Credit Card Debt vs An Emergency Fund

[infocus]

Thank you all for your help. I realized that I probably posted more info than I should have on a public board so I am removing this information. I hope you all understand... and thank you all again so much!

[Ima saver]

Gosh, info, you are between a rock and a hard place. I know if it were me, I would want to get the cards paid off as soon as possible. Never never open a dept. store credit card.
Maybe if you paid that one off, you could take that $40 you are paying on it and put that into your savings account. I don't agree with debt consolidation loans, but maybe in your case you should look into it.
I would call consumer credit counciling and see if they can help you get your interest rates lowered.

[terry1156]

Originally Posted by infocus

My concern is, if there is an unexpected expense, I will have no savings and no available credit (since my highest interest card is a department store card). Would it make more sense to put that $800 towards my Visa, which is 20% interest, so I would at least have credit available if I absolutely need it?

I think you should put it toward the VISA rather than the store card. If you put it toward the store card, you will still have no savings in case of an emergency which could lead to a default since the VISA is already maxed out.

Originally Posted by infocus

Or, would it be best to put that $800 in savings for emergencies, even though I will pay more in interest to my credit cards?

This is a difficult balancing act. I know many will disagree with me, but I would pay down the VISA first - that is how I did it when I got myself out of debt.

Originally Posted by infocus

My concern is that my credit card limits might be reduced if my credit score goes down. Can this happen on regular credit cards like visa and mastercard?

If you're paying down the credit card debt, your score should increase, not decline.

Originally Posted by infocus

Last summer my $1,500 credit limit on my department store card was reduced to $800 due to my credit - I have a lot of credit card debt in my name from our marriage, even though my soon to be ex husband is supposed to be paying it off. The possibility exists that my credit could get worse before it gets better, since there is no way I can pay even a fraction of the minimum monthly payments on a $47,000 credit card balance that is solely in my name (he is only an authorized user). We get along well and he is willing to pay this, but he did get behind for a while due to temporary unemployment and the partial payments he made resulted in the interest rate jumping from 12% to 30% in a few months. So far nothing has gone past 30 days, but I am very vulnerable right now financially. I know if my credit drops it could increase my interest rate and minimum payments on my own credit cards, and my car insurance could go up too, and I sure can't afford that. So I really want to get rid of this credit card debt as quickly as possible, but I also am afraid of giving all that to the credit cards and continuing on with no extra money saved for emergencies. I just don't know which is the best thing to do right now.

Someone please correct me if I'm wrong (not my strongest area), but if the debt is solely in his name, it should not affect your credit rating (be happy it isn't a joint account).

Originally Posted by infocus

So, in light of that longwinded background, what would you recommend I do with the three extra amounts I expect to receive this year? I would really appreciate any advice you could offer. Thank you.

I think it's best to do what you're most comfortable with. I would pay of the VISA first, but that is my opinion. If you use the first one to have an emergency fund, I can see arguments to support that move too. Just be sure not to pay off the store card first.

[infocus]

Thank you very much for the responses.

[cercis]

infocus - if the debt gets into collections and goes to judgment, they will take any money you have in a bank account (and you'd be amazed at how easy it can be to find bank accounts to garnish).

I know it's difficult, but I'd pay half and half, half to the Visa, half to the store card and continue to pay the minimums you are currently paying (in case the amounts go down). Then every extra cent you get ahold of, pay half and half.

[robex]

You are in a tough spot! I would put the $800 in an emergency account, and cancel the credit cards...how likely is it going to be that your going to have an $800 emergency? Go with your gut--seems to me like you've really put thought into your finances. Things will get better so hang in there and keep us posted!

[Lemony]

Are you getting child support from your ex? You should be.

Your credit limits should not go down if you pay off your bills. If I were you I'd keep a small emergency fund ($500 for now, increase to $1000 later) and use the rest of your money to attack those debts. When those are gone, you'll have a lot more liquidity each month to survive on.

[Ima saver]

If he does not pay on the $47,000 worth of credit that is in YOUR name, that will really ruin your credit and you might have to declare bankrupsy.
I would pay all I could on the credit and bank cards.

[infocus]

Thanks again for all the responses.

[Ima saver]

I really think you should call consumer credit counciling.

[infocus]

Thanks - I actually did call to see what my options were, but they wouldn't even talk to me until I signed up with them and paid, so that kinda scared me off...

[CJsoccerchic]

Just because it sounds like there is a lot of money on credit and you owe a lot, I would most definently go with the paying down the credit cards and see about "slightly pushing" your ex-husband to pay more on the big amount that you owe.
As far as "being stupid" for having your ex-husband on a credit card or loan, you're not stupid. When you marry, you think that you are life partners and will share everything - debt, children, money, credit, and extra money. No one gets married thinking they are going to be divorced in 5 years. Who'd get married in that case?!
Hope this helps...

[infocus]

Thanks everyone. I called my Visa customer service, and without giving my name or account info, I told them I was a customer and asked them if they would reduce my credit limit if my credit got bad. I explained the whole situation, and told them I had some money coming and was trying to decide whether to pay off some debt or keep it for emergencies. The guy was really nice and said yes, if there were late payments or whatever on my credit report, they probably would reduce my credit limit. So I guess that answers my question - that first check is going in the bank, or under my mattress if necessary (just kidding!) so I have something for emergencies. I will continue to make my minimum payments, and the next two lump sums I get will go to paying down the credit card debt. I will do the best I can with what I can control, and hope for the best with the things that are out of my control.

Thanks again everyone.

[Ima saver]

I can't believe that consumer credit counseling charges you. I thought it was a not for profit org.?

[PrincessPerky]

If I were you I would go get your EX to pay support and just put it on the debt yourself, that way the money is guaranteed and the state will go get it from his checks if need be, no more waiting till he remembers to pay. And yeah I would prolly go with a split, say a couple hundred under the mattress, the rest on debt.

Find a non profit counseling lace, the for profit ones are just that, for profit, not you. try a local church or something to find a good one.

[JoyJoy]

Did you call the companies and drop him as an authorized user? Have you thought about getting a judgment against your husband so he can pay you or the credit card companies through the court? You definitely need child support. Also I'm glad the guy at the credit card company told you that they could/would lower your credit limit as they not only can do this but they can close your account to further purchases/cash advances so you can't utilize the amount you are sending in for fear you will use that too. I wouldn't worry about receiving interest on the monies you have coming in but would put it in a safe deposit box at the bank and pay what is absolutely necessary for you and your son to survive. If there is a soup-kitchen or a mission of some kind near you, go to them get on their list for free groceries and they may have credit advisers who can direct you towards a free community agency who can help you for no fee.

[Well Spent]

If I were you I would split the $800 between emergency savings and paying towards your debt. And i'd do the same thing with the $700 you're getting in a few months.

I am very concerned about the $47,000 cc debt. This agreement you have with your estranged husband - is it a legal contract? is it in writing that he is going to pay it instead of giving you child support? or was it a verbal agreement between the 2 of you? since you are the primary user and he's an authorized user, he could easily screw you over and leave you responsible for it. You should really deal with this now. I'm very wary of this aspect of your financial life. As far as I can see, it is the most dangerous part of your story. Think about it, if he mkes a low income and his work is unstable, why would he agree to pay 47,000 in cc debt instead of chld support, which would be much lower (in my opinion) because his income is low?

I think he's trying to avoid paying child support for your son and the cc debt. I smell a rat here.

[flash]

Originally Posted by Well Spent

I am very concerned about the $47,000 cc debt. This agreement you have with your estranged husband - is it a legal contract? is it in writing that he is going to pay it instead of giving you child support? or was it a verbal agreement between the 2 of you? since you are the primary user and he's an authorized user, he could easily screw you over and leave you responsible for it. You should really deal with this now. I'm very wary of this aspect of your financial life. As far as I can see, it is the most dangerous part of your story. Think about it, if he mkes a low income and his work is unstable, why would he agree to pay 47,000 in cc debt instead of chld support, which would be much lower (in my opinion) because his income is low?

I think he's trying to avoid paying child support for your son and the cc debt. I smell a rat here.

I have the same concern. If you and your husband have agreed to this arrangement, the debt and legal responsibility should be formally transferred to his name. Period. $47K is a huge number to have looming around. It's not enough just to "get it in writing that he has agreed", you need to have it formally transferred to his name and responsibility.

Regarding paying the credit cards, under the new law, if you miss any payment on any card, the creditor can alert everyone you have credit with, and they can all legally raise your rates, reduce your limit, and even close your account if your risk has changed. That's ONE payment to ANY creditor.

I'd take the extra money and hire a good lawyer.

After I got out from the $47K threat, I'd worry about the rest. As long as you have that financial obligation under YOUR name, you are going to have problems.