Ok, so last time it was budgets, but I have been informed that budgeting is not the way to get out of debt… I mean, it’s important, but just having a budget and not doing anything else makes for a very slow and difficult payoff. Maybe one day I’ll make a blog post detailing exactly how fucked up credit cards and their interest can be, but to keep it short and simple: the interest on credit cards is calculated daily so it builds quickly and it’s compounded so the interest earns interest. My $6,500 in debt is going to cost me more than $6,500 by a fair bit.
I have been given some really solid advice on how to pay off debt that basically comes down to: pay as little interest as you can.
Step 1: Contact the bank/credit company who owns your debt and see if you can negotiate a lower apr. I have a VERY high interest rate at 19.25%, if you can get it to 15% or even lower that’s fantastic! Explain to the company that you’re trying to pay them back and get out of debt, it’s ok to say the apr is too high and becoming a burden. They’d rather get paid than have you go bankrupt and get very little money back.
Result of Step 1: Chase is a bunch of cunts and wouldn’t lower my interest rate. I discussed needing to get out of debt and the apr making that difficult, but apparently I’m getting the “lowest rate they offer” (Bullshit) at 19.25% which is awful. Basically if you can avoid Chase, do so. Or I guess if not avoid them, pay off your card every month so they don’t get any more of your money than necessary.
Step 2: Look into 0% interest balance transfers. These should be approached with some caution as they can be tricky and actually end up biting you. I was advised to see if my credit union (which is guaranteed to offer me a better deal) has a 0% interest balance transfer option. The first thing is the check what the rate of the card will ultimately be because you don’t want to accidentally transfer to a card with a higher apr. Then you check if the entire balance is transferable (this will depend on whether the bank/credit union has a cap on their balance transfers) and how long the 0% interest rate lasts. This will allow you to quickly pay down the balance without accruing more interest for a little while, but this only really works if you aren’t using the credit card you transferred from.
Result of Step 2: Not taken yet. I wanted to wait until my direct deposit went through on my credit union (there was a snag in the original filing which resulted in me getting a paper check one pay period). My direct deposit is operational and I’ll be going in to talk to a loan officer about options soon.
Step 3: Pay down as much of the debt as possible through promotional 0% interest balance transfer as possible and, if a balance is still present and considerable or unable to secure 0% interest balance transfer, seek a loan through my credit union with low interest rate to pay off the credit card and pay back the loan on schedule. Again this hinges on not racking up new debt in the meantime, but if I stick to my budget that should be fine.
Result of Step 3: Since I haven’t been gotten to step 2 yet I’ll have to wait to update you all on step 3 later.
So I have a budget and I have a plan to help reduce my debt in other ways. I’ll be updating about that and also about any additional information or tips I come across. Next Budget Woahs: techniques for curbing the impulse spending that I really suffer from.