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Really need some guidance here. I’m not really sure where to start tho as this is a pretty complex situation. Apologies in advance if I ramble but I will try my best to stay on track.

About six months ago, I went over my $2000 credit limit by $300. I’m a single mom to a 2 year old going through severe health complications over the last year. I’ve never had a credit card before which is probably odd because I’m 29.

When I found out I was pregnant I figured it would be the right time to get one and I was very responsible with it until my son got sick. In the span of six months I had no choice but to charge several of his medical procedures. The last procedure went over my limit by about $300 and I was intending on paying the $300 two weeks later out of my pay cheque but that didn’t end up happening as I was laid off within a week of my child having surgery.

Obviously the bank has been charging me 35$ a month for 5 months ($25 for the first) but my minimum payments are around $55 so adding in interest, etc I’m not going anywhere. Im literally just throwing $55 away. Yes I know I got myself into this. I definitely understand that. Now I have just recently found another job but now I have a pile of medical bills (the $2300 is just the tip of the iceberg) and I’m overwhelmed. I don’t think I will be able to pay that entire $300 off within the next 5 months. Being out of work for that time period has put everything behind. I have always made the minimum payments though.

Here’s what I’m asking though. What would you do given everything in my situation? I was wondering about cancelling the card so at least they wouldn’t charge the overlimit fee right? I know that would totally mess up my credit but isn’t that what’s happening now by being over my limit every month not making a dent. At least if I cancelled it I would be making some kind of a dent in the payments. Or should I just keep paying the $55 till I get things back on track and pay at least the $300 as soon as I can?

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    Which country are you in? – Ben Miller Mar 9 '18 at 14:07
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    This article from thebalance.com discusses the details of the over limit fee in the U.S. – Ben Miller Mar 9 '18 at 14:08
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    I was wondering about cancelling the card so at least they wouldn’t charge the overlimit fee right? I'm not so sure that would fix it... probably worth finding out before taking any action based on that assumption. – HopelessN00b Mar 9 '18 at 23:16
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    Thanks so much for all these responses. I appreciate the kind and educated feedback. Unfortunately I’m a single mom and things have been very tight so there was no ‘emergency fund’ available. As for the comments about whether or not I should have used the card to pay for the medical bills, nothing I can do about that now. At the time I felt that was the only course of action to continue getting my child the specific care he needed. It is what it is. Definitely going to look into the balance transfer option. Would it be possible to just transfer the $300? – Josie Mar 10 '18 at 16:34
  • @Josie Have you called the credit card company and asked them to raise your credit limit so that at least you are not above the credit limit? Since you have been paying the minimum payment, they might be willing to do that. – user Mar 11 '18 at 16:29
28

What would u do given everything in my situation.

There is a way out. Many of us (including me) have been in similar situations. There's not a "magic bullet" to solve the problem, but you can do it with some discipline and some sacrifice.

  1. Cancel and cut up the card.
  2. Call the issuer, explain the situation, and see if you can get the fees removed by getting on a better payment plan.
  3. Stop paying the medical bills until you get the credit card under control. Talk to the billers to let them know your situation (some might offer a discount for full payment)
  4. Get on a written budget in an effort to reduce expenses as much as possible (no restaurants, no movies, etc.) until the card is paid down.
  5. Scrape up some sore of emergency fund (just a few hundred dollars,or however much keeps you from using the card for "emergencies")
  6. Work like mad to get the card paid down as quickly as possible.
  7. Once the card is taken care of, then start negotiating the medical bills, offering to pay off each one in full in exchange for a reduction in balance. If you don't get a reduction in balance, pay off the one with the smallest balance first to get it our of your hair.

Don't worry about the effect on your credit score. It's probably already shot, so the only way back is to slowly rebuild it by paying off your current debts and never let this happen again. You can ensure that by not getting another credit card, in which case your credit score won't matter.

There is a way out. It will take some time and sacrifices, but you can make it.

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    Good answer. Only change I suggest is in #4, change "paid down" to "paid off". Also, I'd suggest getting an emergency fund started. Whether it is $300 or $500 or even $1000. That should be fit in there somewhere. – mikeazo Mar 9 '18 at 15:05
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    I would recommend, rather than stopping paying the medical bills, paying a very small amount per month. Even a couple of dollars a month may keep it from going to collections. – Kevin Mar 9 '18 at 15:35
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    @Kevin You may be right, I thankfully have only had to negotiate one large medical bill, and only let it slip for a few months. Perhaps a compromise is to start by talking with the debtor first, and only paying minimums to keep it from going to collections. – D Stanley Mar 9 '18 at 15:42
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    @DStanley, If they send it to a collection agency, they are selling the debt to them, typically for pennies on the dollar. So they lose a good bit if they do that. As long as you are paying something, they are better off getting the money from you over the course of a few years. – Kevin Mar 9 '18 at 16:54
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    @user31652 -1 for insinuating OP is a simpleton. If there were an "obvious" solution, the question would not have been asked. This answer does provide possible solutions to the problem at hand. And addressing budgeting skills is important; it is often a lack of budgeting that leads to a liquidity dilemma like this in the first place. This answer explains how to address the immediate issue and how to minimize the risk of landing in the same situation later. A balance transfer, as you suggest may help in the short term, but it merely postpones the debt, it still has to be paid at some point. – CactusCake Mar 9 '18 at 21:37
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(This answer largely assumes United States, in part because it focuses on medical bills which are typically a US issue.)

One thing that I think is important to realize here, in addition to the good suggestions of talking to your credit card company as to what options you have for payments, is that paying medical bills on a credit card is a bad idea in the first place if you can't afford to pay them.

Medical bills are much, much easier to work out than credit cards, and have a much less negative impact on your credit history. You're much better off having unpaid medical bills themselves then having unpaid credit cards. They won't generally accrue interest, either, beyond whatever the original penalty is (typically something like 10%) for being late, while credit cards can accrue significant amounts of interest plus penalties.

Sometimes you don't feel like you have a choice, and that's understandable, but even if you are concerned you won't be able to get continuing medical care, there are alternatives. Medicaid (in the US) is an option, and even if you don't qualify for that, you may be able to qualify for significant reductions in premiums through the Affordable Care Act (again, in the US).

Instead of moving to credit cards, work with the medical provider. Tell them you are having trouble paying your bills. They can work out payment plans and even often will reduce the amount owed if you don't make very much income. They're used to people being unable to pay, and understand that medical bills aren't something you plan for, and often affect the poorest people the most.

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    The fact that the amounts are denominated in dollars and medical bills suggests US, but the spelling "cheque" is not in common use in the US. – Acccumulation Mar 9 '18 at 16:42
  • @Acccumulation Yeah, that is interesting; but the most likely alternate locations have socialized medicine, don't they (Canada, Australia)? I assume it is something like Vermont or Minnesota where Canadian spellings are common. – Joe Mar 9 '18 at 20:10
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    @Joe My guess would be Canada... which has had universal health care (for some definitions of the term) for a while, but also has a rather large sector for private health care services due to not everything being covered under the Canada Health Act and related issues (mostly very long wait times for most specialty health services resulting in people opting for private care soon over government paid care eventually). – HopelessN00b Mar 9 '18 at 23:19
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To add some further encouragement to D Stanely's answer...here is mine.

Like many you have fallen for the slick marketing of credit card companies. What happened to you, happened to many (including myself at one time). A couple of untimely happenings, and the CC companies are in your back pocket each and every month. You are working for them. It sucks, and there is only one way out: Be done with them. If you had a higher income, the only thing that would change is that the balances would be higher.

So you can be thankful for a few things. The first is that your son got the medical care he needed. Second that you are learning a valuable lesson for only a couple of thousands of dollars. For many it becomes much worse.

In the future it is best to avoid language like this:

In the span of six months I had no choice but to charge several of his medical procedures.

You did have a choice. For one you could have had an emergency fund that would have covered the cost. That would have required forethought and probably working extra but those options are better than the pain you are going through now.

For a person in your situation, I would highly recommend Dave Ramsey's program. It worked for me, and it worked for many others. You can listen to his radio program for free. You can buy his book The Total Money Makeover second hand for about $5 or check it out from the library. Many churches offer his eight week program, that costs about $100, which is a lot of money. However, you might be able to get a full or partial scholarship for it. If not the $5 book is all the information you need. The rest is up to you.

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If you’re in the US, there is good news. There are credit cards that allow you to transfer existing balances without having to pay interest for up to a year or more. You can keep transferring your debt to new credit cards until your financial situation improves and you can pay off your debt. Just make sure you read the fine print and to transfer your debt to a new card before interest starts being charged, or else you’ll end up with even more debt. You could keep repeating this method for decades, although I would seriously advise against that.

Type into Google search, “best balance transfer credit cards” - and start from there.

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    Balance transfers usually have a 2-3% fee, and would require applying for (and getting approved for) a new card with a higher limit, which may not be possible given the current credit history. – D Stanley Mar 9 '18 at 17:42
  • You clearly haven’t done your research. There are many cards that don’t have transfer fees. And approval generally isn’t an issue, as deeply in-debt customers are their target base. – user31652 Mar 9 '18 at 17:49
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    Fair enough, I'll concede that point (although I said "usually"), but the rest is still valid. – D Stanley Mar 9 '18 at 17:51
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You can't cancel a credit card with a balance on it. Your options are (1) keep paying it, (2) apply for another credit card or loan and transfer the balance, (3) default, (4) file for bankruptcy, or (5) try to negotiate better terms. I would start with (2) and (5). Unfortunately, with a large amount of debt, (2) will be difficult, but it's worth trying. The frustrating thing about credit is that it's easier to get the less you need it. Applying for credit cards when you first started getting these expenses would have been easier, but you can't change that now.

You should find a debt credit counseling service. Try to find a nonprofit program; given that it's a field with a lot of desperate people, for-profit credit counseling tends to attract a lot of people trying to take advantage. If you are able to negotiate a settlement with the credit card company, make sure you understand the impact on your credit score. Some deals are just the CCC waiving fees, but with other deals, the CCC agrees to not collect some of the money but still reports it to credit score agencies.

  • I would note that many "credit counseling" services just tell you to stop paying your bills altogether until you're on the verge of bankruptcy so you can negotiate to pay them for a fraction of the balance. It sounds good but the effects on your credit can be much more severe. – D Stanley Mar 9 '18 at 17:45
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Being overlimit is not a big deal, it's a minor hit on your credit report which heals itself once you fall back below limit.

As long as you are paying the minimum payment the credit card is asking for on their monthly statements, you're pretty much golden.

Dealing with medical

You dug yourself into a hole by the serious misbelief that you "have to" pay for medical procedures, which dangerously misled you into running up your credit card. This is practical fraud on the part of the hospital.

They needle you to pay up at time of service because they are charging you full-boat retail prices, 2-5 times the price insurance companies pay, which are fair actual charges. Ask them why, they'll say "so many uninsured don't pay, we have to make it up from those that do." Outrageous.

The correct tactic is wait til the bills have come in, then ruthlessly haggle with the billing department down to 1/3, even 1/4 of the bill amount - which again is what the insurers are paying, so the hospital isn't actually losing any money. Your success will vary, GPs don't have as much room to move.

Regardless, pay them all, a little bit, at your own rate that is possible for you. Most creditors are unlikely to send it to collections if you're paying at least monthly, and doctors/hospitals are less likely to report it to credit reporting agencies if you do that.

Dealing with yourself

Others are talking like you shouldn't be allowed to have a credit card. I won't say that.

But ever notice how when you don't have money, you usually find a way to work through life's problems without needing money... But when you have spare money, problems show up where the only possible solution involves a lot of money. Isn't that quite a coincidence?

Well, it's not a coincidence, it's a decision process. When you have money, you know you have money, and so solutions which require money come to front-of-mind. If you don't have money, such solutions are out of the question, and you don't even consider them and find other solutions. The trick is, do this also when you do have money.

It's easy to fall into that logic trap, especially when more than one mind is involved... And not surprisingly that will keep your bank account empty. You can imagine what happens when that pattern of thinking meets a credit card. I say shift the pattern, don't cut up your cards.

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Here are 3 suggestions that take very little effort but can help tremendously for someone in your situation.

  1. Ask your bank or credit card issuer to raise your credit limit by at least $300 (Personally I'd ask for $500). If the customer service representative says your request is denied, immediately ask very nicely to speak to his/her supervisor letting them know that this has nothing to do with their level of service. When you get the supervisor on the line make sure you start with the purpose of your call and how they can help you - "I would really appreciate if you could raise my credit limit by $500". Then explain the facts of the situation, including how you are making your minimum installment payments every months but not making any dent in your balance. If you do a good job, and get an understanding person on the other end your problem may be solved right there.

  2. If the above does not work, apply for another credit card with a credit limit that will comfortably accommodate you current balance and see if they have a balance transfer option that is free/no-fee and transfer your balance to that card. Make sure that their fees and interest rates are no higher than your current card.

  3. If you cannot get another card that will allow you to transfer the entire balance, try and get one with enough of a credit limit to cover your over limit and transfer enough to keep both cards below their individual credit limits.

If none of the above work, you could ask family or friends to loan you enough to cover the over the limit amount. Then keep paying your bank the amount that you are currently able to pay, and pay your "other lender" the overdraft amount REGULARLY till it is paid off. The implications of not paying either of your lenders regularly is only too obvious, so I'm not going to get on my soap box about that.

Good Luck and hoping you'll get out of your tough financial situation soon!

0

If I were in your situation, I would adopt extreme frugality and handle my money in a way that maximizes the speed with which the balance is paid off. Setting aside the over limit charge for the sake of simplicity, a balance of $2300 at 19% takes 29 months to pay off, if you throw $100/month at it. It takes just 18 months if you feed it $150/month. If you want it gone in 11 months, the payments must be $250/month.

Content of Frugality

  1. I would sell everything I possibly could, and make do without, or find dirt cheap or free replacements.* Methods are plentiful: Craigslist is free. eBay is costly but offers secure transactions. Facebook has various ways of selling things locally, and there are various phone apps targeted at selling hyper-locally. (And by the way, if you happen to have a phone with re-sale value of $100 or more, sell it and buy an inferior used one that works with your provider for $40. Sell $300 worth of stuff and get rid of that wicked over-limit amount and penalty!

  2. Reduce monthly expenditures. A couple of ideas: For phone service, switch to Ting, if it works for you. If you only use your phone for quick, occasional phone calls, it might. The cost starts with a flat fee of $6.00 per month. Then you pay for the minutes, data, and messages you use. For car insurance, Metromile can be very cheap if you don't drive a lot and don't mind being tracked with a GPS device. There's a modest monthly flat fee, and as with Ting, you're charged for every mile you drive. The upside to being tracked is "free LoJack™" and being able to prove to anyone who doubts you that you really did drive to some location or really did not.

I could go on and on, and I do, below, but the basic ideas are to convert possessions to cash and to spend as little as possible on services. The internet is plastered with good ideas on saving money. I recently stumbled onto the oddly named Mr. Money Mustache blog. The author is stern but good-natured. He takes questions. He's more about retiring young with a million dollars in the bank than merely staying afloat. Retiring young is something to think about after you get rid of that blasted $300.

*I mean: "sell everything!" Yes, the furniture. List a dresser for sale for anywhere from $50 (cheap one in decent shape) to $200 (expensive when new, has seen better days). Replace it with a shelving/dresser hybrid made from scavenged cardboard boxes.

Just one way to make a dresser out of boxes. Search the web for thousands more.

Structure of Frugality

This is how I handled money to get out from under credit card debt, once and for all.

  1. Write down your take-home pay. (Oops--first make sure it's all it could be. If you are expecting a tax refund next time you file, you're harming yourself financially. Tell HR you want less withholding, if you're eligible. Why? Because a tax refund isn't a boon. It's proof that you lent money to the government instead of paying down your credit card debt, and therefore paid interest on part of your balance that could have been avoided.)

  2. Write down your truly essential monthly expenses and add them all up. Rent, insurance, basic phone, utilities, childcare (I assume). (You can usually get an even-pay plan with your utility company that takes your typical annual expense and divides it by 12 to come up with a predictable monthly payment.)

  3. Subtract the sum of those necessities from your take-home pay. Is it a number or a dark hole?

  4. What's left over is for groceries, gasoline if you must drive, and debt repayment. Figure out what works for you. The amount you allocate to debt determines how long it will be until you're no longer pouring money down the drain.

  5. If there was nothing left over, you either cannot afford a car or cannot afford rent, or both.

Now, on to the part where you make contact with actual cash money:

  1. Every month, write a check for the credit card payment the moment the bill arrives, record it in your check register, and mail it. Write a check because it's less abstract (more real) than paying online. Money may be a mere idea in the grand sense, but it cannot be conjured up with wishful thinking. Reducing it to numerals on a screen that are too big (debt) or too small (savings) means losing touch with why those numbers are as they are. The debt is too big because you allowed greenbacks to leave your grasp. If you want to hold on to more of them, hold them in your hand, literally.

  2. Go to the bank (inside, to the teller) and take out your groceries and gas money in cash. Yes, I said cash. Do not use an ATM because you'd have to round up to the nearest twenty. Put the cash in an envelope, write "March 2018 groceries and gas" on the envelope, and safety-pin it to the inside of your purse. You will be amazed at how easy it is to be frugal when you treat money like it is precious. It is precious because our time on earth is precious and most of us trade our time for money. And please note that the envelope says "groceries and gas," not "fast food, restaurants, Starbucks, clothing on sale, and gas."

  3. Pay the other bills as soon as you can. You might have to wait until your next paycheck. Pay them with checks, too.

Good luck.

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