Advice for 20 something some CC debt & questions about cards....

[jcmf339]

Hello,

I am mid-20s with a stable job, a lack of financial knowledge and about $4k in CC debt. Most was accumulated this summer when I had a stipend and was training for my current job. I also signed up for multiple credit cards without thinking about what the ramifications were (e.g., I accepted an offer for an amtrak one I have not used b/c I was offered additional points, got a Macys card (promptly paid off) because I had to buy many work-related clothes and got a significant discount, etc). I realize this was dumb and regrte doing it.

So here is my issue- I have 7 credit cards now, 5 of which have balances, totaling about 4k. 4 were opened this summer (with me not thinking, accepting a southwest credit card offer when I bought a plane ticket, etc). Now I feel like I should close some, but I do not want to hurt my credit score (credit karma said it is 671 but I know that is not necessarily accurate).

I have 18k in student loans. Low monthly rental, no auto loan or anything else. $46k net salary, although $300 a month deducted automatically for grad school expenses.

So- what should I do? Of course pay down the cards; I know that. But I want to know when and how I could close cards (the stupid amtrak one) without it hurting my score, or hurting it minimally. Ideally I'd also like to get a GOOD credit card- unfortunately most of mine are associated with stores/vendors.... (Visa: Gap, amazon, southwest, amtrak; i have the macy's card, and got a wells fargo one this summer as it is my bank).

Also, if anyone knows of a good credit card (with travel points, or one you like) that I'd be likely to get (either now or maybe in 6 months when I lose some debt), let me know

Thanks!

[Wino]

Your credit score is based on how much credit you have available, how much of that credit that you have used, and your payment history. Of these three items, by far the most important is your payment history.

So, once you have zero balance, your percent of credit used will be zero, no matter how many cards you have open. Personally, I never close an account for any reason. Once you get to 750 or so on your score, ten points no longer really matters. At that point, credit scores are only for bragging rights. My son and his friends play these games; I don't really care what my score is. I use Credit Karma to track my score to make sure there have been no drastic changes.

Every two months, I call up one of the records from annualcreditreport.com for me or my wife just to make sure nothing is going on the main record incorrectly. I use Credit Karma for a running total and to make sure nothing is showing on Experian (I think that's the one CK uses) that is incorrect.

In general, forget about your score and just pay your bills on time. The score will take care of itself.

[Tree0164]

If you have a zero balance on the credit card, it doesn't hurt to keep them open.

You should try to get these credit card paid off asap. do you have a plan in playing them off?

[jcmf339]

Thanks- I guess I don't really have a plan. I don't have any other expenses, though (or debts and whatnot) so I was just planning on essentially putting my salary toward it. Other than rent. 2k is on an interest-free card through March.... so I want it to be gone by then. I guess I need to make a budget, but I do not have much experience with that... I will google or look around here! Any advice to a first-time budgeter?

credit karma said my credit score was 671

[humandraydel]

I guess I need to make a budget, but I do not have much experience with that... I will google or look around here! Any advice to a first-time budgeter?

Budgeting itself is easy, the hard part is sticking to the budget Really, the key is make it as detailed as possible. Most people blow budgets because they don't account for everything. Think about ALL monthly expenses that you WILL have, but also think about ones you MIGHT have (should probably save at least $50 per month for medical and $50 for car maintenance). Also, think about yearly expenses that you WILL have (car registration? eyeglasses? Christmas presents?), and divide by 12 to save that much each month.

If you look around google you'll probably find different lists of categories that you can use as a starting point.

[jcmf339]

Budgeting itself is easy, the hard part is sticking to the budget Really, the key is make it as detailed as possible. Most people blow budgets because they don't account for everything. Think about ALL monthly expenses that you WILL have, but also think about ones you MIGHT have (should probably save at least $50 per month for medical and $50 for car maintenance). Also, think about yearly expenses that you WILL have (car registration? eyeglasses? Christmas presents?), and divide by 12 to save that much each month.

If you look around google you'll probably find different lists of categories that you can use as a starting point.

When people mention saving for a vacation, car, different goals... are these ALL separate savings accounts? If so, how does that work? I have Chase checking & savings. I want to open an ING direct for savings emergency fund. Thanks!

[Tree0164]

When people mention saving for a vacation, car, different goals... are these ALL separate savings accounts? If so, how does that work? I have Chase checking & savings. I want to open an ING direct for savings emergency fund. Thanks!

We have 3 savings accounts all with bank of america.

1. emergency fund
2. sinking funds/new car fund
3. Vacation and fun stuff

I believe that ING lets you create sub accounts.

if you are looking to create budget I have shared what has worked for me over the years

[humandraydel]

When people mention saving for a vacation, car, different goals... are these ALL separate savings accounts? If so, how does that work? I have Chase checking & savings. I want to open an ING direct for savings emergency fund. Thanks!

You can open separate accounts for each goal if you want. ING let's you open sub-accounts that you can name whatever you want - I have one named Car Fund. I think there are other online banks that allow sub accounts as well (Smarty Pig maybe?) Otherwise, people just keep 1 liquid savings account and keep track of the categories in a spreadsheet.

[Ramose]

Just make a budget off what you already know about your spending. Throughout the next month track your spending and at the end of the month you will see how much you actually spend. Then just look for areas that you can cut back. It is surprising how much things actually cost when you add them up. This is the method that has worked best for me in the past.

[maat55]

I personally, would start with the lowest balance and snowball to the highest balance(visa versa is up to you). Whichever cards you wish to eliminate, I would do so as you pay them off.

These being fairly new cards will not make that big a difference. I would not worry so much about score and set yourself up in a way you are comfortable, your scores will climb as you use good financial skills. Make sure you only use your cards when you can pay them in full.