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Mdeleon1

Apply cash windfall against credit card balance approach?

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My current credit card debt looks like this:

 

Acct1 = $13,000

Acct2 = $7,000

Acct3 = $6,000

Acct4 = $4,500

 

In a couple of months, i will be getting a cash windfall of $15,000 and have been trying to determine the best approach of applying that cash against my credit card overall balance. I have 100% on-time payment history and just want to start clearing out the debt balance,

 

Should I use it to knock off the highest balance in one shot or spread out across all the accounts?

 

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In 95% of these cases unless there's a special situation (IE: I need to apply for a house or car in the next few months, or income and other limits are where lowering all to achieve a score could get a 0% offer) I advocate applying the funds to the highest interest rates first, which isn't provided above, either.  Do take a look for the Credit Card Spreadsheet, however, as it can help easily factor utilization ratios, which if you're going for a score boost, would be the crux of the question.

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Here are the accounts, limits, rates and balances. I do plan to eventually get balances down to $0 for good. I am planning on purchasing a home in the next 9 months and trying to determine what is best approach to position my financial status when I submit for home loan pre-qualification application say around March.

 

Best approach for using the $15,000 windfall in November and then having an extra $1000/month to pay towards balances afterwards. 

 

  Interest Credit Limit Current Bal Min Payment
Chase 25.49 7000 5338 152
Costco/Citi 16.99 10000 6439 164
Suntrust 21.74 10500 7878.44 221
AMEX 24.49 15000 13452

402

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As another element in the calculus...what sort of retirement plan do you have set up?  Do you have an emergency savings account set up?  If neither of those exist, then at least some of this windfall should be applied to those categories. 

 

Beyond that...what is the limit on each of the cards mentioned and at what APR are the balances sitting?  How much more than the minimum are you typically paying each month?  What other lines are on the report?  What steps have been taken to slash spending that had allowed the balances to get to that level? 

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I do have a 401k with 100K and growing. Limits and APR listed. Other line is car loan of $600 a moth which does not impact amount towards credit card balances. 2 separate occurrences caused credit card balances to reach current status. Those no longer exists. 

 

 

Interest Credit Limit Current Bal Min Payment
Chase 25.49 7000 5338 152
Costco/Citi 16.99 10000 6439 164
Suntrust 21.74 10500 7878.44 221
AMEX 24.49 15000 13452

402

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1 hour ago, Mdeleon1 said:

I do have a 401k with 100K and growing. Limits and APR listed. Other line is car loan of $600 a moth which does not impact amount towards credit card balances. 2 separate occurrences caused credit card balances to reach current status. Those no longer exists. 

 

 

Interest Credit Limit Current Bal Min Payment
Chase 25.49 7000 5338 152
Costco/Citi 16.99 10000 6439 164
Suntrust 21.74 10500 7878.44 221
AMEX 24.49 15000 13452

402

 

11 hours ago, cv91915 said:

Highest APR first.

 

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18 hours ago, Mdeleon1 said:

I do have a 401k with 100K and growing. Limits and APR listed. Other line is car loan of $600 a moth which does not impact amount towards credit card balances. 2 separate occurrences caused credit card balances to reach current status. Those no longer exists. 

 

 

Interest Credit Limit Current Bal Min Payment
Chase 25.49 7000 5338 152
Costco/Citi 16.99 10000 6439 164
Suntrust 21.74 10500 7878.44 221
AMEX 24.49 15000 13452

402

 

If you have otherwise outstanding credit, no delinquencies/etc, aka score that with these under recommended levels would be in the 700 range, I would actually consider getting all under 50%, then purely highest APRs.  Meanwhile, hitting under 50%, I'd ask for CLIs on eligible cards to reduce individual utilizations, and let that report, as well as lower APRs while carrying the balances  (Can't hurt to ask for a lower APR, the worst case you stand exactly where you are now and nothing lost).  If those adjust, it might change what I'd pay down first, but as it stands, I'd use about $12k of it to get everything to 49.49% utilization (And almost $8k of that is exactly where it should be, on the highest APRs, incidentally) 

 

However, what that does is open a path to a 0% balance transfer, which could save you immensely as you pay down the rest of the balances.  You have BofA Americard, CapOne Quicksilver, and Discover IT BT card as solid contenders IMO that give you 15-18 months at 0% as you don't have cards with them yet, and they're usually good with credit lines (Obviously YMMV), assuming you wait the partial month 'til after your payments report (Or get special reporting).

 

NkN8YIx.png

 

To get to that 49.4% (So it doesn't round to 50% even), the following amounts are to each:

Chase: 1,877

Costco/Citi: 1,495

Suntrust: 2,687

AmEx: 6,036

 

That uses 12,095 of the 15,000 windfall.  The rest (2,905) I'd put on the Chase with highest APR (Unless they adjust, in which case, highest APR is the target).  Once all those have reported the lower utilization, you should also see a score bump, at which case I'd apply for one of the BT cards listed above.  Mind you, this is my personal view of how I'd attack such a target, and is not lawyery-fiduciary advise, etc etc.

 

Alternate bottom line:  As it stands (No APR adjustments granted) Taking your numbers above, I would definitely pay off the Chase card, and put remainder on AMEX.  That's the epitome of "Highest APR first"

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1 hour ago, Zanshiro said:

I like how my over-analysis/hypothesizing killed this thread. >_>  Le sigh.

oItBvk1.jpg?1

 

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