Friday, September 9, 2011

Payback, or snowball?

A question to you all...

I charged a few items for PTA (which I will get the check for next week), and a big Sam's Club run to replenish our fridge and freezer after the storm).  In total...about $520 worth.  This went on CC4.

Mom and Dad were VERY generous and sent us some money to help us with the groceries.

My question:

Do I put all this reimbursement money back towards CC4, that has an interest rate of 9.24%, since that is the card I used to make the purchases?


Do I put it towards CC2, as an additional payment, since it has a rate of 11.99%?

I am still trying to figure out what my next snowball attack will be.  The medical stuff...although smaller...isn't gaining any interest, and is sort of revolving, so I know it will just go back up.   CC2....highest interest rate.  CC3....lowest balance, but has 1.99% rate until Jan. 2013.

I ran all the numbers, and CC2 seems to be the next logical choice by financial sense (due to the interest rate).  But I hate that CC4 went up, especially since I have control over that....and can just pay that back.



  1. Hi. I do not understand why you didn't charge all the post hurricane stuff to the cc with the super low interest rate in the first place and then pay that off right away so the net effect of the the hurricane would be zero on your overall finances. Is there a reason you have four credit cards? We've always found it best to have just one main card with a second one to be used as a back up, for emergencies etc. The main card should, of course, have no annual fee and should pay you back in some way for any purchases you make with it. I am impressed that you can even track four credit cards--I would consolidate just to make life simpler!

  2. The super low rate was for balance transfer only....the regular rate is 14.24%. We transferred the balance of CC1 (15.99%) and some from CC2 (11.99) to the low rate.

    We have 4 cards because we each had a CC from before we were married (CC1 and CC2). CC3 and CC4 were opened for balance transfers.

    You are right...1 card is easier, and if we had one that worked for all our needs, that would be great. But we don't, so here we are.

    Tracking it all isn't a problem for me.

    So would you say put the Mom and Dad money and PTA money on CC3, where the purchases were made?

  3. As is, I would put the money towards the card with the highest rate. So the 11.99% one.

    Why didn't you use CC1 though? It has a $0 balance so if you could pay it off in a month, which I expect you should have been able to -- especially with the money from the parents, you wouldn't have to pay any interest at all on the charges.

    Is it one of those cards that Sams doesn't take? I hate that policy.

  4. I would say put it to CC4 - where the purchases were made. I think that it will feel like progress to CC4....and just a drop in the bucket to CC2.....just my opinion.....

    P.S. I have several credit cards too - and juggle the balances around when I get 0% balance transfer offers. Sometimes having multiple cards is a good thing :) Plus - you have multiple credit cards if you ever get in a "worst case" scenario....I like knowing I have $50,000 in credit cards IF I need it.....

  5. As is I would put it towards the card with the highest rate.

  6. I would definitely send it to the one with higher interest. In the long run, that will help that card get paid off faster, then you can focus on something else.

    It would be nice to live in a world where no one had CC debt to begin with, but if that were the case, none of us would be blogging in the first place! All we can do is weigh out decisions like this one to see where we can make the biggest impact. And in the end, you'll have four CCs with zero balances, which will improve your credit score.

    Let us know what you decide!

  7. It has always been easiest for me to pay off the bills in smallest to largest. I need to motivation. Emergencies come up and unless you have a huge emergency fund you will go to a card. I know I do.

  8. I'd put it back on highest interest card, if CC 2 is charging you 11.99% ON $10,443.49 balance that means they add $104.24 dollars every month to the balance... if you reduce the balance by $500 to $9,933.49 they will charge you $99.25 dollars per month... you save 4!


  9. I say send it to CC2.

    If you had no revolving balance on CC4, then I would say keep it that way. But debt is debt. It is better to pay 9.24% than 11.99%.

  10. I say go with the one with the highest interest.


  11. It's not just the highest rate, it's the highest balance so I say that one BUT I also say do whatever makes you feel better. OR you can throw the options in a hat and pick one. I kinda feel like a personal finance rebel today, what can I say?

  12. Which action would make you feel better? That is what you should.

  13. I would go different route to all other comments. I would put it on the one with 1.99% interest (cc3) for 2 reasons.

    1. My understanding of snowball method is lowest bal to highest bal. Judging by this post you seem to be mixing snowball method with the opposite method high int to low int. Each way works, but I think one course of action needs to be chosen and followed to gain traction. Trust me I am snowballing and I know the temptation to chafe methods.

    2 500+ off the lowest balance with lowest interest will make, imo, the biggest impact on your debt. Someone already did the sums, and I am on train and can't do it, but I think off some of the other creditcards it was only going to drop your interest payments by 4 pm. Any payments you send at all to the lowest interest will almost all be debt reduction seeing hardly any interest being charged. This will mean quickly cleared off debt and that current payment will be freed up to snowball or add to your budget