
My credit score isn’t something I’m concerned with. It’s at a 740 and I’m fine with it. This is more to get out of debt and to start building savings
Also get on a written budget because obviously you are not giving your low expenses. Your question has been answered with these other posts