Credit Card Debt

[JTH]

I was debt free when I bought my first house 5 years ago. Too many self-help projects and such put me 18,000 in the hole on my credit cards.

I'm taking out a TSP loan and using it to pay off some credit cards with a higher interest rate. It's not something I want to do, but it doesn't make much since to be investing in the TSP or a Roth IRA, while having excessive credit card debt.

Though some tough budget reductions and sticking to a plan, I expect to have it all payed off within 2 years. After that everythings a cakewalk and I'll be able to invest 20% of my paycheck a month.

I hope someone here reads this and learns from it...

 

[Steadygain]

I hope someone here reads this and learns from it...

If we were all gathered together somewhere (anywhere) and you shared this...


Everyone would cheer for you and show you the greatest support.

 

[XL-entLady]

I'm taking out a TSP loan and using it to pay off some credit cards with a higher interest rate. It's not something I want to do, but it doesn't make much since to be investing in the TSP or a Roth IRA, while having excessive credit card debt.

When my husband and I finally woke up to our long-term financial picture, that's the way we did it too. We paid off our 19% interest cards with a TSP loan.

I treated the loan on my personal spreadsheets as being invested in G Fund while we paid the loan off. We just adjusted the amount we would have had in G Fund anyway. For example, if the loan was 10% of our total TSP fund, and we wanted to have 50% of our TSP in G Fund, then we put 40% in our G Fund and counted the loan as the other 10%. That's a little simplistic from the way my spreadsheets actually treated it, but you get the idea.

Good luck with it!
Lady

 

[ChemEng]

The key thing is to not get back into revolving CC debt again. If you think may be an issue, then I wouldn't recommend taking out the loan at all and just sucking it up and paying it off with the high interest rate.

 

[XL-entLady]

The key thing is to not get back into revolving CC debt again. If you think may be an issue, then I wouldn't recommend taking out the loan at all and just sucking it up and paying it off with the high interest rate.

Big huge thumbs up to your comment, ChemEng!

When we started this, we had 4 credit cards. We got a debit card connected to our one checking account, cut up 3 of the credit cards and locked the fourth one up in the gun safe so that we'd have it in some dire emergency. And we haven't used a credit card since - in years.

That is the absolute total key to making it work!

Lady

 

[JTH]

The key thing is to not get back into revolving CC debt again.

I completely agree with you. This is the second time in 12 years I've put myself in this situation.

Over the years I've gotten a bit wiser and since I joined this site over a year ago, I've learned so much and now I focus on the future more then ever.

 

[Guest2]

Credit Reporting Agencies, Collection Departments, Company Attorneys
and Credit Card Debt are problems which I can relate to in my younger
years. Refinancing of your home to payoff your obligations is not the
best move, but it was my only option back then. When all else fails, you
can absorb $18k into your mortgage balance and make principle only
payments (additional to your normal payment) to get back to your pre
existing balance when better times arrive. Again, I don't believe it should
be your first consideration, but it is a option. Leave your TSP alone unless
you've exhausted every possible solution. JMHO.

 

[ChemEng]

And we haven't used a credit card since - in years.

I may have been unclear in my post. I have absolutely 0 problems with credit card debt--just as long as it is paid in full every month. We use a 2% cash back card that we put all of our monthly expenses onto and then make sure to pay it off every month. I would put my mortgage payment on there if it were possible.

 

[XL-entLady]

I may have been unclear in my post. I have absolutely 0 problems with credit card debt--just as long as it is paid in full every month. We use a 2% cash back card that we put all of our monthly expenses onto and then make sure to pay it off every month. I would put my mortgage payment on there if it were possible.

That is great for you and is a good way to get the 2% premium.

My problem, and I'm embarrassed to say it, is that I'm a credit card drunk. One is too many and a thousand aren't enough. Every time I've gotten myself into deep financial waters it's because the credit was too easy and the day of reckoning was ignored. So I put myself into credit card AA! I'm a credit card alcoholic with five years of sobriety a day at a time!

:embarrest:
Lady

 

[Buster]

Good topic..

The bottom line, and I'm sure you are all saying it too..Is discipline!

I have the usual Lowe's, Home Depot, Sears, and gas..I pay them off every month...Also if you have any dormant CC accounts, my advise is to cancel or close those accounts NOW!..makes a nice difference on your credit score.

 

[Silverbird]

Well....a little caveat. You want to keep one long-existing card account open, lock the card away if you need to. If you don't have any credit accounts, or you closed everything at once, your credit score can be adversely affected.

 

[JTH]

About a year ago Bank of America changed my interest rate from 7.99% to 18% and they didn't tell us. When I called them about it, they wouldn't budge one bit. So I canceled the account and now they are banned for life!

I could continue to play the credit card swipe game where I'm constantly looking for the best interest rate. But I'd rather owe myself then someone else and I think TSP debt looks better then Credit card Debt.

 

[Pill]

Great topic!

Like most I have learned the hard way. Including a bankruptcy at 26. How in the hell does one get bankrupt at 26. But I have learned. I have a few posts in here about credit scores if interested in the topic.

I finally paid my last credit card payment last pay period. It felt great and I don't plan on having a balance that I can't pay in full each month.

Creating an excel spread sheet saving every receipt and inputting it with a list of expenses, assets and liabilities has been the best thing I have ever done for myself. What took me forever to actually do, has really helped me to see my financial future. I recommend to every one who doesn't already have some thing in place.

 

[JTH]

Well....a little caveat. You want to keep one long-existing card account open, lock the card away if you need to. If you don't have any credit accounts, or you closed everything at once, your credit score can be adversely affected.

I've heard the same thing too, and they look at the precentage you owe on each card.

 

[Buster]

Well....a little caveat. You want to keep one long-existing card account open, lock the card away if you need to. If you don't have any credit accounts, or you closed everything at once, your credit score can be adversely affected.

Right..I said close the dormant ones, not all of them..

 

[ChemEng]

Welcome to the only business in the country that can change the price of a purchase months or years after you purchased it.

About a year ago Bank of America changed my interest rate from 7.99% to 18% and they didn't tell us.

 

[Show-me]

Welcome to the only business in the country that can change the price of a purchase months or years after you purchased it.

Sounds like Hank Paulson is trying to get into that business too.:blink:

 

[Silverbird]

About a year ago Bank of America changed my interest rate from 7.99% to 18% and they didn't tell us. When I called them about it, they wouldn't budge one bit. So I canceled the account and now they are banned for life!

BofA bought out my primary credit card company (MBNA) and sent us our new grand spanking contract with 20%+ interest. That's my credit card that I now lock away as evil, nothing on it. Every month I get begger mail from BofA offering me all sorts of short term very little interest credit that can at any time balloon into a monster. And they say ARMS are only in real estate. HA! I now have a new card from my friendly neighborhood Federal credit union that stays at 8%.

 

[wv-girl]

I think I've done or be through just about what everyone else has. I worked two jobs for years and thought $ was no object to buying what I wanted. Wrong, well I was young and dumb, but learned along the way(as we must do). The reason I am posting is to ask(or inform) about a small problem. My credit is excellent, owe only a small amt on home mortgage, and then began to wonder why my home owners insurance kept going up..sometime 2x a year. After lots of calling, asking, finding out info, etc. It seems the new thing(at least for the past couple of years) is to use your credit rating in order to get an insurance rating. They are not one in the same.

After talking to several supervisors, agents, and anyone else I could, they finally let me know that even though I have excellent credit -- it counted against me in the insurance rating! Go figure. Although I owe nothing on credit cards, etc... I had not closed many of accounts.(I usually just let the expiration run out--and tear up any new cards they send) Since I never would have or use a cc that had an annual fee, I saw no harm in doing this. Even if they have zero balances and are years old, these insurance types use anything so you "don't get the best possible rates." Well, now that I have talked ya'alls ears off here is my question(finally). Has this happened to anyone else here?

 

[alevin]

I learned about this game last year. I was appalled as it has nothing to do with insurance. If a person doesn't pay the premiums, they lose their coverage, simple as that-what risk to the insurance company from your other financial biz? None. From what you say here, I guess there is a reason to formally close out one cc I never use. I only have 2 others.