Timeline for What should I do with $4,000 cash and High Interest Debt?
Current License: CC BY-SA 3.0
17 events
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| Sep 12, 2017 at 17:34 | comment | added | iheanyi | @GaneshSittampalam yes, in cases where the minimum is that low, you're correct. | |
| Sep 11, 2017 at 18:37 | comment | added | Ganesh Sittampalam♦ |
@iheanyi not if the minimum is (1% of principal) + interest - in that case a directing a payment to the highest interest card will always reduce the next minimum payment by the most.
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| Sep 11, 2017 at 17:19 | comment | added | quid | @GaneshSittampalam I went back over my spreadsheets on this topic and it seems I did remember correctly that it wasn't always advantageous, but I incorrectly attributed it to the minimum payment, when my example sheet included card annual fees, in that scenario knocking out the higher annual fee card first in spite of the lower interest rate was the lowest cost way to go. My mistake! | |
| Sep 11, 2017 at 15:43 | comment | added | iheanyi | Paying off the 23% debt first can also make sense when you look at monthly minimum payments. By eliminating the monthly minimum on the 23%, you increased your margin for error/emergency by that amount. | |
| Sep 9, 2017 at 17:58 | comment | added | Ganesh Sittampalam♦ | @quid I don't see how it could - at any given time if you are borrowing a total of X between the higher and lower interest cards, the more of X that's on the lower interest card, the better. | |
| Sep 9, 2017 at 15:57 | history | edited | JTP - Apologise to Monica♦ | CC BY-SA 3.0 |
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| Sep 7, 2017 at 17:14 | comment | added | quid | @Grade'Eh'Bacon, it's not always. A typical minimum payment is 1% of principle + interest. Paying 1% of principle + interest toward the lower interest card in order then sending the remainder to the higher interest card may actually take longer than paying off one card entirely to commit the funds more fully to the higher interest card. It's definitely usually faster to favor higher interest debt in repayment plans, but not always because of required minimum payments. | |
| Sep 7, 2017 at 8:34 | comment | added | Eric Duminil | Great answer. The momentum you mention has been described as "debt snowball", here's a related article on get-rich slowly. | |
| Sep 6, 2017 at 16:18 | comment | added | Mindwin Remember Monica | Paying off the 23% and then sweating for getting over the 26% makes sense if you want to create a habit of making more money then you spend. It is a good financial health objective. Getting a single goal in front of you (the untouched 26% debt) and work out to gain those financial muscles. | |
| Sep 6, 2017 at 16:06 | comment | added | Freiheit | There is also a psychological impact of having that account paid off. Its one less bill every month and one less line item on the budget. | |
| Sep 6, 2017 at 15:11 | comment | added | Pete B. | @PattiReiss you can do it, you can whip this. Budget and follow the process you will get there. This is coming from a reformed over spender. | |
| Sep 6, 2017 at 15:05 | comment | added | Grade 'Eh' Bacon | @Zibbobz Mathematically, paying off the higher interest debt first is always the fastest way to pay everything off. Of course, as Pete points out, because there is so much less on the 23% card, that there may be a worthwhile 'morale boost' to paying that one off first. | |
| Sep 6, 2017 at 14:49 | comment | added | Zibbobz | Another advantage to paying off the 23%er entirely is that it will be gone forever - meaning you can focus all future payments entirely on the 26% debt - though, admittedly, I'm not sure if the math would add up to saving you more in the long run. That depends on how much of the 23% payment you commit to your larger debt, and how long it takes to pay off. | |
| Sep 6, 2017 at 14:31 | comment | added | Patti Reiss | I do know I need to make a change. Small steps in the past few months have gotten me to this point already. I know it wasn't smart, and I know I need to work at it. I'm trying to look long term and not just make it to the last day of the month anymore. | |
| Sep 6, 2017 at 13:49 | history | edited | Pete B. | CC BY-SA 3.0 |
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| Sep 6, 2017 at 13:35 | comment | added | MSalters | The 20K estimate looks correct. That means $5200 in interest; the other card incurs $690 in interest. That's indeed emergency territory. | |
| Sep 6, 2017 at 13:23 | history | answered | Pete B. | CC BY-SA 3.0 |