Step one to pay off CC's

[akolb]

So I have a lot of CC debt (ab $14K) mostly from when I was married and when I was in school. I was young and stupid, I know.

I've had the best intentions to pay off my CC's, but I never seem to be able to hang on to the extra little bit of $ each month.

Well I just opened an ING savings account online that links to my checking acct. and pays me interest.

My only question is when should I use it? Should I pay off whatever I can at the end of each month with whatever is in that account (AKA acct balance would go back to zero each month?) or should I leave it until it reaches the total amount of my 1st card? or pick an amount and pay that off every couple of months?

My instinct is to leave it longer since it's generating interest right? And as long as I am paying the minimum on CC's and not using them, it'd be alright to not pay extra eery month? Not too concerned about credit score FYI. It's good and we bought our house so having a great score is not my main concern.

Thanks!

[Greebo]

I'll wager that ING account is generating about 2% interest annually, while you're credit cards are generating lots, lots more.

Thus by waiting to pay extra on the cards, you guarantee that you will lose ground every month.

The BEST way to pay off any debt is ALWAYS as fast as you can, with as much as you can. This is true even if it's a mortgage that gives you a tax deduction on interest paid. Its' especially true on Credit Cards.

I would encourage you to read Dave Ramsey's "The Total Money Makeover" - it will really help you start to understand your money.

[akolb]

So what you're saying is to empty it each month to pay the extra on my cards right?

I've read DR, I understand it, I have a spreadsheet on my computer on how to pay off debt based on his system...I just lack dicipline. I've been trying to do this for years and the problem is if I have a little bit of money I tend to rationalize "oh, its only $10. I can spend that. What good is that going to do me in paying off debts?"

With the auto savings acct, I can deduct weekly before I even realize the $ was there.

And once they're paid off, we'll have a savings acct that generates interest!

[Greebo]

So what you're saying is to empty it each month to pay the extra on my cards right?

Absolutely. To illustrate further: If you have $1000 on the CC and $1000 in ING, and the CC is 10% and ING is 2%, then each month you don't pay off the CC with ING, you pay $8.33 to the CC while making $1.66 at ING. Net loss: $6.66. Hmm - I must remember to use those numbers again - apparently CC's are the devil.

I've read DR, I understand it, I have a spreadsheet on my computer on how to pay off debt based on his system...I just lack dicipline. I've been trying to do this for years and the problem is if I have a little bit of money I tend to rationalize "oh, its only $10. I can spend that. What good is that going to do me in paying off debts?"

OH! You're ME!!! Hi ME! I remember you! You were me about 3 years ago!!! It's so good to see me again!

So I'll tell you what I tell me now, every time I think like this.

When you go into debt, you sell your future to buy the present. Every inch, every millimeter you progress towards getting you out of debt gets you out of debt THAT MUCH FASTER. That $10.00 you don't pay extra, that's $10.00 that gets charged interest *every* *FRIGGING* *DAY*. That's $10.00 that's costing you ground you could be gaining instead. And YOU DID IT TO YOURSELF!

The past is gone - today is the future that your past self sold.

You need to get mad at the debt - and mad at your past self - for having sold YOUR present down river.

With the auto savings acct, I can deduct weekly before I even realize the $ was there.

And once they're paid off, we'll have a savings acct that generates interest!

Absolutely!

[mombottoo]

If you pay your bills online, you could put the extra towards the cc when you have it...make more than 1 payment per month...you'll pay less interest that way in the long run.

I wouldn't use the ING account to save towards debt pay down. I'd make the extra payment immediately directly from my checking. If you could afford to you could use the ING acct. as a plain old savings acct., after your debt is paid off.

[mauimagic]

That's why I love online banking - to get that extra payment to cc everymonth. Money in my hands slips out so easily and too fast - need to grab it.....

[Cricketlegs]

The thing to really remember is it doesn't matter what was going on last year, last week, yesterday or 5 seconds ago. What matters is now. It is never to late to learn and change and get things done.

If you feel the urge to go online to Amazon and buy $40 in books(for example) then by all means go online but go to your bank and put it on CC instead.

What works for me is I plan the money budget for each check. I get the money and I immediately PAY out what needs paying. Once it is gone it is gone.

Sitting money is money just BEGGING to be blown.

Best of luck to you. Also remember www.whatsthecost.com is a great place to figure out payment plans.

[akolb]

Thanks yall!

My main problem with auto deducts/payments is that I am a fulltime bartender. So I never know what my day-to-day income will be. I also have to deal with a lot of cash.

I used to only spend cash for purchases, but the problem with that is that it never made it to my acct! *DOH*
Now it is all going to be deposited daily, then meticulously tracked and stalked to determine where ALL of it goes!

And I am going to do weekly to savings acct of however much I can spare. Then that amt @ the end of each month will go towards lowest balance CC. After that one is done, we'll "snowball" it into the acct for the next card.

I've got this shizit!!!

[savininfl]

I'm still not understanding why your waiting til the end of the month to pay the CC? If you budget all your bills and you get that income in cash and go deposit into your acct, once you go over that (with a ef in place and spending money) that can automatically be paid on your CC since you won't need it in you budget. Like Greebo said, the interest is adding DAILY not monthly, so if you pay $200 on the 14th and your bill is due on the 30th, from the 14th to the 30th you'll have $200 less interest against that $200 on to you credit card. Hope that made sense and good luck to you!!

[lparker]

But, I thought the program says that you pay the minimum on the credit cards until you have a baby EF funded, then start paying down the CC with all available cash? Did I miss something?

[Greebo]

But, I thought the program says that you pay the minimum on the credit cards until you have a baby EF funded, then start paying down the CC with all available cash? Did I miss something?

No, you're right - that's the DR plan - but not everyone here follows that plan.

There is a Money category, and under that a Debt Reduction and Money Management Forum. The Dave Ramsey forum is under that - so if you want DR specific input, that's the better sub category for you than General Chat.

[lparker]

Greebo - The reason I asked about (suggested)the BEF was that

1. "I never seem to be able to hang on to the extra little bit of $ each month."

2. "I just opened an ING savings account"

3. " $4500 EF in 2010 $0/$4500"

It seems to me that it would be in their best interest to have a BEF before worrying about paying off their balances.

BTW, I don't follow "the plan". I pick over what I find here and use what fits....Gonna be a great year for me...not the cc companies this year.

[Greebo]

Oh I did miss the $4,500 EF.

Yes, I think that's probably overkill at this stage.

akolb: DR suggests only a very small baby EF of $1,000 to start before you get really aggressive in paying off debt because his objective is two fold - he doesn't want the slightest little thing to set you back, but he also doesn't want you getting "safe" feeling, and thus complacent.

Remember - every penny of interest accumulated is a piece of your future you've given up forever. Don't wait too long to start buying your future back from your past self.