I visited Benjamin, over at Feed the Pig, to find out how long it will take me to pay off my existing debt.
Benjamin has a useful credit card payoff calculator, here.
I rounded up my debt amount, to $112,000. I estimated that I will continue to have new spending of approximately $1200 per month. This is the amount that I seem to spend regularly, even if I am avoiding frivolous spending. I spend this amount on:
1. After-school care costs for my two kids (I avoid late fees by having the amounts charged automatically to my card);
2. Gas, groceries, and online bill-paying for the electric or water bill, insurance, property taxes, and so forth, when I don't otherwise have the money to pay them because I have sent it all to my credit card companies for their minimum payments. (It is truly a vicious cycle.)
3. Internet access for my disabled friend (I know, I know, I should probably cut her off / make her pay her own, but it's only $20 per month, and it gives her access to her friends when she otherwise can't get out of the house. She can't afford to pay it herself, as she is on social security disability income. I know, I know, I can't afford it either.... it's a dilemma, isn't it? But I just can't stand to cut her off, so I won't).
4. Clothing and shoes for my kids and (rarely) myself. Since I never have any money in my bank account, the credit card is the only way I can ever buy these necessities. And I haven't gone clothes-shopping just for fun for at least a year. I have only bought things we truly need, such as when my kids' shoes are falling apart, or their pants no longer fit them.
Benjamin advises me that if I want to pay off this amount of debt in 60 months, I need to send $4,035 per month to my creditors, rather than the current minimum payments of $3,700.
If I continue sending the current minimum payments of $3,700, it will take 76 months to pay my debt -- an additional 16 months!
16 months x $3700 = $59,200
$335 x 60 = $20,100.
So by paying an extra $335 per month, I will pay the total debt down 16 months sooner, and will save $39,100.
If I can find the extra money, I definitely should do that.
Of course, we come back to the initial problem that I haven't been earning enough to even make the minimum payments each month, so I may be pie-in-the-sky dreaming to think I can come up with the minimum payment amounts plus an extra $335.
But I will have to try.
And now I am going back to work - you know, to earn that money!
Monday, May 11, 2009
Thursday, May 7, 2009
Every Little Bit Helps
As I've mentioned, I am desperate to reduce my debt.
I called all my credit card companies and asked them to reduce their interest rates. I didn't spend a lot of time or energy arguing with any of them, and I went into it assuming I would get a "no" answer from all of them, as I have had several late payments recently. Plus, I find it easier to expect the worst and avoid disappointment, rather than getting my hopes up and feeling crushed if it doesn't work out. But, as they say, "nothing ventured, nothing gained." So I tried.
My basic approach was as follows (after wading through the automated systems and entering credit card numbers and telling them my secret codes and so forth to reach a live person):
Credit Card Company Representative (CCCR): How may I help you today?
Me: Well, you could help me a lot by lowering my interest rate to something more reasonable. Your cost to borrow money is at an all-time low, and I was hoping you could pass along some of the savings.
CCCR: Well, let me just check your account on the computer, please hold for a minute....
As expected, most of them came back from reviewing my rather sad credit history and said "no." But one said "yes," and reduced the rate by 2% (14.24% down to 12.24%). Not a lot, but better than nothing.
I owe $11,500 to that creditor.
According to bankrate.com's credit card calculator, if I continue to pay $230 per month for that card (my current minimum payment), it would take 76 months to pay it off at 14.25% interest, and 70 months at 12.25%. So by lowering the interest rate, I saved 6 months of payments. 6 x 230 is $1380 over the life of the loan. Not bad for a ten minute phone call. Not bad even for the hour I invested in calling all my credit card companies. Yay me!
For the ones that said "no," I did ask, "why not?" and mostly they said due to the recent history of late payments. I asked when it would be useful to inquire again, and most said to check back when I had 6 months of timely payments. So, I'll stay on top of my payments, and try again in a few months. If I could just save a few percentage points on each card....
I wonder if I will do better if I try that "power of positive thinking" approach, and go into it expecting a "yes" from each creditor?
I called all my credit card companies and asked them to reduce their interest rates. I didn't spend a lot of time or energy arguing with any of them, and I went into it assuming I would get a "no" answer from all of them, as I have had several late payments recently. Plus, I find it easier to expect the worst and avoid disappointment, rather than getting my hopes up and feeling crushed if it doesn't work out. But, as they say, "nothing ventured, nothing gained." So I tried.
My basic approach was as follows (after wading through the automated systems and entering credit card numbers and telling them my secret codes and so forth to reach a live person):
Credit Card Company Representative (CCCR): How may I help you today?
Me: Well, you could help me a lot by lowering my interest rate to something more reasonable. Your cost to borrow money is at an all-time low, and I was hoping you could pass along some of the savings.
CCCR: Well, let me just check your account on the computer, please hold for a minute....
As expected, most of them came back from reviewing my rather sad credit history and said "no." But one said "yes," and reduced the rate by 2% (14.24% down to 12.24%). Not a lot, but better than nothing.
I owe $11,500 to that creditor.
According to bankrate.com's credit card calculator, if I continue to pay $230 per month for that card (my current minimum payment), it would take 76 months to pay it off at 14.25% interest, and 70 months at 12.25%. So by lowering the interest rate, I saved 6 months of payments. 6 x 230 is $1380 over the life of the loan. Not bad for a ten minute phone call. Not bad even for the hour I invested in calling all my credit card companies. Yay me!
For the ones that said "no," I did ask, "why not?" and mostly they said due to the recent history of late payments. I asked when it would be useful to inquire again, and most said to check back when I had 6 months of timely payments. So, I'll stay on top of my payments, and try again in a few months. If I could just save a few percentage points on each card....
I wonder if I will do better if I try that "power of positive thinking" approach, and go into it expecting a "yes" from each creditor?
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