Post subject: Paying-Off Multi Credit Card BalancesGuest: JaneiR36
Posted: Sat Apr 30, 2005 12:17 pm
So can you help, please?
I've usually editted this information in the past to leave out some details, but now I'm just gonna come clean: I have a little over $12,000 in credit card debt both from spending in school when I didn't have a summer job and subsequently 1 year of unemployment post-college. Now I have a job where I can pay back the balance, but only over time!
The balance is currently distributed among four companies as follows: Capital One $2800 @ 8.9%
Citibank $4000 0% for 1 year
MBNA 2400 @ 19.47%
Discover $3000 @ 15.74%
I recently tried my best to get a credit line increase with Citibank. They only went up to the $4000, so the other balances will continue acruing interests on the other cards!
My ideal plan would have been to pay $150 a week, with the entire balance being 0% financed by Citibank. At the end of the one year, the balance would have been so small that the total interest would be less than 50 bucks! But alas, they won't play ball.
What should I do? Is it prudent to hunting for more and more credit cards, so my entire balance is 0% financed? Will I get denied till no company would ever want to touch me with a 40-foot pole?
If I leave everything as it stands, I'll be paying $1400 in total interest charges. If I am able to get a "pay off your debt" loan from MBNA, they'll give me "as low as" a 6.99% interest rate, and the total interest would be about $650. NONE of these, of course, is as good as 0%.
I just have so many questions. With all these recent activities on my record (I just got the 2800 to 4000 CC line increase from Citibank this morning), do I stand a snowball's chance in HECK of getting any other 0% finance plans? How about having all these cards, could that be a bad thing in and of itself, for me?
Can someone please give me any suggestions on what to do?
(By the way, WOW-EEEEEEEEEEE!!! An entire board dedicated to credit card issues!!!! I'm gonna be raving everywhere I go for a while now!! ).
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Guest: Daniel
Post subject: Paying-Off Multi Credit Card BalancesPosted: Sat Apr 30, 2005 12:40 pm
Well without knowing all the details it’s kind of hard to say.
It depends on your credit score your income etc… when applying for new cards and or increases.
I can tell you In general some effective strategies without getting a new card are.
Call and ask for a rate reduction with your existing creditors.
You may find that if you shift the debt around between credit bureau reporting periods, creating a window of opportunity when it is reporting as a 0 balance then it may strengthen your case.
Tell them that you would like to do a balance transfer and see what they can offer; this works best when you have a low or 0 balance.
MBNA may very well offer you a low rate teaser if you paid them off.
I doubt that you would get any 0% offers from them greater than perhaps a 6 month term.
But even if you can mitigate the interest your still ahead.
Good Luck
Guest: JaneiR36
Post subject: Paying-Off Multi Credit Card Balances Posted: Sat Apr 30, 2005 1:26 pm
My credit score is around 650, which the truecreditreport people said is "meagre" or average to poor.
Income is generally enough for most things, I imagine, but not enough to pay off 12 G's immediately!
I wonder about asking the companies for a reduced APR, though. Could they give me as little as I'm asking?
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Guest: JaneiR36
Post subject: Paying-Off Multi Credit Card BalancesPosted: Sat Apr 30, 2005 2:01 pm
Here, check out the Excel file I've been using to calculate all this stuff AND drive myself crazy. If nothing, for a chuckle.
http://members.aol.com/janeir36/stuff/plan.xls
Guest: Polonius
Credit Expert (100+ Posts)
Post subject: Paying-Off Multi Credit Card BalancesPosted: Sat Apr 30, 2005 8:55 pm
You don't tell us your available credit or the minimum payments for each account right now.
You're thinking in terms of even payments, roughly, on each of the cards. Redo the calculation--put in the minimum amounts required for each account each month, with the excess going to the highest interest account.
If you have any available credit on Capital1, why not use that credit to transfer a balance from your other accounts, thus reducing the interest charged? Capital1 doesn't charge a fee for balance transfers.
Try applying for a few more cards. And call those two high-priced cards once or twice a month, asking for a reduction of the interest charged. Can't hurt; might help.
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Guest: JaneiR36
Post subject: Paying-Off Multi Credit Card BalancesPosted: Sat Apr 30, 2005 10:27 pm
well, Mother of Crap!!! You're right! (I was so sure you'd be wrong ). Here's another file doing what you've said:
http://members.aol.com/janeir36/stuff/min_excess.xls
All cards except the Discover are for all intents and purposes maxed out. MBNA just had 4000 freed up on it, but as you know, even if I did a balance transfer, existing cards will typically apply payments to the lower APR balances before really hurting the high interest ones I was trying to reduce in the first place, thus totally defeating the purpose!
I just applied for a card online this afternoon. I'll wait to hear from them, then make my next move.
Meanwhile, $373 is going to MBNA next time. Thanks, man! You've just saved me $400!!! (Compared with what I was planning to do). I owe ya one
Last edited by JaneiR36 on Sun May 01, 2005 3:11 pm; edited 1 time in total
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Guest: Polonius
Credit Expert (100+ Posts)
Post subject: Paying-Off Multi Credit Card BalancesPosted: Sun May 01, 2005 12:58 am
I prefer being called Father of Crap!
Anyway, you can do even better. Remember, this is all revolving credit. You're assuming that you're not going to be using those credit cards from this point on in your calculations...let's keep that assumption. So there won't be any new charges overall. But why not use those repayments--which are reducing your minimum payments--as revolving credit to lower your interest costs? For example, since Cap1 has no balance transfer fee, after you make a payment to it, balance transfer whatever is available to the MBNA account. If you have a grace period for balance transfers, try to pay the entire Cap1 account off when you're able to, and then time a balance transfer properly. If your 0% from Citibank also has no balance transfer charges, once you make a payment transfer it back to MBNA as well.
I have a Cap1 account that I use in this way. Suppose my statement date is May 10th. I make sure I have no balance (you want to use the account only for balance transfers, not for purchases, to avoid those two-tiered interest rate divisions you mention) on the statement closing date. On May 11th, I call Cap1 and transfer 85% of my credit limit to my HELOC. On June 10th, Cap1 sends my statement giving me until July 10th to pay my balance in full. On July 7th, I pay the Cap1 account off in full from my HELOC online. Net result: for nearly two months I've used Cap1's money free of all charges to reduce the interest I'm paying on my HELOC. I wait a few days and repeat the process. The terms of my account are that balance transfers are treated as purchases without fee and with a grace period. That's not true of all Cap1 accounts of course.
With proper timing and staggering of due dates, you can even use the same payment to meet the minimum payments of several cards at once by the same technique (again, assuming there are no charges for balance transfers). And remember that you don't have to wait to make a payment. You don't need your statement coupon; you can make a payment whenever you want; online payments get there faster. I "sweep" all spare cash into my HELOC by an online transfer whenever I have a few spare dollars. If I need that money, I just transfer the money back to another account. That way even if I have just a few days before I need the money I'll save a little on interest.
I wouldn't recommend this approach to everyone--but you're an Excel user and have a mathematical bent. I think you can handle it. It's sort of a fun game for me...and I do save a lot of money on interest by doing it. Of course, I owe over $170,000 right now in my HELOC and cards... But I only pay about 2% annually overall on the debt by using these methods.
Guest: JaneiR36
Post subject: Paying-Off Multi Credit Card BalancesPosted: Sun May 01, 2005 10:07 am
OMG, please tell me a HELOC is some kind of student loan account for like Neurological studies in Med school or something! YIKES!! (Yeah, yeah, as if you didn't feel bad enough already
Either way, that is such a WEALTH of information you've shared! Another term I'm not quite so sure I understand is the whole "grace period" speak. Does that mean even after they've sent you your statement, and/or after your due date, they give you a few days to pay up without being charged extra?
Yeah, I do use Excel, and MATLAB, and a couple other mathematical software programs. They're fun to use. MathCAD was my favorite but my CD got scratched up and died on me.
And you know what? This "fun" calculation in Excel is turning out to be the most vicious I've worked on in a couple years! See, even after doing the dedicate all excesses of the minimum to the highest APR account, I STILL went ahead and tweaked the numbers a little.
So it's back to the drawing board! I'd like to clean up my own algorithm, and then see if I can incorporate any of the additional tricks you've mentioned (it's difficult enough as is!) Well, good luck to me!!!
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Guest: Polonius
Credit Expert (100+ Posts)
Post subject: Paying-Off Multi Credit Card BalancesPosted: Sun May 01, 2005 10:14 am
And now let's get even more real. (I just love math!) You're going on the assumption that your payments are fixed (an amortization model, where you pay the same amount per month for the life of the loan). But your minimums aren't fixed--they're a percentage of the outstanding debt. For the Capital1 card, here's what would happen if you made just the minimum payment each month for the next year. (From your Excel spreadsheet, I see you're paying 3% back each month as the minimum.)
Payment Schedule
Month Minimum Payment Interest Paid Principal Paid Remaining Balance
1 $85.71 $21.19 $64.52 $2,792.48
2 $83.77 $20.71 $63.06 $2,729.42
3 $81.88 $20.24 $61.64 $2,667.78
4 $80.03 $19.79 $60.25 $2,607.53
5 $78.23 $19.34 $58.89 $2,548.65
6 $76.46 $18.90 $57.56 $2,491.09
7 $74.73 $18.48 $56.26 $2,434.83
8 $73.05 $18.06 $54.99 $2,379.85
9 $71.40 $17.65 $53.74 $2,326.10
10 $69.78 $17.25 $52.53 $2,273.57
11 $68.21 $16.86 $51.34 $2,222.23
12 $66.67 $16.48 $50.18 $2,172.05
So after a year, your new minimum will be $66.67 per month, not $85.71 per month--and each month you would have a bit extra to use for your higher-interest payments. Plus, again, after a year you'll have repaid more than $600 of your principal, so that's available for a balance transfer to cut the interest paying on the other cards...
In other words, the optimal approach is still to pay the minimums on the cards and funnel any extra to the highest interest rate card until it's paid off. But the savings are more than you calculated, especially if you add the balance transfer stuff each month. It only takes one phone call and 5-10 minutes to do that.
Guest: JaneiR36
Post subject: Paying-Off Multi Credit Card BalancesPosted: Sun May 01, 2005 10:43 am
It just seems that even after using the minimums, and funneling all the extra cash to the highest APR acct, there's still a little bit to be squeezed out of it!
I'm not clear on how to calculate the minimums for all my bank accounts. I had to nearly harass a customer service rep before she put the phone down, did some research, and came back and told me that MBNA now charges 2.25% of the balance as MY minimum (could be different for someone else or for another acct).
The only acct that I'm clear on this would be Citibank. In their terms and conditions, I was able to see that you either get charged 20 bucks, 1% + finance charges, o 2% of everything, whichever is the highest. Something LIKE that. Either way, my point is the method for calculating the minimum varies across companies, depending on the balance, etc etc. SOOOOOO many darn equations, not enough information!!! I could go back to my original mailing to look up the terms and conditions for min pymts, but even that may have changed. I could call up the customer svc people, but they could be clueless like the last one I talked to Almost sems too easy to just resign and pay whatever, even though it might not save me the most NOT!!!
As for balance transfers, I've been doing them online for the longest time...lol. If I'm picking up the phone to call the CC company, it's usually a sign of trouble
But right now, I need to know how to calculate the min payments of all the accts, and from there I could adjust the Excel file before EVER considering tweaking or reconfiguring the whole "total minimum interest" algorithm!! *sigh*
Guest: Polonius
Credit Expert (100+ Posts)
Post subject: Paying-Off Multi Credit Card BalancesPosted: Sun May 01, 2005 1:25 pm
Don't bother calculating it. The principle is clear: funnel as much money as possible to pay off the highest rate debt, thus reducing the principal and therefore the interest as much as possible. After all, some months you may be able to save more than the $600 you're anticipating, some months less. You'll do fine as long as you remember the basic principle: make minimum payments on all cards, and pay off the highest interest card as often and as fast as possible with any cheaper source of money, whether that source is your savings or a balance transfer from a cheaper source. You'll do just fine!
The HELOC is a home equity line of credit. I ran into a bit of bank trouble myself so decided to pay off all cards with a HELOC at prime less .25%. It's a good deal, but being a frugal person I hate paying the 5.50% I'm paying on the HELOC, so I'm still using every gimmick to pay it off as much as I can from day to day, using intro balance transfer offers and special deals as offered from time to time. I figure I've got the net cost of the debt down to about 2.5% per year using these tricks...
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Guest: JaneiR36
Post subject: Paying-Off Multi Credit Card BalancesPosted: Sun May 01, 2005 1:31 pm
oh! That's a HOUSE DUH!
lol home ownership is a whole different ball game. I wouldn't really consider yours to be a bad debt at all!
The reason I continue to calculate it is there are clearly numbers that'll give me a lower total interest (please refer to the slight tweaking in one of my posts above). I would like to find out what the lowest possible one is!
When I plugged in the correct formulas as far as updating the lowering minimums, the 969 only changed to 915. I really was hoping for something more drastic. I didn't do the balance transfers to the lower APR ones, either, because with only paying the minimums on those, the credit line freed up isn't enough to significantly affect the total interest.
More updates on my calculations soon! (And don't worry, I'll be paying huge chunks to MBNA immediately no matter what! ).
Guest: Board Monitor
Post subject: Paying-Off Multi Credit Card BalancesPosted: Mon May 02, 2005 1:53 pm
JaneiR36,
Greetings and welcome to the board! I like the Excel stuff. Sounds like you're on the right track.
Out of curiosity, how did you find out about our site?
Best Regards,
Curtis Arnold
Board Monitor
http://www.cardratings.com
(501) 663-0314
Guest: JaneiR36
Post subject: Paying-Off Multi Credit Card BalancesPosted: Mon May 02, 2005 9:00 pm
Google! I was reading around on the subject but not quite finding enough information. This sure helps out a lot!! I'm still looking forward to going through all the pages as I get more and more time. This is fun
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Guest: JaneiR36
Post subject: Paying-Off Multi Credit Card BalancesPosted: Tue May 03, 2005 6:38 pm
Chase approved me for $1500. More applications will follow.
hey Polonuis, you were so right, things changed around and I've already paid more than I planned to this month alone!! (To MBNA). When my paycheck is direct deposited Thursday or Wednesday I plan to schedule another payment to just take care of the whole thing! (I don't want to get too excited and schedule it even before the money arrives... he he).
So let's break down my balances:
MBNA: $504
Discover: $3014 @ 15.49%
Cap One: $2818 @ 8.97%
Citibank + Chase: $3842 + $1300, 0% till like May '06
PS: Is it okay to max out an account with no interest rates if I keep an eye on it? There's like $158 on Citibank and $200 on Chase I could use...
So I still have roughly 6K to finance properly. I called MBNA because they had a 0% BT APR offer for me. When I talked to the rep, turns out they had three, actually.
First one: 0% APR on BT's till Jan '06, NO CAP on the transaction fee! 3% flat! That's $180 in BT fees only!
@ $500/month pymt, interest would be $74, total charges on this loan = $254
2. A full year @ 1.99%, interest = $63, total charges = $243
3. A full year @ 2.99%, AND they'll put a cap on the transaction fee. I'm guessing $50 or $75. Total interest $95, +$50 = $145, +$75 = $170
I'm seriously considering this over applying for another account, which it's already being cumbersome keeping track of five accounts! Accounts that I'll have to keep open even after paying off, or risk getting a ding in my credit score.
Or should I just suck it up and keep applying for more cards instead of bothering with MBNA again? thoughts? opinions, please?
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Guest: Polonius
Credit Expert (100+ Posts)
Post subject: Paying-Off Multi Credit Card BalancesPosted: Mon May 16, 2005 10:50 am
Good news! Congratulations.
Maxing out any credit card will ding your credit scores, of course. The only other downside I see is if you missed a payment and got socked with a late fee that sent you overlimit for an additional service charge. But if you're in that position, you'll likely be seeing the banks raise your interest rates to some usurious numbers and throw all your fine calculations off anyway.
I'd take the MBNA offer with the lowest interest payout in a second myself. But there's no harm applying for another card as well. Assuming you're responsible about your credit now, the more the better as far as cards and limits are concerned, to hold in reserve in case of an emergency, loss of job, health problem, and the like. The more cards you have, the more opportunities for special rates, the more ways to transfer things around without violating the rules of a particular bank. (I've got a Sears MasterCard, AT&T Universal Card, Driver's Edge MC, AAdvantage MC, and two Mellon Bank cards--all NOW owned by Citibank, all prohibiting balance transfers to each other. So I'm glad I still have MBNA, CapitalOne, Chase, Discover, and American Express to transfer to and fro those Citibank-owned accounts.)
Also, with additional cards it's easier to separate balance transfer offers and purchases. Sometimes the special balance transfer rates apply to purchases made with the card as well, but usually that's not so. Best to make purchases on one card which does NOT have a special balance transfer available...so you can pay that one in full each month.
Guest: Ira
SENIOR MEMBER (Member for 2 yrs.+)
Post subject: Paying-Off Multi Credit Card BalancesPosted: Mon May 16, 2005 11:05 am
Quote:
all NOW owned by Citibank, all prohibiting balance transfers to each other.
Polonius, have you tried the "What's in a name" game? Don't call it a balance transfer, don't call it anything, but call customer service and ask if it's possible to move some of your balance from card A to card B. A long, long time ago I remember successfully doing this with two cards from the same offerer. I don't remember which bank was involved. Try it, it might work.
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Guest: Polonius
Credit Expert (100+ Posts)
Post subject: Paying-Off Multi Credit Card BalancesPosted: Mon May 16, 2005 7:05 pm
Ira, I know your suggestion is a good idea and the odds of it succeeding are fine. So far, I've had no problem playing strictly by the given rules, so haven't had to test the system to see if the restrictions are for real or are just legalese in the fine print.
