Credit Card Confusion!

**Ima saver** · 09-11-2007, 07:47 AM

If you can do it, I would definately take the money out of savings and pay it all off. Then put it away and don't use it. don't close it because that will hurt your credit score, but hide it somewhere (like in a block of ice) and don't use it again.

**vsjhoc** · 09-11-2007, 07:51 AM

Originally posted by brandijo View Post

I am definitely not intelligent when it comes to making decisions for my credit card.
Basically, I have one credit card with Citi and it has a balance of $2900.00.
I have not used the card for months because I want to pay it off. I absolutely HATE carrying the burden of the debt.
I submitted 2 payments over the phone, which ending up were in a different time zone, so they were both late. This has been several billings ago, so my monthly minimum payments are low again.
I am currently paying $400/month, but the random interest charges and such are outrageous.
I see that they have offered to increase my credit limit by $800; which would make it $3740.
Would it help for me to accept the increase or would this harm me? Would it assist in decreasing any of the random charges?
I'm considering just taking the $ out of my savings and paying it all off at once.
But again, I have no clue how to do any of this; I'm 23-that should explain it. Ha...
I feel like I'll be paying this off forever if I don't do something.
ANY suggestions would be great!
Thank you!

A few suggestions, and a few questions (in no particular order):

* Call Citi and thank them for the offer to increase your credit limit, but tell them what you'd really like is a credit for the late fees they charged you (explain what happened), or at the very least, have them remove the black marks from your 3 credit reports for the late payments. If they say no, politely ask to speak to a supervisor. If they say no again, hang up, call back, and repeat. The worst that happens is everyone will say no, but you haven't lost anything other than 10 minutes of your time.

* The increase in credit limit will have no absolutely effect on your repayment of the debt. It does not change the amount you owe. It will have a positive effect on your credit score, but ignore the credit score issues for now since you should (as you already understand) concentrate on paying back the debt as quickly as possible.

* Always pay more than the minimum payment. If you pay only the min. amount due, it will take many many years and mucho dollars to get out of debt.

* What is the interest rate (APR) on the debt?

* How much do you have in savings?

Hope this is helpful. It's great that you're interested in learning about this stuff at your age. Many people don't get it until much later, if ever.

**brandijo** · 09-11-2007, 08:09 AM

Thank you so much for your response!

The APR is 32.4 (Which is obviously INSANELY high, correct?!) Like I said, I am poorly informed, but am assuming I know enough to understand that is a very high percentage.

I have $4,100.00 in my savings, so it wouldn't completely break me, but it would still be a large dent.

My monthly payments are MUCH higher than the minimum due. I think last month the min. due was something in the $80 range and I paid $400.

Does that information tell you anything else I should do?

I'm not using the card until I have it paid off. I want to keep it for good credit because I have had it for about 6 years now, but I definitely won't be putting anything on it again unless I can pay it in full. Ugh.

**autoxer** · 09-11-2007, 08:09 AM

Originally posted by brandijo View Post

Would it assist in decreasing any of the random charges?

What exactly are the 'random' charges? Are any of them over-the-limit charges?

Originally posted by brandijo View Post

I'm considering just taking the $ out of my savings and paying it all off at once.

If you have the money in savings, then it may not make sense to pay interest on the debt.

You should get in the habit of paying the bill as soon as it comes. Don't wait until it is due, so you never have to worry about late charges.

**DayByDay** · 09-11-2007, 08:22 AM

Yes, that interest rate is insane! I'd be running to the bank to get the money out of savings to pay off that card.

**PrincessPerky** · 09-11-2007, 08:26 AM

Are you single? living on your own? what are your monthly expenses? what would happen if you did pay it in full this month and started sending that 400 to build back up your EF?

Even if you do have dependents, buying milk on a CC in case of job loss is prolly cheaper than paying the 34% interest on your card.

And don't beat yourself up to bad, you are at least seeing the light now, and you are learning from your mistakes, we all make em.

**brandijo** · 09-11-2007, 08:37 AM

I am single and live with my sister (who bought her own home) so my monthly expenses are very low.
I'm sorry, what is my EF?
My only dependent is a dog; definitely no children!
Every month there is a "Periodic Finance Charge" of $77+. I don't know what that is; the interest of my debt?

I am definitely in the habit of only using my debit card/checks/cash now. So I only buy what I can afford. This debt is from college, so I wasn't working and obviously spent more than I could pay.

**brandijo** · 09-11-2007, 08:37 AM

And by the way: I SINCERELY appreciate everyone's input! It's a really stressful subject for me; especially when I feel completely uneducated.
So really, thank you!

**Snodog** · 09-11-2007, 08:59 AM

I would take out of savings to pay off asap. Its costing you $77 a month in interest and your credit score will go up if you pay it off. Then I would slowly build up the savings again. Credit cards are bad if you dont pay them off every month.

**skydivingchic** · 09-11-2007, 09:34 AM

EF = Emergency Fund

The standard recommendation is that you should have 3-6 months worth of expenses saved in an easily accessible, safe account (such as an FDIC-insured high yield account (ING, Emigrant, GMAC)). This money is to be used in the case of emergencies only - job lay off, major car repairs, surgery, etc.

Definately take the money out of savings and pay off the card. 34% is insane interest and the money sitting in savings is not earning anywhere near that.

You would also do well to sit down and read your card holder's agreement and do some research about credit cards so that you can understand the charges and how to avoid them. The periodic finance charge is the interest on the balance and can be avoided by paying the CC off in full before the due date every month.

**autoxer** · 09-11-2007, 09:40 AM

Originally posted by brandijo View Post

Every month there is a "Periodic Finance Charge" of $77+. I don't know what that is; the interest of my debt?

That is the interest on your debt. That rate of 34% is ridiculous. The rate on my Visa is 10%... but I even think that is high, so I don't carry a balance on any card.

I vote for pay it off, then put the extra money back into savings each month to build it back up.

**brandijo** · 09-11-2007, 09:46 AM

Ok-Pay it off from my savings it is then!
I had just heard that paying it all off at once could be a bad mark on my credit score or something of that sort, but it is very likely I misinterpreted the information.

Definitely going to just pay it off then and be done with shoveling out all that interest, so the Citi employees can have bacon, eggs, and donuts every Friday

**My English Castle** · 09-11-2007, 10:29 AM

Pay it!

Brandijo,
Everybody's right. Pay it now.
You'll still have enough leftover without that awful interest rate to pump up your EF.
Yikes--that interest payment scares the heck out of me.
Think what fun and investment return you can have with that kind of money.
Do it now.

**Hot dog** · 09-11-2007, 11:01 AM

Just wanted to say welcome to the group and if that is all that debt you got in while in college than you have done well. You are young let that fear motivate you to learn and you have definitely come to the right place to do that. Stick around and read up and then read some good finance books and you will be ahead of most americans and most of us since you are so young. The possibilities are endless you are very lucky.

Credit Card Confusion!