Help with CC situation? advice appreciated!

[dcox20]

Intro:

• Married couple (30/28)
• Credit scores are in the very low 700s (ie. 702-709)
• Both self-employed for same home-based business (operating for 1.5yrs)
• 2008 AGI shown on taxes is around $60k
• 2008 taxable income is around $37k
• 2009 Gross income estimated at $120k
• No bankruptcy, charge-offs, or late payments
• Financial mindset has recently (last 2 yrs) changed from "spend spend acquire" to "oh crap, let's get financially sound and forget about the toys"
• Have always carried a balance

Debt:

• Home loan: $325k ($2350/mo) (6.625% I/O fixed)
• Auto: $26k ($535/mo) (7.39%)
• Auto: $705/mo (stupid decision convertible on a lease, anyone want it!? we're currently trying to sell it or find someone to takeover lease payments) (No % as it's a lease)
• BofA card: $14,300 ($260/mo) (13.6%)
• BofA loan: $20,000 ($388/mo) @15% (emergency loan, unavoidable given our situation at the time)

Situation:
Bank of America CC
Limit: $14,800
Balance: $14,360
Rate: 13.6% (including $2k in cash advances @ 20% and the rest at 12%)

Comments:

• We'd like to pay the card off in full but don't have the funds to do so (there is the possibility that a large job will come in soon and if that happens we will pay it off but we can't count on it)
• The card currently has no rewards.
• We are obligated to attend a family vacation in Hawaii this year and have to pay for our airfare
• We would like to get a rewards card with 0% balance transfers, low apr, and good rewards for travel or cash back.

Questions:

• Does something like this exist? (it is my understanding that I can't go from a BofA to another rewards BofA, at least balance transfers are not allowed I've been told)
• Do you think getting a card with the same limit (or higher in order to lower utilization %) will be an issue given our income situation?
• Do you have any advice for us besides getting out of this CC and into another one?

We are working towards the goal of not carrying a balance month to month, but this is our current reality.

I appreciate your help folks! looking forward to hearing any advice you may have!

[noppenbd]

First of all, I would say I find it very sad that you are "obligated" to this Hawaii vacation, and that there is no way to politely decline. That said, I am assuming this is an issue that would test your marriage, so I will leave it alone.

As far as managing the debt, you do have quite a large hole. My advice is not to worry about the rewards. These are really small potatoes these days, and considering the interest rates on your current card & loan, you should focus on lowering the rate as much as possible. The best you are probably going to do is 6-9 months of 0% interest. You should also look into cards with low fixed rates, even with no special BT offers, since you may be paying down this debt for a long time. I would see if you can transfer the BofA loan as well. You will have to run the numbers based on how much extra you can pay each month, whether it is best to go with a short-term BT offer or try instead for the lowest fixed card you can get.

If you are comfortable doing so, more detailed expense info could get you a more detailed plan.

[jIM_Ohio]

The interest rates on all the debts (mortgage included) would help.
How much do you owe on cars? what is the interest rate for each? When will each be paid off?
Do you own 20% of your home?
Can you post how the 120k gross pay is budgeted? A detailed budget would help.

My general comment is that on 120k gross income you should be able to send $22k per year to the cc debts. If this is not possible you need to cut the budget until it is- 20% of gross pay to debts and financial independance.

[dcox20]

@noppenbd obligated indeed :-( also hard to put too much more detail out on the interwebs :-) thanks for the info/advice!

@jIM Ohio I've updated the OP with interest rates, updated car with total owed (the other is a lease), We do not own 20% of the home as it is IO we owe the full amount and values are decreasing. Part of the problem is that we don't really have a working budget, we just pay the bills and try to be frugal... something we're working on. I know our monthly "nut" is $7100 including everything (food, gas, insurance, etc)

hope that info helps!

[creditcardfree]

What happens if you turn the leased car in early? I know there can be penalties, but what are yours? If you could get out of that lease, you would have a lot more wiggle room.

What do you have that you could sell for cash? Electronics, boat, jewelry...anything that you no longer need. Start selling on ebay!

Just my first thoughts

[noppenbd]

Originally Posted by dcox20

@noppenbd obligated indeed :-( also hard to put too much more detail out on the interwebs :-) thanks for the info/advice!

@jIM Ohio I've updated the OP with interest rates, updated car with total owed (the other is a lease), We do not own 20% of the home as it is IO we owe the full amount and values are decreasing. Part of the problem is that we don't really have a working budget, we just pay the bills and try to be frugal... something we're working on. I know our monthly "nut" is $7100 including everything (food, gas, insurance, etc)

hope that info helps!

I would post as many of the bills as you can so we can get a sense of where money is going. Also include savings in that list.

[dcox20]

excellent thoughts and we've been there already... sold off all the toys that we could think of.

Giving the car back right now would mean that we pay the remaining payments to the lease co. no real savings... ie. we have 14 months left @ $705 and we turn back in right now, we owe them $9870.

[creditcardfree]

I wish you luck on finding someone to lease it from you!

Can you take on part time jobs?

[GREENBACK]

You're pinched pretty tight. You should seek( both of you) additional income(2nd job) if at all possible. No matter how much you cut back or play credit card games it will take a while if your income doesn't increase .

[disneysteve]

Interesting that you consider the 2nd car a "stupid decision" but not the first car. I'd propose that both weren't such good ideas given your finances. We hear so much about problems people are having due to their home purchases but I think far more people get into trouble due to their car purchases.

You are spending over $1,200/month on car payments. That is darn near equal to what I am paying for my mortgage including PITI.

There are companies that can arrange for someone to take over your lease. I don't know the details of how that works, but I'd certainly suggest looking into it. I'd also be looking into getting rid of the 26K car even if it means taking a loss in the process. What is it worth today? Check kbb.com if you aren't sure. Let's say you could sell it for 21K. You could then spend 5K to replace it and reduce your total car debt from 26K down to 10K. That would drop your payments considerably.

Beyond that, I'm with the others. Let's see a breakdown of your monthly expenses. You say they total $7,100. Surely, there is a lot of fat to trim there to free up money for debt repayment.