Debt Snowball: a question

[kbrewis]

I really like the concept of the debt snowball. The problem is that I don't know where to start. The credit card debt that I have is the most problematic area in my finances and at the moment the majority of my cc's are over the limit. My question is: how do you start a debt snowball when you are in a circumstance in which the credit cards are beyond the credit limit? Do you line them up, like you would if they weren't over the limit or would you pay them down below the limit then start the debt snowball? Any help would be appreciated.

Thanks.
Kathy

[lgslgs]

If your credit cards are over limit, contact the creditor and make sure you fully understand the costs and potential consequences of not paying those immediately.

You don't want to automatically pay off the highest interest rate first if another card is over limit and subject to over limit fees or collection action. If something's on fire, you've got to put out the flames first before you start rebuilding!

Lynda

[anonymous_saver]

I agree. If you have cards that over their limits, focus first on paying those down so that you are under the limits. Only then, do I think you should do the true "debt snowball" effect.

Try calling all of your credit cards that you are over the limit. Explain to them that you are really trying to pay this debt off. Ask them to explain the fees you have for each of them for being over the limit. Who knows? Maybe they will up your limit, doubtful, but possible!

Have you listed all of your credit card debt, with interest rates, the limit on the card, how much balance you have on each card, and the monthly payments? I think this could help you out A LOT! Organizing these numbers will help you get a good understanding of where you are at. By the way, if (or when) you do this, I would also include all other debts that you may have.

It may even be helpful to you to post those numbers here so we might be able to help you get started.

Good luck.

[disneysteve]

What is the point of having a limit when they don't enforce it? Credit card companies should deny transactions that would put you over the limit. What a scam. They give you a limit, then they ignore that limit and charge you for exceeding it.

[kbrewis]

What is the point of having a limit when they don't enforce it? Credit card companies should deny transactions that would put you over the limit. What a scam. They give you a limit, then they ignore that limit and charge you for exceeding it.

It really wasn't purchases that put me over the limit. It was the late charges.

[thekid]

What is the point of having a limit when they don't enforce it? Credit card companies should deny transactions that would put you over the limit. What a scam. They give you a limit, then they ignore that limit and charge you for exceeding it.

I'm surprised that you can continue to make purchases on cards that are over limit. I figured they would not be accepted. The only way I thought one could be over the limit is by compiling interest fees.

Wow. I guess they are not so much limits as they are lines above which credit is discretionary and additional fees are charged.

This works out well for the CC company. They can, if they belive the client is solvent, charge additional fees and grant more credit at such fees or, at their discretion, cut off additional credit and/or go into recovery.

[simpleyme]

before the debt snow ball is started you should get current on all your bills,to me that would mean getting each card below your credit limit then starting the snowball to pay down debt

[luvnspnful]

not just paying to below the limit......paying at least $100 below the limit. also, pay on time. if possible, apply for another card with either 0% or a low apr, and transfer at least some of your balances over. Use those checks they offer. You dont have to transfer all of your balance, maybe just a couple hundred bucks from each card to give you some breathing room, and end the fee gouging. Then start your snowball. Just make sure you pay every card on time, keep far enough below the limit to curtail the O/L fees and start socking it to one account. Do you have any savings you could use to pay off even one card? that one less payment each month can really make a huge difference. good luck, keep us updated on your progress

[Ima saver]

I agree with every body, get those cards paid down below the limit and always pay on time and don't occur any more late fees.

[Elgin526]

First, congrats on admiting that you're in a mess, and having the guts to attempt to get it under control. Many people just burry their heads in the sand and hope it all goes away (it never does, of course). You're facing it, and that puts you ahead of a lot of other people in this country!

The best advice I can give you is to read Dave Ramsey's "Total Money Makeover", it describes the snowball in detail (you can get it at the library for free!). But the first step to is get current on all bills, so that means you need to pay them all on time and get them all under the limit so you don't incur more fees. Once that's done, save up at least $1k in what's called a "baby emergency fund" (baby meaning "small", not "child"!). This will allow you to pay for most emergencies that will pop up while you're trying to pay off you CC's, so you don't need to charge anything new. Once you're caught up and have at least $1K in the bank, THEN start the snowball. DR says you should start with the lowest amount owed first, and work your way up, but other's think that you should start with the card that has the highest interest rate, and work your way down. I think either way is good, as long as you're paying down debt! Really, it's a personal preferance. What you do is you pay the minimum payments (on time, always on time!) on all but one CC, one the one CC you pay as much over the minimum as possible. Once you pay off that one card, you then take what you were paying on the paid off card, and add it to the minimum you are making on the next card. Your payments keep getting bigger as you pay off cards, that's why it's called a 'snowball'. As you are paying down debt, if an emergency happens and you have to dip into the emergency fund, then you stop paying extra on the CC's and only make the minimums utill you refill your savings, then you pick back up again where you left off.

To get extra money to pay off your debt, you need to do two things. 1) Write out a budget. A real budget. A budget that includes every last thing you spend money on each year, not just each month. Irregular bills like insurance, membership dues, car maintenance, clothing, all has to be included in your monthly budget (take the total amount of the bill, divide it by the number of months until it's due, that's what you have to save each month so you'll have the money when you need to pay it).

2) The second thing you need to do is, once you have a real budget to work from, is to find places to cut your spending. The easist places to cut are "wants" like eating out, clothes shopping, vacations, groceries, and utilites (call waiting, cable tv, etc). If you need tips on how to cut your spending, just ask here, you'll get all the advice you could ever want!

There is a thrid thing you can do, and should do if it's possible, and that's to earn more money. You can earn more money by getting a better job, getting a second job, or asking for a raise/promotion at your current job. You can also raise money by selling stuff around the house, either in a yard sale, a consignment shop, or on e-bay (I personally would try the the first two first, I find selling on e-bay difficult and not worth the trouble, but others have had success so do what works for you).

This is going to be a lot of hard work, but remember, you didn't get into debt overnight, so you won't get out of it over night either. Just keep plugging away at it, I promise you'll start to make progress.

[creditcardfree]

I do agree it is important to get the cards below their limts. You might make a list of the dollar amounts over the limit for each card and pay the overages off in order of smallest to largest. Just an idea.

[Ini_g]

Well, there is not othre asnwer than you have to pay your cards.

And then you have to say No to use your card. It´s hard I know, but you are first and your security, than the things, and the bank.