Want to make a bigger dent in CC debt, already pay minimum every month

[batgirl]

Hello,

I am new so please forgive me if this question has already been answered. I already looked at the sticky post at the top but still have questions.

I have $20k in CC debt. I am able to pay the minimum every month without problem but not able to pay much more at this time. Because of this, the debt gets chipped at very slowly (esp with the addition of interest) and I want to speed it up.

Is there anything I could do to reduce my interest rate or reduce my overall debt? I've already tried talking with my CC companies multiple times and they said no to reducing my interest rate. I'm not sure why they said no but I am guessing it may have to do with 1) most of my debt is from previous frivolous spending of the past (which I no longer do) and 2) I have no trouble paying the minimum payment so far.

I've tried opening a 0% APR card but the credit limit I got was only $500 because my current credit cards are maxxed out. I do have a decent credit score (700+) because I always pay on time but my debt to assets ratio is terrible.

Is there anything else I could do? I saw some stuff on the internet about debt consolidation, but not sure if that is scammy.

Would a credit counseling session help me? From my understanding though, they do not offer services that can reduce overall debt or interest rates, or am I wrong?

[cooliemae]

If you don't mind, having the actual amounts and interest rates would be helpful in trying to help you out.

[Wino]

Debt consolidation is the equivalent of borrowing money to get out of debt.

Read that sentence above until you see how foolish it sounds. The only way to get out of debt is to pay it off. You need to either increase your income or cut back on your spending. You say you've cut out luxuries, but I will guess you still have more in your budget you can cut out.

Do you have a written budget? If not, I suggest you begin to develop one. You won't get it right the first month, but over time, you'll find that you can track your spending more closely and determine where you're spending more than you must.

If you post your budget on SA, you'll find that lots of folks will go over it, ask questions, and help you find places to cut back. Also, if you read the blogs and older posts, you'll find lots of suggestions on things to make you more frugal.

Good luck. You've started, which is always the first step.

[bjl584]

The best way to pay it back is to cut expenses and/or boost income.

As suggested, post up a detailed monthly budget so we can have a look.

[batgirl]

I have been tracking my budget for a while and I was able to reduce down to this. Before I was spending a little more than I was making and putting it on my credit card. I have been basically 'breaking even' for the past several months. I am only spending cash right now (have been for the past several months).

Here is my budget per month:
+3000 take-home pay
-1200 rent
-70 utilities
-80 cell phone
-130 student loan 1
-280 student loan 2
-20 gym
-350 groceries
-50 toiletries
-500 min payment on Visa card
-250 min payment on Discover card
-25 min payment on Chase card

Total left: $45. But take home pay and minimum payments on credit cards vary slightly.

Credit card details:
-9000 Visa card with 10.90% APR
-11000 Discover card with 13.99% APR
-500 Chase card with 0% introductory APR but will go to 22% after October 2013

All my credit cards are essentially maxxed out, the first 2 have a $10k limit and the last one has a $500 limit.

Student loan details:
1: federal perkins loan, $11k left with 5% interest rate.
2: federal direct loans, both subsidized and not, $42k left, with 6.3-6.5% interest rates. I'm already on the 20 year repayment plan so I don't think I can pay less on this.

[riverwed070707]

I have been tracking my budget for a while and I was able to reduce down to this. Before I was spending a little more than I was making and putting it on my credit card. I have been basically 'breaking even' for the past several months.

Here is my budget per month:
+3000 take-home pay
-1200 rent
-70 utilities
-80 cell phone
-130 student loan 1
-280 student loan 2
-20 gym
-350 groceries
-50 toiletries
-500 min payment on Visa card
-250 min payment on Discover card
-25 min payment on Chase card

Total left: $45. But take home pay and minimum payments on credit cards vary slightly.

Credit card details:
-9000 Visa card with 10.90% APR
-11000 Discover card with 13.99% APR
-500 Chase card with 0% introductory APR but will go to 22% after October 2013

Student loan details:
1: federal perkins loan, $11k left with 5% interest rate.
2: federal direct loans, both subsidized and not, $42k left, with 6.3-6.5% interest rates. I'm already on the 20 year repayment plan so I don't think I can pay less on this.

So you opened the chase with a 0% and then maxed it out? Was that a transfer from one of the other cards?

Who lives off this budget? Is it just you? For 1-2 people your groceries/personal items spending is high. With a budget this tight I'd cut all dining out and make sure you're cooking at home breakfast lunch and dinner. Rent is crazy high for your income. With $3k/mo take home you really shouldn't be spending more than $600-700/mo on housing. Can you move to a cheaper place? Get a roommate to help cut costs?

if you're going to get out from under this debt you need a drastic change, not nickles and dimes. Housing would be a huge help. I would also look at getting a second job at least until those CCs are knocked out. Once that $775/mo is freed up you'll be able to tackle those student loans in no time. Good for you in taking the first step in realizing the problem and asking for help.

[batgirl]

I opened the chase with the intention of doing a balance transfer but the limit was $500 so I could only transfer that much.

This budget is for me only. I live in NYC which is why everything is so expensive. I stopped dining out except for special occasions (which maybe happens once a month or once every two months) and I make sure not to get any drinks. I could cut that out but it would only save maybe $50 bucks every month or two. I also stopped going out with my friends which has taken a huge toll on my social life but I needed to save money. Also, the groceries include food/litter for my cat, lol.

I don't think the 20% of your income to rent can apply here unless you make a huge salary. I already live with multiple roommates. There is no way I'd be able to find a place here for $600-$700/month for rent. The best I could hope for is $1000 but that is only if I am very lucky and find a deal like that. Most of the good 'deals' are with leasing brokers and they also charge huge upfront fees (typically one months rent) so in the end I may not even save that much over a year lease.

Not sure what I could do for a second job. I work about 50-60 hours per week at my current job. If you have suggestions I'm definitely open to looking into them. Probably would have to be a weekend only job since I work M-F.

I'm not really concerned about my student loans. Just my credit card debt. I am ok with paying the minimum on my student loans for now.

At this point, I am looking for ways I can reduce my actual debt or interest fees on the CCs. I am looking for a new job with higher pay but no guarantees on that.

[batgirl]

Debt consolidation is the equivalent of borrowing money to get out of debt.

Read that sentence above until you see how foolish it sounds. The only way to get out of debt is to pay it off. You need to either increase your income or cut back on your spending. You say you've cut out luxuries, but I will guess you still have more in your budget you can cut out.

Do you have a written budget? If not, I suggest you begin to develop one. You won't get it right the first month, but over time, you'll find that you can track your spending more closely and determine where you're spending more than you must.

If you post your budget on SA, you'll find that lots of folks will go over it, ask questions, and help you find places to cut back. Also, if you read the blogs and older posts, you'll find lots of suggestions on things to make you more frugal.

Good luck. You've started, which is always the first step.

But wouldn't debt consolidation offer me a lower interest rate? So I would be basically paying the same debt back but at least I would have to pay back less interest. Or am I not understanding this correctly? I don't know much about debt consolidation. I have only done it with my student loans and it did lower my interest rate a little.

[riverwed070707]

Thats tough with a HCOL since you are already in a shared living situation. Second job options are endless. Serving/cocktail waitressing is always my go to when we're in a pinch because the money is good and the hours are flexible. Other options might be stocking shelves, delivering newspapers or phone books, grocery stores or any kind of retail that is open nights/weekends. The pay might not be great but think how much it would help your situation to have an extra $500/mo to throw at your debt. Try a calc like whatsthecost.com to plug numbers in the snowball tool and see how fast you can pay your debt based on the additional amount you're able to bring in.

[batgirl]

Is there nothing I can do to decrease the actual debt or interest? Obviously getting a second job is possible but not exactly ideal because I already work so much. Plus it would probably be best to have both.

[riverwed070707]

Is there nothing I can do to decrease the actual debt or interest? Obviously getting a second job is possible but not exactly ideal because I already work so much. Plus it would probably be best to have both.

You're looking for an easy way out. There isn't one. Assuming the purchases you made aren't a tangible item with value you can sell to recoup the spending, no you can't just consolidate to a lower rate. Think from the lenders POV. People don't hand out money for free. A low rate on a high risk, unsecured loan doesn't make sense. There are companies who make money selling this service but in most cases you can do the same on your own. Fundamentally, nothing improves until your income exceeds your expenses. If you can't decrease your expenses, you have to increase your income. It really is that simple. Of course a second job isn't ideal, but if you really care about fixing your situation, you'll find something.

[disneysteve]

You need to slash your budget. You "can't" afford more than the minimum payments on your CCs but you can afford to feed and care for a cat and belong to a gym and spend $350/month on groceries and don't want to work weekends. You can clean this up just fine. You need to be committed to doing so for it to work.

[batgirl]

Disneysteve is partially right. I am not willing to give up my pet or give up working out. The only thing I have done in reducing those expenses is joining the cheapest gym in the city. I am willing to lower my grocery bill. I have done so over the past few months but I am still looking out for better deals and cheaper options for food. I am willing to get a 2nd job, and will look to do so. I have done tutoring as a 2nd job in the past and it has worked out well for me (especially considering my current work schedule).

In terms of no cheaper loan, what about credit cards like the PenFed Gold Visa? It offers a 4.99% APR for the life of the balance, which is much lower than what I'm paying for any of my loans currently (credit or student). I imagine if a credit card is willing to do so, there must be other institutions as well? I would go for the credit card but given my high debt to credit ratio, I am not sure if I could get a credit line high enough to make it worthwhile.

[Petunia 100]

Disneysteve is partially right. I am not willing to give up my pet or give up working out. The only thing I have done in reducing those expenses is joining the cheapest gym in the city. I am willing to lower my grocery bill. I have done so over the past few months but I am still looking out for better deals and cheaper options for food. I am willing to get a 2nd job, and will look to do so. I have done tutoring as a 2nd job in the past and it has worked out well for me (especially considering my current work schedule).

In terms of no cheaper loan, what about credit cards like the PenFed Gold Visa? It offers a 4.99% APR for the life of the balance, which is much lower than what I'm paying for any of my loans currently (credit or student). I imagine if a credit card is willing to do so, there must be other institutions as well? I would go for the credit card but given my high debt to credit ratio, I am not sure if I could get a credit line high enough to make it worthwhile.

Yes, there are better deals out there. You have one yourself (your 0% offer from Chase), it's just that the credit line was insufficient to transfer all of your debt. The key is your credit score and your ability to repay what you owe. As you whittle down your debt, you will have opportunities to refinance your debt with better terms.

In addition to reducing debt, you should be saving, which you are currently not able to do.

Are you a recent graduate, just at the start of your career? What could you be doing at your present job to qualify for a raise and/or a promotion? Growing your income should be a major priority for you. A second job is ok, but increasing your income from your first job is much better.

Are you still using your cards? It is very important that you stop using them.

I do see a few places in your budget where you can cut. You already mentioned you are working on your grocery budget. The other item which jumped out at me was your phone bill. I suggest you look into prepaid plans. You could trim $50 per month from your budget right there.

Do you have extra items you no longer need/want sitting around the house? Sell them. You can use the money to pay down your debt or to open an online savings account.

[Wino]

But wouldn't debt consolidation offer me a lower interest rate? So I would be basically paying the same debt back but at least I would have to pay back less interest.

In theory that's right. In theory, getting a zero-rate credit card and moving some of your debt over to it would help too.

How's that working out for you? (in my best Dr. Phil voice)

Consolidation loans usually open up more monthly income. If that income were applied to the debt, then they'd work out like you said. In reality, people usually run up their bills because now they "can afford it." Nowadays, people think in terms of monthly payment, and not in terms of too much debt. I was the same way, until I saw the light. You have to get rid of your debt and never run it up again. Until that switch goes off in your head, debt consolidation is not a viable option. It will just allow you to have maxed out credit cards, plus a debt consolidation loan payment in six months or a year.

Your problem is that you're spending more than you make or that in the past you spent more than you made. Until you stop doing that, getting any kind of loan only opens the monthly payment available window, which in your case seems to only allow you to go back to spending more than you make, just like with your zero-interest credit card.

You need a lifestyle change. Ramen only costs a quarter a bag. That's seventy-five cents per day. You can get a bag of dried beans for about a dollar. Lot's of protein there. You can cut back your spending. You have to cut back your lifestyle until you get your credit cards in control. You probably don't like what I just wrote, but it's the truth.

Here's the problem: You're spending more than you make.

Here's the solutions: Spend less than you make or make more.