Use entire bonus to pay down credit card?

[lottadebt]

I know I've got a lot of credit card debt and want to get out. I have about $46k in debt on a couple of accounts. I'm able to make the minimum monthly on all of them but that's it, and it doesn't leave much left over.

The worst of the cards is a Citi card with $12k on it at 29%. Minimum payment is about $500, give or take. I just got a bonus of about $9k and could also use some extra money in savings as a safety cushion (esp since I don't have much left over after paying my credit card bills). But this credit card debt is killing me and Citi wasn't able to reduce my apr right now.

So I'm thinking I should just take that $9k and put it all towards the Citi card and significantly reduce my monthly payment, thus freeing up some extra money.

Advice, thoughts? Thanks.

[creditcardfree]

Yes, that is what I would do in your situation. I don't know how much you have in savings, but it would still be a good idea to hold on to some of it as an emergency fund.

[lottadebt]

My savings is pathetic, but that's really because after I pay my credit cards, and other bills, there's not much left to put in to savings. I figured by putting the $9k towards the citi card, that would free up some money that could be put towards savings.

Or, I could still make the same $500/mo payment towards citi after using the bonus which would pay off the remaining $3k on the card much quicker.

[cptacek]

What are the balances on the cards and what are the interest rates?

[kork13]

I figured by putting the $9k towards the citi card, that would free up some money that could be put towards savings.

Or, I could still make the same $500/mo payment towards citi after using the bonus which would pay off the remaining $3k on the card much quicker.

Great idea on both counts. Do it, you'll thank yourself 6 months from now, when the debt is gone and the $500/mo can go to your other debts.

The worst of the cards is a Citi card with $12k on it at 29%. ....... this credit card debt is killing me and Citi wasn't able to reduce my apr right now.

If that's the answer you got, you haven't tried hard enough. 29% for just about anybody is ridiculous. Call back, and tell them to reduce it to something more reasonable. If they still insist "no", ask for a supervisor. If they still say "no", ask for a manager. If they still say no, tell them that you will be transferring the balance, and to expect payment in full shortly, after which you will close the card. Often, they will make at least a better offer in order to keep you as a (interest-paying) customer. If they don't give you an adequate offer (I'd aim for 15%-20% at the most), follow through with your threat -- do a balance transfer on the remaining $3k to one of your other cards. In all likelihood, one of them has a standing balance transfer offer that is FAR better than 29% interest.

While you're at it, call ALL of your CC companies, and ask for rate reductions. Just because one card won't cooperate doesn't mean another won't.

[Granite]

keep 1K for emergencies and pay the rest of it on your debt

but the above poster has a good point, you should definitely negotiate your interest rates down and ask for "hardship programs and "deferral programs"

[disneysteve]

My savings is pathetic

Or, I could still make the same $500/mo payment towards citi after using the bonus which would pay off the remaining $3k on the card much quicker.

You could also do a bit of each. Put the 9K toward the CC. Rather than continuing the full $500 payment for right now, divert part of that toward padding the savings a bit. Even $50/month to savings and $450/month to the CC will make a big difference. You'd gradually be building your savings and still greatly accelerating your debt repayment.

[Tree0164]

I would use the 9k to towards this citi credit card especially since you have some other money saved! Nice bonus money

[wincrasher]

I'd echo the above statements. Paying such high interest is a death spiral.

Thought of another way - this is an investment that pays 29% returns!

Get this monkey off your back and keep it off.

[lottadebt]

Thanks all for the feedback. I think I'll put the money towards citi, maybe keep $1k. Then call citi and negotiate a lower interest with the threat that was mentioned above. After paying off nearly 2/3 of my debt, they better be more willing to negotiate or I will move it to a lower interest credit card.

I have another card with almost the same balance and slightly lower interest. So the bulk of what I save after paying off citi will likely go there and still try to put some extra in to savings.

[creditcardfree]

Great plan. Although, and if they don't lower the balance, you only have $1,000 left to pay...the interest will be much less than you are paying now!

[Mike75]

If that's the answer you got, you haven't tried hard enough. 29% for just about anybody is ridiculous. Call back, and tell them to reduce it to something more reasonable. If they still insist "no", ask for a supervisor. If they still say "no", ask for a manager. If they still say no, tell them that you will be transferring the balance, and to expect payment in full shortly, after which you will close the card. Often, they will make at least a better offer in order to keep you as a (interest-paying) customer. If they don't give you an adequate offer (I'd aim for 15%-20% at the most), follow through with your threat -- do a balance transfer on the remaining $3k to one of your other cards. In all likelihood, one of them has a standing balance transfer offer that is FAR better than 29% interest.

While you're at it, call ALL of your CC companies, and ask for rate reductions. Just because one card won't cooperate doesn't mean another won't.

I am sorry but this doesn't work every time. My friend tried to use this trick on his bank, but he got a stern NO from everyone he talked. All he go was a headache and a wastage of 2 hours/

[kork13]

I am sorry but this doesn't work every time. My friend tried to use this trick on his bank, but he got a stern NO from everyone he talked. All he go was a headache and a wastage of 2 hours/

Sure, it won't always work, but sometimes it does. And if you continue to get "no", then you can (should) follow through with the 'threat', and transfer the balance to another card, then close the uncooperative one. In most cases, balance transfer offers are below 5-8%, which beats 30% by a long shot, even taking into account the BT fees.

[woodie96]

Of course try to get them to lower the APR....
With or without the APR reduction, I think I would put 1K in the bank to help for an unforseen emergency...and then put the other 8K to the CC. After that, still ping on the CC for 500 a month, and within a few short months it will be gone, then you can free up that 500 towards some of the other debt.