Massive credit card debt!!

lucy2222October 23, 2007


I am new to this forum and am truly dedicated to getting out of massive credit card debt. I have taken a long and very hard look at my finances and am truly sickened about what I have found. I have destroyed my credit cards and have been working extra shifts at work to chip away at this debt.

My problem is I am not sure where to start. Please, if anyone has the time to give me advise, i would greatly appreciate it.

I owe 3 major debts:

visa balance of 14,000 rate of 4.9%

visa balance of 8,000 rate of 6.9%

heloc balance of 16,000 rate of 9.0%

I know, a ton of debt and believe me I am so very ashamed of this. I have lost a lot of sleep and even began to hate myself for doing this. I have a good job now and am ready to pay this off and quit feeling sorry for myself. I don't know which to pay first. Part of me would like to get rid f the 8,000 debt first so I see progress but I am not sure if that is the wisest choice. Would paying off the highest rate be best? I can dedicate 900.00 per month to all of this debt and some months possibly more.

Thanks from the bottom of my heart for any advise.

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You've already taken the first steps - recognizing the problem and cutting up your CC's.

I'd focus on the highest interest rate debt first (even though I do recognize the emotional benefit of paying off even one of them). But if you put that entire $900 toward the heloc, it would be paid off in less than 18 months.
And you would feel GREAT!
That doesn't factor in the interest you'd be paying and you probably also have to meet minimum payments on the two visa balances - but with determination, the heloc could be paid off in less than 2 years.
Then you could tackle the higher interest visa - again at $900/mo, it could be paid off in less than 9 or 10 months. That would leave the third visa - about 18 or fewer months.

With some luck, a lot of determination and discipline, you could be debt free in four years. Then you could start saving and investing that $900/mo. Then, the real fun begins....

Here is a link that might be useful: Yes, you can get out of debt

    Bookmark   October 23, 2007 at 9:42PM
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I think you should pay something off on all of them each month, and speak to them now to tell them to expect it - which will motivate you (because you keep your word, right?) and to pacify them - they'll be patient if they believe you're trying. Yes, the LoC has a higher rate, but they won't be sending bill collectors after you anytime as long as you keep up with the interest, but Visa may not be as understanding in the long run, though speaking to them will help.

    Bookmark   October 24, 2007 at 6:17AM
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These are the question I ask when I first sit down with friends that I am helping to get our of debt.

What are the minimum required payments on each?
Are the rates on the Credit cards & the helco fixed for the balance?
Is the $900 the total amount you can pay or is this on top of the minimum payments you are already making?

I have some ideas I would like to suggest but need the full picture.


    Bookmark   October 24, 2007 at 6:50AM
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I used to teach personal financial management for the Navy. In that course, we suggested that one focus on paying off the credit card/line of credit with the lowest balance first (feeling of success when one is paid off) while making the minimum payment to the others. When that one is paid off, then work on the one with next lowest balance. We had sailors come back to us a year or so later and thank us for helping them with come up with plan to get out of debt.

Remember the HELOC may be tax deductible depending on the rest of your income and tax situation. Being able to deduct the interest on the HELOC makes the difference between the interest rates not as great as it appears at first glance.

    Bookmark   October 24, 2007 at 6:55AM
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There are many books and websites that can help. The best book imo is Jerrod Mundis: How to Get out of Debt, Stay out of Debt, and Live Prosperously. (Get it from your library!)
A good website is The person who started the blog was in debt and has chronicled his passage out, with much good financial advice along the way.

    Bookmark   October 24, 2007 at 8:16AM
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Thanks so much for all of the answers so far.
900.00 is the total amount I can aford to spend on these debts each month. I have not been late or behind on any of it.
Minimum payment on
visa 14,000 is 292.00 I always pay 350.00
visa 8,000 is 150.00 I always pay 175.00
heloc 16,000 is 150.00 I always pay 175.00
so I roughly have 200.00 left to pay extra on these each month.
Sorry I did not give enough info at first, and thank you all for your answers!!!

    Bookmark   October 24, 2007 at 9:19AM
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by the way the credit cards are a fixed rate and the heloc is variable, right now 9.0% Thanks!

    Bookmark   October 24, 2007 at 9:23AM
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If your credit-card rates are fixed and your HELOC rate is variable, then your HELOC rate will probably always be higher than your credit-card rates. Unless you're in a high tax bracket, the fact that it's deductible won't matter all that much.

Therefore, your best strategy is:

1) Make the minimum payment on each debt.
2) Whatever money you have left over after (1) goes to paying down the principal of the HELOC, because it has the highest interest rate.

It is true that by paying off the lowest balance first, you will have the psychological satisfaction of having paid something off earlier. However, by paying off the balance with the highest interest rate first, you will become completely debt-free earlier.

And won't that feel good!

    Bookmark   October 24, 2007 at 11:02AM
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This calculator will help.

Here is a link that might be useful: Credit card calculator

    Bookmark   October 24, 2007 at 1:27PM
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Lucy 2222,

I'm glad that your credit card debts aren't at the usual high rates that they charge - usually 15 - 18%. That makes it much more difficult to get the amount still owing reduced, as so much of the regular payments must go to pay interest.

If it's any consolation - store-issued cards are usually much more difficult to clear, as they usually charge 25 - 28%. I'm glad that you don't have any of them to cope with.

If you can have the persistence to keep plugging away at the payments without getting the feeling of satisfaction that comes with getting one paid off fairly soon, I prefer paying the extra amount monthly, or at least most of it, on the HELOC, as it carries the highest interest rate. And if interest rates go up, it could be raised even higher. On a larger amount still owing.

As credit card debt is unsecured, in case of serious problem, the credit card co. can hound you, but not take your house.

As the people that carry the HELOC have secured debt, the loan being secured by a lien against your house, they could cause your house to be sold, if things go really bad with that one.

That seems to me another reason to get rid of that one as soon as possible.

Are the interest rates on the Visa debts fixed throughout the full term that the amount is owing? Sometimes they offer low rates, but that rate is for a limited period, e.g. a year or so, or even only a few months. After that, the interest rate becomes much higher. And usually if one doesn't make the full minimum payment, or the payment is a day late, etc., the rate goes to the usual higher rate immediately.

I hope that you won't run yourself down into the dirt for getting into this problem. Lots of people have sort of wandered into a similar kind of a bind. It's really easy to get bogged down in debt - really easy: as you've found out.

But while I ask that you not hate yourself for this mistake, I also ask that you be honest with yourself, and face the real issues and choices that you have made that are hurting you now.

You have made a really good start, in recognizing the problem, and making a reasonable plan to get the problem fixed. A plan that is, according to your evaluation, do-able.

As someone has suggested, I agree that it would be a good idea for you to get some information from the library to help you along the line of learning how debt works and how to manage it.

It's really a situation where you gave yourself a pay cut - for, as you bought the goods that were more than you could afford on your current earnings, you set up a situation where you had to pay for it out of future income.

Not only that, you had to pay rent on the money that you borrowed to buy goods before you had saved enough to buy them with your own money. That rent on the borrowed money is an expense to be paid in future , that you would not have had to pay had you been less impatient, could have waited until you could pay for the items out of your income at the time.

After you get the loans paid off, please follow the suggestion offered above, of saving most of the $900. monthly to build an emergency fund to be available in case some unexpected but necessary expense crops up.

When one has a such a cushion, it eases one's mind greatly.

And can I offer a further suggestion?

But that you go even one better ... get some materials that will help you learn how to manage your investments so that they produce better results for you than many obtain, plus reducing or deferring income tax, etc.

In over 20 years as a personal financial advisor, I've told a number of people that learning how money works is an interesting hobby ...

... and it's a hobby **that pays well**!!

Maybe you could retire early.

Or retire a millionaire.

Dream some great dreams ... but not of the castles in the air kind, but of ones that can be brought to pass, with increasing skill, effort, some self-control, and persistence.

You can do it - and when you need some advice, or support, or to cry on someone's shoulder - come any time. We want to see you succeed in this noble enterprise that you've chosen.

Good wishes for getting these debts whittled down.

ole joyful

    Bookmark   October 25, 2007 at 1:20AM
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Years ago when I first got married, my DW came with a ton CC on top of the debt for our wedding, which my cheap a$$ mother law backed out of helping us with after we spent the money. At the time I had just left the military and was working in a starting level professional job that paid an ok wage. She worked in banking and was paid along the same lines as me. We had zero savings and not a lot of extra money thanks to her sky high credit card debt. We didn't have the luxury of the low rates like you had, she had the rates they charge you when your balance goes over the credit limit, thanks to the sky high interest.

The first thing we did was understand where out money was going. Its not the big stuff that gets you, its the dumb little stuff you don't even think about. We kept a little scratch pad book and tracked every penny we spent. Nothing was too small to write in the book, including a cup of coffee. I also created a budget and allocated our inflow to first the mandatory stuff (rent, utils, gas, food, medical), then the discretionary stuff (eating out, coffee, small vacations, etc) and then what was left over went to pay down the debts. Once the budget was used up for an item that was it. If the mandatory stuff was more then I budgeted, I took budget dollarts from the discretionary stuff. No matter what, when the limit was met, that was it. This was the biggest help and I think the only way we could have done what we did.

To make sure we didn't get into further debt or lose our way, we only paid cash. We did not allow either of us to have more then $50 in our pockets at a time, so we wouldn't be tempted to spend money on dumb stuff.

Once we started getting some extra money from the frugality, we started paying off the credit cards, almost the same way you are doing. We picked one card to pay off more and worked and worked on it until it was done. Once it was done we cut up the card and closed the account. It was a great feeling and made us want to keep at it. After nearly 2 1/2 years of paying down the cards, we were finished. We vowed that we would never again carry a credit card balance and I am happy to report that to this day this has been true. We use almost exclusively our Amex which requires us to pay it off each month (no sign and travel).

If you work at it, you will feel great and in control once you get your finances back in order. The harder part, just like dieting is staying there.

Good luck.

    Bookmark   October 25, 2007 at 6:01PM
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Hi kitchenshock,

Looks as though you had a major shock, not only in the kitchen, but pretty well through all of the other rooms in the house, as well.

And in the other areas of your life, too.

Thanks for sharing that (rather embarrassing?) story.

And congratulations on having defeated that tiger on your back, and explaining how you did it.

I never got into credit card debt - there were hardly any till I was grown.

Plus I learned too much frgality at home to get caught up into such a serious problem, I think.

Those high interest rates, fees, penalties and surcharges really weigh one down, don't they?

Good wishes to you and yours.

ole joyful

    Bookmark   October 26, 2007 at 1:08AM
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I just want to offer words of encouragement to lucy2222.

A few years ago I zeroed by credit-card debt. It wasn't as high, but it was higher than I was comfortable with.

I completely zeroed my spending. Every single spare dime, every ounce of discretionaly spending, went to the cards. (and I had much less spare $ to use--probably $300 per month).

I got two benefits out of it that I hadn't counted on.

one was that when my DH got laid off, I suddenly had so much more of MY income available to take care of us. Bcs I wasn't paying the money to interest. I bought myself some financial freedom.

And, here's the one I *really* didn't count on: I re-aligned my values.
I don't mean I became "a better person" or anything--I'm still the same schmoe I was before.

But I discovered that "stuff" mattered less. I became more attuned to the idea that the things I bought had LOTS of costs--costs in money, of course; costs in space, etc. I stopped feeling any urge to buy.

In fact, I started to get antsy if I went in a store. I became much more frugal, and much more discriminating on what I spent my money and my ENERGY on.

I ONLY GOT this benefit because I did the long, hard slog of paying th ecards off bit by bit by bit--which translated into long-term training.

I'd paid them off before out of savings, and always built them back up again without really thinking. It was as if I did the "weight lifting" training using my "self-discipline muscles."

I was SO SO proud once that debt was gone; I bragged about it. I felt that I had really achieved something. I was now invested in a CLEAN credit card, and not in the idea of being able to buy whatever I needed.

I am wishing the same results for you--I bet you will achieve it.

Extra income now, while you are freshly aware of the financial situation is a great thing as well. This is very smart of you. And hopefully it'll also help you feel that you are taking control, instead of making you feel helpless, overwhelmed, and unable to sleep.

Feel "wised up," not beaten down. You can do this--you are ahead of MANY people.

    Bookmark   October 26, 2007 at 11:21AM
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I got this month's CC bill, and I can see how a person can get into serious problem if they don't pay it off every month. I laid my last month's bill on a stack of papers on my desk, then laid something on top of it and so forth and so on. I got this month's with a $35 late charge and $15. in interest. Wow, I won't do that again.

    Bookmark   October 27, 2007 at 9:11PM
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