? asked in Business & FinanceCredit · 1 decade ago

How to pay off credit card debt?

I'm 24 and desperatley need to start paying of my credit card debt. I have tried to consolidate my cards though had no luck as my debt is to big on each card for me to merge them together.

Basically my debt is as follows:

St George Mastercard - Owe $5,600

Bank West Mastercard - Owe $5,800

Citibank Visa Card - Owe $9,230

NAB Visa Card - Owe $8,960

Myer Store Card - Owe $1,300

There all 95%-98%maxed out.

Although i also pay $2200 a month in rent, (and my income per month is only $2600). I have a total of another $600 that is charged on my cards every month for contracts that i cant get out of (such as furniture rentals etc).

The interest + insurance on each card is around $130-$180 per month per card so again its around another $450 per month just to meet the insurance and debt.

I paid almost $2000 as a whole to my cards last month, and its already gone right back down again, so i'm currently thinking either declaring bankruptcy or just letting my cards run down to $0 to force the banks to stop charging interest.

Is there any company who can buy your debt of you? as i dont want to pay the banks back, they have already charge me enough in usless insurance, late payment fees and interest to get any favours from me.

18 Answers

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  • 1 decade ago
    Best Answer

    You need to move and fast. You are paying 85% of your income in rent and that is ridiculous! You should never pay more than 25% of your income for housing. That means that you should find a place for no more than $650 per month. If you are stuck in a lease, get 3 roommates today. If this is a home mortgage, SELL THE HOUSE!!! While you are waiting for the house to sell, start renting rooms.

    You cannot "force the bank to stop charging interest". They will charge interest on the debt for as long as you owe the debt. They don't need a "favor" from you, they need you to pay what you owe on time. Having to pay late fees is a choice. A late fee means that you chose to not pay your bill on time.

    Declaring bankruptcy for approximately $30,000 is just plain silly. You need to either get your expenses down ( the rent) and get your income up. You need to stop buying things that you cannot afford. A bankruptcy will trash your credit for about 10 years. Not a good thing unless it teaches you to stop buying stuff on credit.

    Please do not consolidate. It is not free, they will lower your payments by increasing the length of time until you are debt free, and you will take a hit on your credit score. Or they negotiate your debt down after telling you not to pay for awhile adding another hit to your credit score. Student loans are the only debt that can garnish your wages for non payment without taking you to court first. Just list them out on a piece of paper or a spreadsheet and follow the plan. If you work the plan, the plan will work for you.

    A. Have a garage sale and sell anything that you no longer need or want.

    B.Get a temporary part time job, if you have one, get another.

    Here is a plan that can help you. If you work the plan, the plan will work for you:

    1. Make a budget. Make the budget a week before you get paid. A budget is not a punishment! It is a tool which will free you from ever having to worry about money again. Put everything in your budget. Especially those annual, biannual, or quarterly bills like car registration, insurance, etc. Give every dollar you are going to bring home the name of where it is going. Add an "emergency fund" category to your budget for 25 dollars and save up until you have 1000-1250 dollars. Your emergency fund will help keep you from getting into new debt because of an emergency. If you can, set up a direct transfer to a savings account for your emergency fund. That way it moves automatically and you don't even have to worry about it. You must cut your spending and live on less than you make.

    2.First get current on all of you debts and make no more late payments. Stop using your credit cards immediately. Do not take on any more debt. Credit cards are like quicksand only the death is much slower. Make a list of all of your debts in order of highest interest rate to lowest interest. Use cash only for your spending from now on.

    3.Pay the minimum due on all of your debts and then put your extra money towards paying off the highest interest one first. After you get that one paid off, you put the money you were paying on debt #1 (the minimum payment and the extra payment) towards debt #2. That will pay debt #2 off faster. When that is paid off, you put all three payments towards card #3 and that one will be paid off pretty quickly. As an example:

    To start :

    Debt #1 (highest interest): minimum payment+ extra payment

    Debt #2 (middle interest): minimum payment

    Debt #3(lowest interest): minimum payment

    Debt #1: paid off

    Debt #2: minimum payment from Debt #1+ Minimum payment from Debt #2 +extra payment

    Debt #3: minimum payment

    Debt #1: paid off

    Debt #2: paid off

    Debt #3:Minimum payment from card #1+ minimum payment from Debt #2+ minimum payment from Debt #3+ extra payment.

    That way, you will get them all paid off, on time, and pay the least interest. It will also help towards rebuilding your credit since you will no longer have any late payments. This works no matter how many different debts you may have.

    4. After you get all of your debts paid off, add to your emergency fund until you have 6-12 months of income saved up. Put that emergency fund money into a liquid money market fund or into a Bank of America no-risk CD so that if you need the money you can take it out without penalty.

    5a. When you have your emergency fund in place, add a category for "fun" to your budget. Save for a holiday, a vacation, a big screen, or dinners out, whatever goal you want. Remember to enjoy your life.

    5b. When you have your emergency fund in place, start saving for your retirement. Join the 401(k) plan at work and contribute the maximum. Your employer probably matches at least part of your contribution so why give up free money? Open a Roth IRA and contribute the maximum on a monthly basis. If you start saving for your retirement now, you will probably retire a millionaire.

    5c. When you have your emergency fund in place, start saving for y

  • Apollo
    Lv 7
    1 decade ago

    Really good answers

    Your problem isnt the debt, it is the way you manage your money. If you make 2600, your rent cannot be by any means 2200. What do you eat? Car insurance? Emergency savings? ....

    First you need to reduce your rent by 700 or so. Find a tight place that has everything included. When you go to the supermarket have a budget. Do not endulge or overspend. Open an oline savings accounts and put 20 for now every month. Dont say you cant, you can. AH btw, the fact you have debts has nothing to do with savings....

    You need more money, get a better job, or a second job.

    If you have not paid late until now, in order to rescue that credit and get rid of that debt you need a very agressive plan. Minimum payments wont do, interest will eat them.

    Why on earth you pay so much on friggin rent??? Are you running a bussiness from which you make all of your money??? If so you need to get one or two regular jobs and lessen the rent payments to survive.

    Suppose you need monthly

    850 a month for rent (utilities included) this could be even 700.

    80 a month for food, asumming you know how to cook and strech the dollar.

    130 for car insurance, = bad credit

    60 = cell phone

    200 miscelanous expenses = gas, etc a month

    = total 1260 a month to live.

    If your job gives you 2600, wich is about 20 an hour, and you get a part time for 10/h that gives you at leasts 1000 bucks extra, that would be 3600 a month - 1200 = 2400 to pay for your debts

    You owe = 30890,

    Your debt to credit ratio sucks so you cant ask for more. Forget about 0 % offers.

    So, Pay those 1300 first all at once to improve your credit score a little. Then pay the other cards.

    DO NOT INCURR ANY NEW DEBT.

    In one year you should be debt free = 30890/2400 = 12.87 = one eyar aprox....

    If you can make more money or borrow from your parents you are encouraged to do so.

  • 1 decade ago

    Your credit cards have been paying for your food, haven't they? It's not even the cards that are the problem, it's your rent! How did you manage to get approved for an apartment when your income is so low compared to your rent? You should only be paying about 800-900 in rent with your income! When I got approved for my apartment rental, they had checked to see if I was really making enough to comfortably pay the rent along with all my other obligations.

    If you've been getting hit with late fees and things like that, chances are your credit isn't that great anyway. Especially with your debt-to-credit ratio being what it is.

    You have to move to a much cheaper place, or get a roommate at least. If you really want to pay off the credit cards, you'll need a second job. You need to be able to pay all of your bills (including the credit card bills) without using credit cards. If you find yourself needing a credit card to pay for ANYTHING, it means you have to revise your budget yet again.

    Even if you declare bankruptcy, that will only discharge your credit card debts and those rental agreements maybe, it won't help with your main problem anyway.

  • 1 decade ago

    you live way above your means. Get a cheaper place and get a second job.

    You may be able to get out of the furniture payments easier than the credit card payments. If you lower your rent, you may be able to get your head above water. Even under bankruptcy with the current laws you will have to pay most of the debt back. Plus your credit will be ruined(may be a good thing, sounds like you can't manage it anyway). I do not recommend bankruptcy but it sounds like your lifestyle has caught up with you. If lowering your rent and getting a second job isn't enough then talk to a bankruptcy lawyer and see what you can do. You will not get much sympathy from the courts(or me) by living in such an expensive place.

    BTW: You aren't doing the banks any favors. You are paying back debt that you created.

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  • DM
    Lv 4
    1 decade ago

    What is the insurance for? If it is only if you loose your job that can be very expensive. If your job is secure loose it.

    Consolidation loans usually do not work. It is easier and less expensive in most cases to pay off debts that are separate.

    In the future realize that department store credit has the highest interest rates around. Avoid them.

    Sell any items you don't need. Extra clothes, furniture, ETC... Sell it through craigslist or Ebay. Get a roommate or rent a place less expensive.

    Re-look at all contracts again or have legal aid look at them to see how to get out of them or make a deal to pay less or pay it off for less.

    On the credit card debt call and explain your situation and see if they can work with you on lowering the rate even if it is for only 6 months.

    Then get a free analysis done to see if it is possible to get things back on track and when possibly you can get things paid off.

    For the free analysis go to: http://www.moneymergespecialist.com

    No account numbers or social security questions asked. Just need to gather all your debts and interest rates.

    If it shows you won't be able to pay them off with the resources you have then look into bankruptcy. Realize it will be on your credit history 7-10 years and any credit you get will be very high interest rates.

    Hope all this helps.

  • Anonymous
    1 decade ago

    You may seriously consider bankruptcy. You have over 30 grand in credit card debt and you can barely make enough to pay your bills.

    Before you do that though...

    If you would like to avoid bankruptcy, then you need to increase your income and lower your expenses and start paying off the cards faster, and also stop using credit cards (other than your contracts)

    Get a part time job as a pizza driver maybe.

    Go through your expenses and find about $300-500 in savings. Cancel premium channels, optimize your cell phone plan, anything you can do. You're also paying an awful lot for rent: get a roommate or find cheaper rent.

    If you do this you can get out of it without bankruptcy. But you need to be very determined.

    Good luck!

  • 1 decade ago

    If you don't want to file bankruptcy here's what you do:

    1) Find a roomate or move to an apt that is in the $700/month range. Your housing payment should be between 25-33% of your monthly income.

    2) Contact a local credit counseling agency to see if they can help you pay off your debt. They specialize in negotiating lower interest rates and lower monthly payments with your creditors so you can be debt free in 5 years or less.

    3) Get another job. Be it a legit job or an "under the table" job. It sounds like you really need to increase your income.

    4) Good luck.

  • Anonymous
    1 decade ago

    Bankruptcy should be your last resort, and you can't just run up your bills and then bail...the reprocautions will last a LOOOOOONG time. Here's what I'd do.

    1 - Return all contracted rentals. There isn't a contract out there that you can't find a way out of with minimal damage. Bring the appliance, furniture, into the store and ask to speak with an associate. Tell them, DON'T ask, that you need to return the appliance/furniture because you can't continue to afford payments. Don't accept a "better deal"; pay them the balance for the month and wipe your hands clean. 99% of stores out there would rather cut their loses here then not have the merchandise AND not be receiving payments. Trust me, they'll bow out if you're persistent enough.

    2 - If you're in an apartment, get out. If you have a mortgage then that's another story. In that case you just need to accept the situation. But if you're in an apartment, get out! Go into the leasing office and explain to them that you no longer can afford payments and that this month will be your last month. Don't sway when they try to force you to make the remaining payments. They can't take what you don't have. Look at it from their shoes, they'd rather you be out and have someone renting that will make payments then you be there unable to make any payments. Don't accept no for an answer; explain to them that there is NO way you can make rent, they will release you from the lease.

    3 - Call every credit card company you owe money to and explain to them your situation. Two things are likely to happen (since they wan't their money back...remember that); one, they will lower your interest rate to help you make payments; and two, they will likely set up a payment plan for long term recovery of the debt. If you're motivated enough you have a good chance of consolidating a lot of your credit card debt.

    4 - Remove any and ALL unnecessary expenses. Unless you need it to survive get rid of it, sell it, or return it.

    5 - Get a second job. Sorry, you're going to have to.

    6 - Pay one debt off at a time, don't make minimum payments on every debt. Pick the debt with the lowest remaining balance and attack, attack, attack. When that balance is paid off move those monthly payments to the next debt (which already has a minimum payment being made). By the time you reach your final debt you'll be amazed by how fast you can pay it off.

    I know what you're thinking, this seems horrible. It is, trust me. But it could be worse, you could final for bankruptcy.

  • Carlii
    Lv 4
    1 decade ago

    I'm with Andy on this. Get out of that apartment. Cancel the insurance on your credit cards - they are a waste of money. Yes, if something happens to you, they'll make the payments for you, but - honestly - when was the last time you needed it??? And how much have you paid into it so far??? If you'd have saved that amount (or used it to help pay your debts), you would be in a much better situation today. The ONLY reason I would suggest to keep the insurance is if it would cover you if you lost your job - and only then if your job is in danger. If you think it's fine now, but next year that changes, and you start to thinking you might get laid off, then you can call them and start the insurance up again. But in the meantime, if the risk is minimal, then don't pay for the insurance.

    As for letting your cards run down to $0 to force the banks to stop charging interest - what do you mean by that? Do you mean to max your cards out so you don't have anything left available? I hate to mention this, but... interest will still accrue on your count - plus over the limit fees, which are usually about $40 a month. The only way to stop being charged finance charges is to pay the account off in full.

    As for your place, that rent sounds completely out of proportion to me, although who knows? Perhaps you live in New York City or something, and need a place close to work to not have to buy a car or something - I'm not one to judge there. The rented furniture, though, can be sent back - and, each month, instead of paying $600 for rental furniture, spend $600 in a consignment shop for several pieces of good furniture... furniture that you won't have to keep paying for. Sure, it's used, but if you're renting furniture, that's been used by someone else before, too, most likely.

    What I would suggest is to start with your card with the lowest balance - first, put the card somewhere you can't touch it - or even cut it up (although, for some cards, to register to pay online, or to change your address over the phone, etc, you have to have the code off the back of the card). Figure out how much you can afford to pay to your cards each month, pay the minimums on the rest of your cards, and send the rest of what's left to that one card. This gets it out of the way faster.

    Some people would argue and say to pay off the highest interest card first, but if you kill off the smallest balance first, it is faster for you, and once it's gone, you've got one less card to even deal with.

    From what I can tell though, you've got a seriously bad relationship with debt, and you really need to look at your spending. Another thing that's a killer is late fees, and payment fees charged by having to do a payment over the phone, or online (some companies charge for that type of payment). Make sure you're making your payments using a free method, and on time. All those fees add up!

    When it comes to paying the banks back, they'll get their money one way or another - if you get a consolidation loan, it's still paying the banks back. You can't blame the banks for charging the interest you agreed to when you signed up for the cards, and received because you carried such a high balance. If you pay your cards off but still use them, and pay the balance each month, then you'll have NO interest to pay at all.

    One helpful website for you to review is this - http://finance.yahoo.com/how-to-guide/personal-fin... It can give you instructions on how to handle your debt. As for CCCS or Bankruptsy, I wouldn't suggest either one - not while you're still working. And if you talk to a Bankruptsy lawyer, or a CCCS councelor, they will convince you that you need to do that - because, just like car salesmen sell you a car, bankruptsy lawyers sell you a bankruptsy, and CCCS councelors sell you debt plans. Bottom line.

    Source(s): Finance industry for 15+ years.
  • 1 decade ago

    I am not sure what you mean by "letting my cards run down to $0". Letting your cards reach 100% of the credit limit ($0 credit available) will NOT stop the banks from charging interest. Instead, they will charge interest PLUS an over-limit fee.

  • Anonymous
    1 decade ago

    You are so far in debt that you should be considering bankruptcy. And with a monthly income of $2600, you can't afford a $2200 rent. Don't blame the banks for your situation. What are you thinking??

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