My plan to be debt free

[Radiance]

I think that until I have a decent EF, life can come with a curve ball and force me to use credit, so it would be nice to have fast access to low or decent interest money. Mainly thinking about medical emergencies, nothing else comes to mind.

Well, you never now, let;s say you need to bail an innocent family member from jail. Or maybe someone sue you and need to pay lawyers.

I'd better stop or I will scare myself.

The point is, until I have a decent EF, I would like to have low interest credit available, makes sense?

[davecc]

I will be debt free by 2011, paying off my car, care debt and other stuff! never missed a payment woohoo!

[Radiance]

2011, that is right around the corner, so exciting! You go!

[connor_zen]

Totally agree:

- Don't use any of the cards anymore
- Whittle down the manageable ones first to get them out of the way

Also, one note: if I remember correctly, canceling a credit card will NEGATIVELY affect your credit score. Once you're down to $0 debt, you might want to just put the cards in a drawer and never use them.

[LMA]

Radiance, I would close the cards in which you owe the balance. I believe they will let you do that and then you would work on paying them off. Then keep the master card as your one and only credit card, no need to have more than one.

[Radiance]

I'm already not using them at all so no risk on keeping them active. Last time I used credit was in June.
Master card I closed, because they charge annual fee.
With Amex paid for, I only have 1 cc = visa, working on paying that one down.
The other debt are loans which will come after the cc.

[sgfinancialfreedom]

I am still a long way to being debt free.

I have around 27 more years in housing loan to payoff

[lovcom]

But that might be the "good" type of debt and does not really count like CC debt ;-)

[anonymous_saver]

Radiance, I would close the cards in which you owe the balance. I believe they will let you do that and then you would work on paying them off. Then keep the master card as your one and only credit card, no need to have more than one.

Sorry to say it, but this is bad advice. Don't close the cards (closing the Mastercard was a good chioce though, b/c like you said, there was an annual fee). Closing your other CC would effect your FICO score negatively. It doesn't hurt you to have it open with a zero balance.

Once everything is paid off I'd use all of the CC on a rotating basis. One time a month that you can easily pay off. This way the cards will stay active and won't be closed by the CC companies. Again, having this history will help your FICO score stay high.

[TurnDebtIntoDebt]

I agree with the order of how you are going to pay off debt. If you want to keep a credit card, do you have a need for it? If you don't have a need, which means have adequate savings, then cut up the cards. You don't necessarily have to close them. Closing a lot of accounts at once will actually harm your credit score. 15% of your score is measured by the length of your relationship with your creditor.

[bheem]

Man.. you rock! Your approach of hitting the smallest debt first is very good strategy from an emotional boost stand point. By any chance are you a Dave Ramsey listener?

I don't think closing credit cards is a bad advice. Yes, without credit cards your FICO score will take hit. But, unless you really keep borrowing and paying them the hit will be there anyway. I don't think a barely used credit card will lift your FICO a lot. FICO score has several components. Major part of it is based on how much you borrow and how promptly you pay back. Unless you are keen on maintaining high FICO score and about to do some big purchase where FICO score will be a key factor, don't worry about it.

Keeping credit cards open may bring back old habits Otherwise enjoy the debt free life and kiss good bye to credit cards. You will be much happier.

Bheem

[Radiance]

Thank you!
I've never heard Ramsey, but i have heard a lot about him here, so I might.
As per keeping cc, I am for now (Master is long gone) because I do not have adequate savings. Just 2k. I want 6 months of income in the bank. ... but that is another series of objectives, 2k will have to suffice for now.

Anyway, two of my shirts and 3 of my shoes dye down on my in the last 2 weeks... so I need to do a little spending there.

[sfalexi]

Once I pay off my credit cards, I plan on canceling both, but opening one that has some sort of rewards/cash back or rebate system. Even if it's only 2% rewards or cash back, at least that makes my necessary monthly expenses (Gas, Food, etc.) that much less expensive. And I'll pay it off every month. Something to think about.

Alexi

[Slandgie]

Hey Radiance, give us an update!

[Radiance]

Hello!

I got a bonus at work and sent it to my personal loan without thinking much about it!

I did complete a short sale in November so my creditors are more and more aggresive reducing my limits. Also I called my bank to further consolidate and they advised me to not even apply due to the short sale. That is ok, I have 3 accounts left, I'll pay them separately.

ok, so we have:

Visa
Balance: $2800
Limit 2800 --->Reduced from $5000
Interest: 12.99%
Available balance: 0
Monthly interest fees: $31
Annual Fee: None
Monthly minimum: $50

Personal, non revolving loan
Balance: $1600
Interest: 16.45%
Monthly payment 360, out of which 85 is interest, 275 goes to principal
Monthly interest fees: 85

Car loan
Balance: $8600
Interest: 5.95%
Monthly payment 297, out of which 49 is interest, 248 goes to principal
Monthly interest fees: 49

Paid for accounts, keeping them open for now:

Care Credit
$5000 available credit @ 23% (only for health services)
Annual Fee: None

Amex
Interest: 27.24%
Available balance: $1600
Annual Fee: None

I am just waiting for my tax return to make another bulk payment!