I'm clueless when it comes to money. Please help

[jardru1981]

I have about $13K in credit card debt with approximately 9.2% APR. I recently got approved for a credit card with 0% APR on balance transfers for 15 months. I got approved for $7,500 only. If I call the credit card company, can they increase my credit limit to $13K? I would really like to transfer all my debt into that new credit card and pay off as much as I can before the 15 months expire.

I have $2,500 that I can use to either use to invest or pay my debt with. I am also expecting $3K from my work stock in May. What should I do with the $2,500 and $3K? Should I invest them or just use them to pay off my debt?

[disneysteve]

Welcome. It would really help us answer you if you gave more info. How much do you earn? What are your monthly expenses? Other than the $2,500, do you have any savings, emergency fund or investments?

Without any of those answers, I'd say to keep $1,000 as an emergency fund and put the rest of any money you can toward paying down the debt. You should not be investing at this point.

Transferring $7,500 to the 0% card might be a good idea. Check what the balance transfer fee is. Also, be sure that you can repay it all before the promo expires. If not, what will the rate be after that?

The last thing I'd want to know is how you ended up with 13K in CC debt and if you have corrected the spending issues that got you there.

[creditcardfree]

Yes, I would call to see if they would raise your credit limit. Let them know why. They may say no, but at least you asked.

I would definitely use the money to pay off debt. If you don't have an emergency fund, you might consider keeping $1,000 as a beginning emergency fund.

Good luck!

[nim3]

You should stop taking out credit cards!

[disneysteve]

You should stop taking out credit cards!

As I've said here many times, you can't borrow your way out of debt. While that is certainly true, it can be a good idea if you can lock in a lower interest rate as it can help accelerate you getting out of debt.

[jardru1981]

Welcome. It would really help us answer you if you gave more info. How much do you earn? What are your monthly expenses? Other than the $2,500, do you have any savings, emergency fund or investments?

Without any of those answers, I'd say to keep $1,000 as an emergency fund and put the rest of any money you can toward paying down the debt. You should not be investing at this point.

Transferring $7,500 to the 0% card might be a good idea. Check what the balance transfer fee is. Also, be sure that you can repay it all before the promo expires. If not, what will the rate be after that?

The last thing I'd want to know is how you ended up with 13K in CC debt and if you have corrected the spending issues that got you there.

Thank you all so much for the response. I make $2,330 a month net. I pay $600 for my car, $500 for rent, $60 for cellphone bill, $110 for car insurance, $110 for student loan, $140 for gasoline, $10 - Netflix, $15 - XM radio subscription, $400 credit card. The rest is my budget for food and entertainment. I have $1,000 in emergency fund. I have around $3K stock option which I'm planning to cash out in May. I have $10K in 401K which I will never touch.

The balance transfer fee is 3%. I'm looking for another card with 0% balance transfer, so that I can transfer the rest of my $13K CC debt. After the promo, the rate will be around 12%.

I was unemployed for 2 years, so I depended on unemployment benefits and my credit card to pay for tuition and car payments. I was young and dumb, and I splurged on things that I really didn't need. My debt was originally $15K. I have not used it in more than a year, and I am not planning on using it anytime soon.

[disneysteve]

Thank you all so much for the response. I make $2,330 a month net. I pay $600 for my car, $500 for rent, $60 for cellphone bill, $110 for car insurance, $110 for student loan, $140 for gasoline, $10 - Netflix, $15 - XM radio subscription, $400 credit card.

You need to step back and make some serious changes. You are spending 17% of your income to pay the credit card debt and yet you are still spending lots of money on luxuries that you can't afford. $600 for a car is simply insane. That's over 25% of your income. How long is that loan? If it is 5 years, that's $36,000. Even if it is 3 years, which I suspect it isn't, that is $21,600. You can't afford that. How much is the car worth on the private market today and how much do you still owe?

Cancel Netflix. Cancel XM radio. Put the car up for sale. Shop for cheaper auto insurance. Switch to a cheaper cell phone plan. Sell everything that isn't nailed down and put every spare penny toward debt repayment.

[wincrasher]

The writer is probably upside down on the car, so selling th car is not a practical alternative. Selling all their worldly goods that will have to just be replace later at an extra cost is also not very realistic either. The situation just doesn't appear that dire.
They have $2500 in cash and $3000 coming soon. Put all of that against the debt.

The income stated is net. How much is going into 401k? Suspend the 401k for a bit and put that, plus the $400 already going in, towards the credit card. After your debt is paid, then go max on your 401k. Anything above that, start a Roth.

Good luck!

[disneysteve]

Selling all their worldly goods that will have to just be replace later at an extra cost is also not very realistic either.

When I suggest selling things, I'm not talking about selling the pots that you cook with or the bed that you sleep on or anything else you actually need. Most people, though, have a house full of stuff that has accumulated over time that they don't really need and may not even use anymore. Better to have $1 in your pocket than some box collecting dust in the back of your closet. CDs you never listen to (or have stored on your computer), DVDs or video games you don't use anymore, clothes that you never wear or don't fit, gifts you've received that you never even liked in the first place, etc. There is another poster who has been averaging $400/month in ebay sales cleaning out all the clutter in her house. That can help make a nice dent in the debt.

[maat55]

Cancel Netflix. Cancel XM radio. Put the car up for sale. Shop for cheaper auto insurance. Switch to a cheaper cell phone plan. Sell everything that isn't nailed down and put every spare penny toward debt repayment.

I agree 100%, the car should go, even if OP had to use 3k to get rid of it. 600 a month could fix a lot of problems.

OP, what is the balance on your loan and what is the car worth? You need to be serious about getting rid of this car.

I would rather sell and borrow for the difference than continue to loose more on the car. Let's say you owe 25k and the car is worth 20k, selling means you realize a loss of 5k, that loss already exists, selling is still a much better option than continuing the loan. Use 2k of your 5500 and put the rest towards loss, this will lower your debt tremedously allowing you to focus on CC debt.

[BlackDiamond]

I am selling almost all of my "worldly goods" because I'd rather pay off a loan and save money than have this "stuff". I am not selling my bed, practical clothes, cookware etc. But I am selling books, dvds, frivolous clothing, collectibles, etc. I am doing this to the tune of almost $400 a month. Also, I like getting rid of the clutter. Ebay is like a giant worldwide yardsale. People will buy stuff that would surprise you.

Why on earth would you pay $600/month for a car if you only bring home $2330? How old is the car? I am alarmed that the auto insurance is not higher actually. I work in auto insurance. You are paying only about $20 more a month for insurance than I am. And I have a very non-luxurious 2007 Focus with full coverage on it. I have a perfect driving record and live in a moderate risk town. If your car was newer, fancier or had a greater monetary value, the odds are high that the insurance payment would be more than $110. I'm just guessing though. You need to get rid of the car. What is the local market value on it? If possible, try to sell it. Even if you just break even with the loan.

I don't agree with cancelling Netflix. Netflix is a great, cheap way to prevent onesself from wanting to buy movies, go to movies or otherwise spend more money on entertainment.

[disneysteve]

I don't agree with cancelling Netflix. Netflix is a great, cheap way to prevent onesself from wanting to buy movies, go to movies or otherwise spend more money on entertainment.

We have Netflix and love it, but we can afford it.

Hulu.com, fancast.com, tv.com and other sites have plenty of entertainment available for free.

Redbox rents DVDs for $1.

Many libraries rent DVDs for free (ours charges but lots don't).

I think Netflix is a luxury that isn't needed in this scenario.