Best advice for paying off a credit card?

[geepondy]

My friend has a credit card thru Citibank and carries some sort of a modest balance but more then she can pay off at once. Like many credit card companies they sent her a letter in the mail saying her interest rate was going to be jacked way up despite never being late on a payment and paying off more then the minimum balance each month. She asked me for advice and I suggesting going to her local credit union and taking out a personal loan for the shortest duration possible to pay off the credit card and canceling it. I also said she could apply for a credit card thru the credit union to use for emergencies but do whatever possible not to carry a balance on it, at least until the loan is paid off.

Is that the best advice I could have given her? I know some people play the game of getting a credit card with 0 percent interest on a balance transfer for a given period of time and then when that time is up, swapping to another with the same deal but I know she doesn't want to apply for a bunch of different credit card. Also she wishes to do minimum damage on her credit rating.

 

[1wrx7]

Sounds like you're giving her good advice... in no way am I an expert though:tinfoil: The way I look a CC's is, only charge what you can pay off when the bill comes. Emergencies are a different story though.

One thing I've heard... remember I'm not an expert... if you cancel a CC it will affect your credit report negatively. You're better off just not using the card until they close the account. I have gotten a 0% credit card specificly to use for a planned purchase, but I haven't done the balance transfer dance. It seems to work for some, but it seems like too much work for me.

I don't know her situation or balance but, maybe looking at luxury spending over a few months would help. Coffee, eating out, going to the bar for a drink, ect can make a huge difference on a CC balance. Especially when I would bet they are trying to raise her rate to 20-28% APR I wish you and your friend the best of luck:thumbsup:

 

[jtr1962]

Can she get a loan from a friend or family member? That's really the best course here, provided she can trusted to pay it off, especially if by modest balance you mean three or perhaps low four figures. And although it goes without saying, it's always a really bad idea to charge more than you can pay in full at the end of the month. Once her debt is paid she should consider reevaluating the habits which got her into debt in the first place. I've known quite a few people with huge credit card balances (six figures in some cases). In nearly all cases, 100% of this debt was for discretionary items (gadgets, vacations, eating out, clothing/shoes above and beyond what was necessary, etc.). Of course, if this spending was for medical or dental expenses, or perhaps for some emergency repair in her residence, then that's another story.

 

[Light Sabre]

I have 2 credit cards that I use. One only has a $1000 limit and it's the one that gets paid off in full every month. The 2nd one has a high dollar limit and is for infrequent high dollar items like car repairs, new computer (soon), newer bigger HDTV (maybe), Blue-ray player (maybe). I try to keep my CC foot print very low (means I don't use them very much). Pay cash as often as possible. I always pay more than the minimum amount on a CC. Can't remember that last time I payed just the minimum amount. My high dollar CC is going to be paid off in January or February.

If you pay just the minimum amount your'e never going to get ahead on the balance. At least pay 2 or 3 times the minimum amount. Try and find a CC with a lower interest rate. My high dollar one is only 12% and that was after they added 4% so it was ~8% originally.

 

[TooManyGizmos]

Start with the highest balance with the highest intrest rate . Pay it off first .

Then do the next one in line .

Credit card company's are devious and have no scruples . Bad as politicians and government .

 

[Bullzeyebill]

Good advise given here to not close your credit card account. You would think that might be a good thing to do, but it will work against you credit wise.

Bill

 

[Eugene]

Closing a credit account will not hurt your rating unless its the only one, Now closing a bunch in a short period will hurt it for a short time. I did that a few years ago when I closed out all the store cards we had to consolidate, our score went down a bit but then by the next year it was back up higher than before.

 

[DonShock]

Have her read the notice of the change in terms closely. Usually, there's a way to refuse the change in terms. Most times, you are basically closing the account and have to pay off the balance under the old terms. I recently got a change notice on one of my cards and I refused the change. Fortunately for me, I had just renewed the card but under the refusal terms I get to keep using it under the old terms until it expires. I just won't be able to renew it again after 2012.

 

[brucec]

Moving the CC balance to a personal loan at her bank is a great idea. Then she should setup an automatic payment schedule that will pay it off in about 12 months.

 

[ElectronGuru]

There are three things you need to demonstrate to improve your credit score:

Stability - open and close things seldom. Avoid opening credit for single purchases smaller than a home or car.

Reliability - make all minimum payments on time or sooner, every time.

nonchalantness - this one is trickier. It comes down to have the means and not using it, or using 'it' only a little. For example, be able to get 10 credit cards and have only 3. Never use one of them. Have a huge credit limit and never go above 10% of that limit.


In this case, move that debt to a non-lame institution asap and close that account. First choice, a local credit union. Second choice, one of the highly rated banks on bankrate.com

 

[Oddjob]

A lower interest rate line of credit or loan is probably the way to go. If that is not possible then at least switch to a lower interest credit card. Definitely tell her to take any extra money, no matter how small and pay off the card. An extra $50 here and there does add up.

 

[blasterman]

Unless you plan on buying a house in a the short term may I ask what difference it makes if your credit score takes a minor wack? Maybe we should be more concerned about getting rid of the high interest debt than keeping our credit score immaculate just in case we want to aquire more dept we are trying to get rid of. Plus, credit card companies are looking to impose fees on existing cards with zero balance.

Capitol One sent me a notice last year that they were jacking up my interest rate for no reason, but at least they were somewhat fair about it and giving me a generous time frame that they'd leave my current balance alone. I paid off the card, and they closed it. I wasn't given the option of keeping the account open - when I paid it off - it automatically closed.

My credit score dropped a little. The earth did not stop rotating, nobody broke into my house with guns, I wasn't fired from my job, and my car insurance didn't go up.

 

[TooManyGizmos]

The credit card co's are still un-regulated , free to do as they please , and getting even MORE greedy.

They are trying to take even MORE money , from those who can least afford it , trapping them with higher intrest .

They should be ashamed - but they are not !
.

 

[Alaric Darconville]

What NOT to do

One thing you should NOT do is get a Home Equity Line of Credit or just a standard home equity loan to pay off a credit card debt. This changes the unsecured debt to a secured debt-- secured against your home. If you default on your HELOC or HEL, you essentially are defaulting on your original loan, and can therefore be foreclosed upon.

Therefore, when getting a new loan to pay off credit card debt, make sure it is an unsecured loan. There may be a higher interest rate than an HEL/HELOC, but there is much less risk to you, the borrower.

 

[rje58]

Tell your 'friend' to quit charging so many flashlights, batteries, chargers, parts, etc.

< just kidding >

 

[BVH]

The way it was explained to me by a Wamu branch manager. Part of your credit score is dependent on your outstanding credit card debt vrs your total available credit limit from all credit cardS combined. If you close out a card, you reduce that ratio and your score is lowered. Just passing it on.

 

[mvyrmnd]

I once had over $10k of CC debt... it took me 5 years, but I am now CC debt free.

I did the 0% merry-go-round a number of times. All in all I'd estimate it saved me $2000-$3000 in interest.

It's a massive PITA changing card and providers and payment schedules every 6-12 months, but well worth it in the end.

I allowed myself a weekly budget, stuck to it, and put every other dollar I had into the card.

It's difficult, but if I can get out of a hole that deep, anyone can.

 

[turbodog]

My friend has a credit card thru Citibank and carries some sort of a modest balance but more then she can pay off at once. Like many credit card companies they sent her a letter in the mail saying her interest rate was going to be jacked way up despite never being late on a payment and paying off more then the minimum balance each month. She asked me for advice and I suggesting going to her local credit union and taking out a personal loan for the shortest duration possible to pay off the credit card and canceling it. I also said she could apply for a credit card thru the credit union to use for emergencies but do whatever possible not to carry a balance on it, at least until the loan is paid off.

Is that the best advice I could have given her? I know some people play the game of getting a credit card with 0 percent interest on a balance transfer for a given period of time and then when that time is up, swapping to another with the same deal but I know she doesn't want to apply for a bunch of different credit card. Also she wishes to do minimum damage on her credit rating.

With the credit crunch upon us, the old swap from 0% to 0% is hard to do, especially if you don't have stellar credit.

I would keep the card open. Her credit report will benefit from an open, paid on time (if not in full) card with an older account opening date....

Unless we're talking nosebleed rates, there may be real little difference between shopping for some new credit to payoff the card and simply paying it off asap. Skip a few times eating out, etc and it'll be gone more quickly.

Would help if you gave some hard #s here...

Also..... with some of the new credit laws in effect she may be in a better position than she thinks, and that they want her to think. Offer to pay it all off within 30-45 days for a reduced principal amount and see it they bite. This is a new thing some issuers are offering. Only problem is that they force an account closure. Worth looking into.

 

[turbodog]

The credit card co's are still un-regulated , free to do as they please , and getting even MORE greedy.

They are trying to take even MORE money , from those who can least afford it , trapping them with higher intrest .

They should be ashamed - but they are not !
.

Credit and banking is one of the most tightly regulated part of out economy.

The "greedy" credit companiy? Well that's you and me. We are shareholders of these companies. We get to vote at annual meetings. We can attend meetings. I can at least vote by mail, or let my proxy vote.

I think you may be describing yourself. Your CPF description says wealthy and lazy.

 

[TooManyGizmos]

All the credit card company's ARE and have been way out of control on the willy-nilly intrest fees at their own discretion . They have been free to charge any rate they wanted with NO regulated limits.

Why do you think the Govt. is (acting) like they are trying to get the CC Co's to change their policies . The public is tired of being bullied with outrageous rates . It has been in the news a lot lately .

As to your final comment - I won't even reply to it - except to say that I don't think it's relevant to the topic , and I was not describing ANY one . (Don't get personal.)


( Actually - maybe I will reply to it .....

It's really more of a "state of mind" than a "statement of status" . And I'm just lying to myself .:mecry: ... )
.