After Just Paying My Monthly Statement For My Credit Card I did Some Math

[no limit]

I owe bank of america about $2,500 from a couple years back when I got behind and needed a bit of a bailout. Today I had to pay $77 which is part of my monthly due. If I got back to last months statement I can see that Bank of America automatically added $56 as a finance charge. That means only about $21 of that $77 went toward paying off my balance. At this rate it will take me about 10 years to pay this off, at which point bank of america would have made over $10,000. I have to be honest, I don't really understand how this works and maybe my math is off. In hindsight I should have probably paid a little more attention to the terms when I needed this money.

I will call them today and pretty much say that at this point I am ready to fuck over my credit and just stop paying them if they don't lower my interest rate. But I would like to spare my credit as much as possible, I'm young and I worked hard to have a decent credit score. Does anyone have any ideas on the best way to get them to lower my interest rate? This is really my first and only credit card experiance so I don't know much about it. What I do know is that having done this math I'm no longer willing to bend over and take it. I've been paying off this balance for almost 2 years now and it doesn't seem like it changed any. Thanks.

[SoCalDem]

1. The best thing you could do for yourself at this point is to ask a family member

to loan you $2500 at straight 10% interest, pay off the credit card and then religiously pay off the family member.. and then cut the damned card up or at least never use it for over a $50 expense, and pay that off all at once.

If you paid $100 a month, you would pay off that $2750 in a couple of years..

[no limit]

4. Unfortunately not an option for me.

[Warpy]

9. Excellent advice

Also, even a consumer loan from a credit union would likely carry a lower interest rate than a credit card that was jacked up because you were slow to pay in an emergency.

The best gift you can give yourself is to pay that bastard off ASAP and get rid of it. A call doesn't cost much and might get the rate reduced in light of your present good credit rating but don't count on it.

Just remember every dime you pay toward the principal is a dime they can't charge you on, so forget those minimum payments. Just live on rice and beans and pay it off.

[villager]

2. the thing is, once you miss a few payments in a row, banks are often willing to settle

...for lower amounts to "settle" accounts...

It's kind of a nerves thing (and letting your credit rating to roller-coasters, until they sign off on your account...)

Don't just take my advice for it, of course, but look into the "debt settlement," etc. In other words, corporations are free to make counter-offers to settle their debts.

why can't we -- the taxpayers who subsidize them -- do the same?

[no limit]

7. Thanks. Do you have any idea how badly something like that would affect my credit score?

[MindPilot]

12. define "badly"...

Any negative item will have a negative effect. Exactly how much of a negative effect is determined by the extremely complicated and proprietary formulas the credit recording companies use to generate credit scores.

But the bottom line is you will have a harder time qualifying for credit and it will cost more more when you do. And since employers also use credit scores to evaluate applicants, it could keep you from getting a job.

[zipplewrath]

3. Refinance

Do you have a car good enough to borrow money against? Belong to a credit union? There's probably a way to "refinance" that loan to more reasonable rates where you could pay it off in about 5 years or less. If you are only paying $77 on such a loan, you aren't paying enough. If you CAN'T, then I wouldn't worry too much about credit scores. They're only good for getting new debt and you shouldn't be doing that. There are nonprofit credit counseling services in most large communities. They could probably help you sort out your options. One word of caution, they might suggest you sell an asset (Car, bike, TV, etc.) to get a jump start on paying it down.

[no limit]

6. I actually owe more on the car than its worth right now

and I dont see needing credit anytime soon. But I don't want to screw it up for 7 years, I could see me wanting to buy a house in the next 7 years.

[MadHound]

5. A couple of suggestions

First of all, as far as your interest rate goes, the only thing that I would suggest that you explore is taking out a small loan, with a fixed rate, and paying off your balance that way.

Next suggestion, and the most important one, is that once you've paid off your balance, cut up the card and never, ever get a credit card again. Those things suck your life and money right out of you and you are better off without them.

If you really don't want to carry cash, get a debit card, but with the way they're starting to charge fees on those I would go with a cash only basis.

I've been card free all of my life, I work on a cash, check, debit card system and it has helped me immensely. I don't have to worry about what my credit card company is going to do to me, I don't have the extra bill coming every month, my credit rating is excellent, it is simply the best way to go.

[Born_A_Truman]

8. Use this website

http://www.bankrate.com/calculators/managing-debt/minimum-payment-calculator.aspx

I used it to figure out how to pay off my cards early (if you can).

[no limit]

10. Wow, thank you. That's a great web site

If I pay $100 a month I can pay it off in 36 months, if I pay the minimum payment it will take 218 months. That's nuts!

[AnneD]

14. A program that has helped us.....

Dave Ramsey's Total Money Makeover. I don't agree with his politics but he does give good money advice. You seemed to have had a good wake up call. Hubby and I have been credit card free for 7 years now. Our aim is to be debt free and are 2 years away from that.

try this site...

www.daveramsey.com

He has some freebies and good advice.

[MindPilot]

11. What's the maximum you can pay per month?

Don't risk your credit rating for 2500 bucks; it will take a decade to fix that.

You have to take a mind set that paying off this card is THE most important financial obligation you have right now. Will you get an income tax refund? Use that toward the credit card, any extra cash you get from odd jobs or whatever, pay off that card. The faster you pay it off, the less it will cost you in the long run.

Also start using some financial software like Quicken. It will help you keep track of where it goes, set up a budget and rein in unnecessary spending.

[caraher]

13. Minimum payments are only for desperate circumstances

Of course it takes forever to pay off if you pay the minimum. Always pay more if you possibly can!

[cbdo2007]

15. If you still have decent credit....find another card that will let you transfer the

balance for a very low interest rate, even if you have to pay a balance transfer fee and that will at least buy you some time.

Here, these are all 0% APR balance transfers for 6 months-1 year though they will have a BT fee. Still worth it to get back on track.

[dionysus]

16. they're automatically going to add the finance charge, it's interest you legitimately owe. you have

to pay (way) more than the minimum due, because just paying the minimum due sets you up to pay needless interest for years. i always pay 50-100 more than the minimum balance when i can afford it.

that is, if you can afford to pay extra.

i have this problem with my student loans. if i could afford to pay a little extra, i could take years off the life of the loan.

[cbdo2007]

17. Also, just paying $10 more than the minimum will help your credit score.

Then, see my post regarding the balance transfer because also after you transfer the balance, pay more than the minimum.

[dionysus]

18. agreed. i've transferred balances as well. if you can afford to it's essential to pay more than the

minimum. i can understand sometimes that you can't afford it, because it's happened to me.

but you can beat them at their own game if you say, pay triple the minimum. i still have one card i'm working on paying off but i've largely switched to cash purchases.

[gratuitous]

19. Something very similar happened to me about 20 years ago

Almost the exact same amount. I gritted my teeth, bit the bullet on discretionary spending, and threw $150 down the yawning rathole every month. It took a couple of years, but I finally got it paid off. Every expense went through the "do I really need this" filter, and I was ruthless in chopping my personaly budget. Entertainment was reduced to a puzzle magazine every other month or so. If I wanted a diversion and it wasn't paid for, I'd look at something else, like go for a walk or browse through a shopping mall.

Your math is probably spot-on; I'd advise cramming down every last penny you can in your personal budget, and upping what you pay the bank until that high-interest portion is retired. In the end, it actually benefited me in a way, such that I'm still reluctant to spend a lot of money on frivolities, and my frivolity filter is pretty wide.

[malaise]

23. That's the only approach

A limited frills life is stress free.

[Bill McBlueState]

20. Wow, you posted about your personal finances on DU

Be prepared to take a lot of crap from people who think they're better than you!

[cbdo2007]

25. Actually, this person is taking personal responsibility for their finances...

admitting they probably didn't read the terms, have worked hard on their credit, and though he mentions calling the CC company to just give up he would rather work on it all to salvage his credit score.

This isn't anything like the typical finance post on here how the government is trying to screw them out of all their money and the banks are all criminals and under no circumstance should the poster be responsible for paying off the debts they've racked up for the past 20 years. Those are the people we sh*t on. This guy is alright and is gonna be in good shape after he gets this debt paid off himself.

[beyurslf]

21. Every dollar over the minimum pays down the balance. Can you afford

to pay $100, instead of $77? No matter what, keep paying the $77 (or higher) even when the statement lowers your minimum. The payment listed on the bill is designed to keep you in debt for as long as possible.

[malaise]

22. Join a credit union and save $20 a month

After a year take a loan and pay off the credit card thieves.

[Vinca]

24. $2,500 isn't enough of a debt to ruin your credit over, especially

if you plan to go house hunting at some point. If you pay online, you can make multiple payments every month. Look around and see if you've got any "stuff" you don't especially want any more and sell in on ebay or have a yard sale or take it to a consignment shop. Throw everything you can spare at the credit card bill. The sooner it's gone, the better. My incentive for working on getting out of debt is the knowledge the bums won't be making a dime off me pretty soon. I'd rather live without material possessions than feed the greedy bankers. You'd be amazed at the good stuff you can find at thrift shops, yard sales and church bazaars. Credit cards are good to have in case there is an emergency and that is all.