Credit card debt in marriage

7 comments

1. Find a card with zero percent on balance transfers for several months. It might cost a little in transfer fees but it’s worth it. Then try to pay the 11,000 off in the time of zero interest

2. If you have some assets you can use as collateral, like a home with enough equity, you may be able to get a personal loan so you can consolidate both cards by paying them off, then you just have the loan payment.

   When my wife and I moved to Minnesota in 1994, we didn’t have any collateral, and just started full-time professional jobs, so our approach was different.

   First, we called each credit card we had and asked if they could lower the interest rate. This means that what you pay them will eat more of the balance, instead of just the interest.

   Second, we asked if they could do balance transfers. You have to be careful, because some cards (at least in the 1990s) looked at this as a special kind of cash advance. Different cards have different rules about balance transfers, and may give you a lower rate.

   The balance transfer technique might work if one of your cards has enough credit to cover the other. Suppose your $7,000 card had a limit of $15,000, so you could easily pay off the $4,000 card via a balance transfer.

   Third, we had to decide which card we wanted to keep. As a couple, we didn’t need separate credit cards; we could just be on one account. So we looked to the card with the best interest rate and the highest credit limit as our target card. What this meant was when we paid off any other card, we closed that account. That way, we weren’t tempted to use the card again.

   Fourth, our approach to paying off the cards was to make sure we made at least the minimum payment for each card. However, any extra money we could spend to pay down the debt would be targeted on one card at a time. Let me explain.

   Suppose we had cards A, B, C, D, and E. Suppose our minimum payment was $50 for each card, so we’re spending $250 a month in minimum payments, but we have $300 a month we can afford to spend on debt. What we do is take that “extra” $50 and spend it on card A, so it gets $100 a month.

   Once we pay off card A and close it, we then *add* what we were spending on A to our card B payment. That means we’re now paying $150 for card B every month. Once we pay B off and close it, we add that $150 to the $50 we’re spending on card C, and so on.

   By doing this, we were able to close down all our credit cards, and get to our “goal” card. We got both our names on that account, so it was shared. It took time, but we couldn’t find other ways to do it.

3. Eek! Paying minimum balances with no new charges is often something like 30 years of paying. Add it all up and you’ll pay mountains of interest so that $20 trip to McDonalds could end up costing you like $80 over time (so to speak).

   /r/personalfinance is a great sub to discuss these challenges.

4. Never spend more on your card (one account with 2 cards) than you can pay off in full each month. You will never get anywhere paying minimum payments. College loans work the same way. We paid them off by making double and triple payments each month.

5. Just follow the Dave Ramsey method. People love to hate on him but no one denies his methods work. I mean they have to because the basis is to live on less than you make lol.

6. talk to the bank or a financial advisor and see if a line of credit will be better or maybe a personal loan where the interest is much lower. Credit card interest rates are extortion.

7. Get a handle on your spending first. Then pay it down with whatever you can safely handle each moth.