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how to pay off credit card debt

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Harris
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Subject: how to pay off credit card debt
 
Posted on Mon Apr 12, 2010 6:11 am  

Hello, I am trying to figure out what to do with my CC situation. People have been giving me varying advice from filing bankruptcy, debt negotiation, debt management program and credit card counseling. I acquired approx $20k in credit card debt from a divorce proceeding about 3 years ago. However, most of this CC debt is not mine.

Current stats:

Card 1 $5000 12.42%

Card 2 $2440 12.24%

Card 3 $2810 13.24% (acct closed)

Card 4 $3040 18.44%

So my CC debt is now approx $14K and my utilization on the ones that are open is about 70%. I have more or less about $20,500 in. I had bought a house 2 years back and have a car. So I have no big purchases planned in the immediate future. Should I go for a debt management program or handle it myself? Can I call the credit card company. and ask for a rate reduction? Will that help? All four cards are from same company.

One account is threatening a rate increase due to two late payments in last 6 months, should I accept or close the account to keep the lower rate?
Aaron

Aaron

Joined: 08 Feb 2010
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Posts: 2632



48565 Magic Points

Subject: how to pay off credit card debt
 
Posted on Mon Apr 12, 2010 11:38 am  

Hi Harris,

The closed account with $2810 on it is hurting your credit score the most. Thus, you should first try to pay that off.

If you think that you will be able to pay off the outstanding debt amount, you can start paying the one with the lowest balance first. Along with paying the one with the lowest balance, you should also forward minimum payments on the other cards. In addition to the minimum payments on the other cards, if it's possible you can try to make some extra payments too on the cards.

When the card with lowest balance gets paid off fully, you can start the same process as mention ed above with the next lowest balance card. Add the last amount you were paying towards the previous one along with the minimum balance, and start paying the second lowest balance card. This is known as Snow ball technique of paying off debts.

However, if you think that it isn't possible for you to pay the whole amount on the cards, you can try to settle the debts. Settlement lowers the outstanding debt amount by 40-60%. For more details on debt settlement you can refer http://www.creditmagic.org/debt/settlement-bankruptcy.html#43737 .

Hope this helps.

Regards,

Aaron
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NightStar



Joined: 10 Mar 2010
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Posts: 142
Location: Illinois


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Posted on Tue Apr 13, 2010 10:36 pm  

I agree, that the closed account with the balance looks negative, even though it is not the highest interest rate, I would pay this one off first.

If you have another one threatening higher interest rate - opt out and close that account too. And focus on paying that one off next.

Once you have them down, I disagree there - you should pay that one with the 18% interest off first. The other ones are incurring less finance charges and can wait until you deal with the high interest one.

I would avoid debt settlement companies - they totally trash your credit to settle debts for the lowest amount. You can negotiate settlement direct yourself if you want to try paying lower then full amount. But this will not look good on your credit report if other lenders see that you settled.

Consumer Credit Counseling is a possibility, but it comes with some problems, sometimes reps will tell you one thing just to get you to sign up with out having accomplished what they proclaim. You HAVE to double check all agreements with the creditor to make sure they agreed with the CCCS company. Also you have to contact the creditor to make sure the CCCS pays them before the due date, if not make arrangements with the creditor to change the payment due date.

CCCS will cause a notation to be added to your credit report, it does look negative as if you filed chapter 13 bankruptcy, but unlike bankruptcy it can be removed as soon as the payment plan is finished. Also you are required to close all accounts included in CCCS.
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Arthur Lowe
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Subject: Credit card debt
 
Posted on Thu Apr 29, 2010 4:32 pm  

I want to negotiate a CC balance reduction and payoff. Who is the authority (typically) that can enter into such an arrangement and who should I ask for when I call?
Steve_Smith



Joined: 13 Apr 2010
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Posts: 4



66 Magic Points

Subject: How to pay off credit card debt
 
Posted on Thu Apr 29, 2010 7:34 pm  

Hi Harris

I agree with NightStar you should pay the card that is charging you the highest interest rate first, whilst paying the minimum payment on all the others. Or alternatively if you can arrange for a debt consolidation loan where you can pay them all off in one go and reduce your monthly outgoings in the process that may be a better option, as it would maintain a healthier cerdit record.

Hope this helps.

Cheers

Steve
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