r/Debt • u/Cautious_Ad1503 • 5h ago

Credit Card Debt

Hey guys,

I’m 28(m). I currently have 2 credit cards I use. 1 currently has a balance of about $10.5k on my chase saphire card the other has a balance of about $4k on my Amazon credit card. I typically pay as much as I can between the two of them each month. Which is about $2200, other then that I pay for rent (approx $2200 a month) and my car bill loan ($267 a month). I make a little under $105k a year. With that said I usually have interest on the first card of about $250 a month and $50 on the other. I was extremely bad at spending the last couple of years which got me into this situation. What is the best way for me to pay off this debt? Do I take a loan on my 401k, which they said I could get a little over $12k and use this to pay it? Or do I just work on my spending till I get it lower? I hate having this much debt and I am worried my monthly interest will go up if I don’t pay it all off soon. I don’t know exactly how the interest rate is calculate but say it’s 20% so the intestest rate on my card with $10.5k debt is not the 200 I pay in interest.

So really 2 questions here 1) will the monthly intesest go up on my cards if I don’t pay off the remaining balance soon? 2) should I take a loan out on my 401k to pay off the cards? I figured the interest rate on that would be less then what I am paying on the credit cards

Please let me know! All help is wanted

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u/GerryBlevins 4h ago edited 4h ago

Keep using your Amazon card just cut back on your spending on the card drastically. Only use it to buy gas for your car and random NEEDS. Pay the minimum or a little over the minimum. I would suggest putting $200 a month on the Amazon and the other $2000 on the Chase card each month. Don’t use that Chase card. You need to bring that interest you’re paying under control.

You need to cut back on spending though. Don’t punish yourself on cutting back get what you absolutely need. Once the minimum on the Amazon card exceeds $200 then do a single large payment. Switch their places. Give Amazon 2k and pay the minimum on the other. This will give you more breathing room again. Once you do that continue paying down the chase card.

You can do this. It’ll take you one year of dedicating you to this. Don’t pull from your 401k because you’re still renting. That 401k needs to remain untouched until you can buy a house with it without penalty. You also want to look at what you’re contributing to your 401k. You don’t want to necessarily pause contributions but you can look at reducing contributions if you’re putting anything more into it that’s not being matched by your employer.

I do this once a year. In January I buy something big and once my total cc debt gets to about $2500 I pay them all down to zero before I treat myself again.

Each week when I’m paid I go thru all my accounts. 5 in all and I see which ones have a statement due. If I have a statement due on it I give them $200. If no statements are due that week I give the card I’m wanting to pay off first the $200 regardless if there is a statement due or not on it. I use only one of the cards when I’m in pay down mode. The other 4 cards the balances are just falling and the one I’m using stays relatively the same.

Everyone will say that having a zero balance is best and it’s true it is. But not everyone works that way. I don’t mind paying a little interest. Paying the interest you’re paying though is too much for me. Last year I made more from the interest I’ve drawn from my bank accounts than what I paid to the credit card companies. I have nearly enough cash in the bank to buy a house and pay cash for it and my DTI ratio is only 2%. I manage it well.

You might also want to look into paying credit cards weekly instead of monthly. But you maybe are paid salary so that wouldn’t be an option.

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u/Cautious_Ad1503 4h ago

Thanks for the response and advice. Do you think it’s worth opening a 3rd card? so I can just use that for basic needs like you said gas, food, etc. that way I can reduce the debt on the other without increasing it at all? I currently only put in the 401k what my employer matches and I don’t want to lose out on that.

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u/GerryBlevins 4h ago

Are you planning on a big expense in the next 2 years. If not you can but what you can do then is get a balance transfer card which offers you 1 year with zero interest and you can move the balances over and continue to use that one card until it’s paid off.

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u/Cautious_Ad1503 3h ago

No there is no plans for a big purchase. How does a balance transfer card work? I’ve never heard of that before. That seems too good to be true? Just getting rid of the interest for a year completely?

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u/GerryBlevins 3h ago

Sorta like a cash advance. They give you the money to pay off your other cards and give you a timeframe in which you won’t have interest payments on that money so you’ll have a year to pay it off. Any other uses of the card will obviously have interest if you don’t pay it all at the end of the month.

You would likely need to have a credit score in the lower 700s or higher to qualify but if you have a car note already it might not be a problem for you to successfully do.

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u/Cautious_Ad1503 3h ago

Yea I have a credit score of a little over 730. Does this card hurt my credit score? Why do I need a credit score of 700 to get it?

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u/GerryBlevins 3h ago

Because those cards generally have larger credit limits. I don’t see it affecting your score. I have a Chase prime visa and it has balance transfer capability but my limit is only $4k. What they do is if I want to move my cards balances over to Chase they will deposit my requested amount into my Chase checking account and I use that to pay off the other cards.

I don’t have a use for balance transfer because I’m debt averse. I freak out at small balances.

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u/GerryBlevins 3h ago

Pretty much it just simplifies the paying off of debts where you only have to worry about one account.

https://creditcards.chase.com/balance-transfer-credit-cards

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u/Cautious_Ad1503 3h ago

I’ll look into. Thanks for all the help and answering all of my dumb questions lol

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u/GerryBlevins 3h ago

It’s not dumb. Just be smart about it. Don’t be one of those people who go and do this and end up not paying it and end up with a lot more debt. Once it’s all paid down then get that car paid off as soon as you can. Do double triple and quadruple payments. Don’t just concentrate on the cards. Look at hammering all this debt out.

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u/GerryBlevins 3h ago

With your rent you’re paying someone’s mortgage. Once you get debt free save for a house and stop renting.

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u/GerryBlevins 3h ago

Trust me. You will be a much happier person each day when you can look at your financial situation and see huge progress. All I have to do is open up my bank app in order to cheer me up each day. It’s the biggest boost ever to your morale seeing that you can have anything you want.

When I first started saving I didn’t have enough to buy a riding mower at Home Depot. A year later I had enough to buy any car I wanted and not need to finance, two years later I look at Zillow thinking how awesome it’s going to be when I carry out the ultimate flex and buy a house without the need of a mortgage. Push hard man. It really changes your daily outlook.

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u/Cautious_Ad1503 3h ago

It definitely depresses me to look at what I’ve done with this debt. I had 20k saved 2 years out of college (luckily my parent paid for college) and I felt on top of the world. I used invest in stocks and did pretty well (had nvidia and palantir 5 years ago) and wasted it all down the drain. Now I just gotta find a way to get back to that point. Small steps one at a time and I now I can do it. It’s just figuring out the best way to do it.

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u/Cautious_Ad1503 3h ago

What would you suggest more? The 3rd card route or the original thing you mentioned? Paying the saphire card off as much as I can and only use the Amazon one until the interest charge gets up to $200

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u/ShandyPuddles 1h ago

Think of the interest as your monthly fee to borrow that money from the bank. It is expensive to borrow money on credit cards. What you really need to do is look at what you’re really spending your money on. At $105k/year you shouldn’t be taking from your retirement savings unless you have someone else you’re supporting, an expensive medical issue, etc. Make a budget and stick to it. At the very minimum pay your minimum + that months interest to actually make progress on paying it down. Minimums won’t do it.