Do you like math? CC payoff help

[tinyrev]

Hello! I hope I can post this question here, apologies if I have erred!

Here is my situation. First let me say I have a lot of embarrassment about my credit card situation but I’m working on it and have been meticulously budgeting to get everything under control. I have issues with math but even worse, no one ever really has taught me to manage my finances and I’m self taught, though recently I hired a coach who is really helping me.

I have two credit cards and I am wondering how to optimize paying them off. Should I throw more at the high interest one to pay that off and then target my 0 interest card? The problem w the 0 interest card is I’m on a 21 month deadline to pay it off.

Current budget for credit card payoff: $700/ mo
(some months I’ll have more but this is the minimum I’m allocating)

Card 1:
0% APR for 21 months
Time to payoff: 21 months
Balance: $7900
Min: not sure but probably around 200, it’s a new card

Card 2:
15.15% APR
Time to payoff: ideally I would like to pay off within 24-36 months
Balance: $9400
Min: currently 200/mo

Current math:
Card 1: I’ll pay off on time in 21 months at payment of $377/ mo

Card 2: I’ll payoff in 36 months at monthly payment of 292/ mo

What do you think of this? Is there a world where I should pay more on card 2 to save on interest and snowball that into card 1?

Thank you so much.

 

[monetb]

@tinyrev What’s your budget to pay off debt? Have you cut out everything you can and extra spending.

What you have to spend monthly may change my answer.

 

[tinyrev]

@monetb I know it’s buried in there but the budget is 700/ mo. Some months maybe more. thanks!

 

[monetb]

@tinyrev Sorry for missing that. I’m a avalanche debt payoff person. But you wouldn’t pay off card 2 and take care of card 1 before the 0% period ends so I think you’re on track with your approach. Pay the $377/mo to card 1 and throw $323 at card 2.

I want to be clear that you should scrape together any extra funds you can and stop using credit cards all together and be bare bones on your budget because if you start today you will be done April 2026. But that’s only if you don’t accrue more debt. You can be done sooner if you find more money to put towards card 2.

 

[tinyrev]

@monetb Thanks! That confirms what I thought. I definitely have worked as much as I can on my budget and I know what is at stake. I’m working with a financial advisor and meeting her every month so she holds me accountable. I definitely hope to throw more money at this as I am able. It’s definitely quite an undertaking though. Anyway thanks!

 

[monetb]

@tinyrev No problem. You can definitely do it! 2 years seems long but it will go fast as long as you’re consistent. I didn’t set up and stick ti a budget so it took me longer to pay off my cc debt back in the day. Now that it’s gone and I just pay off my monthly expenses it’s really nice. You can do it!!

 

[tinyrev]

@monetb Thanks so much. It’s daunting but hearing other people have done it is encouraging!

 

[johnnie4jesus]

@tinyrev If that 0% is a deferred-interest offer, the entire amount of back interest will be added to the principal if you don’t pay it off by the end of the period. Strategy:

You should pay $395/mo on the 0% card, which will pay it off one month early. That leaves you $305/month to put on the interest-bearing one. Then, and this is the important part, on month 21 and after, you raise the payment on the interest-bearing to the full $700 (because the other will be paid off).

If the 0% is a true 0% promo, your balance at the end of the promo will simply be transferred from the promo rate to the regular rate (no accrued back interest). Strategy:

Pay the minimum on your 0%, put the rest on the interest-bearing card. After the promo expires, re-assess based on the new interest rate (you didn’t mention that so no way for me to calculate.

Be VERY SURE you know which kind your 0% rate is.

Also, this is all assuming you don’t put another cent on either of those cards. Neither snowball nor avalanche methods work as advertised if you’re still spending.

 

[tinyrev]

@johnnie4jesus Thank you! Ah yes you’re right that I’ll actually pay off the higher rate card once I put the full 700 to it (after paying off the 0 card).

I also agree on paying off the 0% card a month early. I can definitely up my payment by 20 bucks to achieve that.

And who knows, i might get some kind of windfall (tax return, raise, etc) that will help me accelerate things.

I’ll also check my terms, good advice. My plan though is to pay it off so I don’t have to worry about it again.

Thanks so much.

 

[someorder2]

@tinyrev At the plan you laid out, you pay a total of $2,739 in interest.

If you are able to up your payments $800/month, then you can pay off both cards in 21 months and pay only $838 in interest by paying the high interest card off first.

 

[tinyrev]

@someorder2 Thanks. Great feedback. I’ll try!

 

[someorder2]

@tinyrev Put all your $ towards the cardcharging you interest then move on to the 0 interest. There is absolutely no reason to pay any money at all to the 0 percent (unless you must make minimum payments) .

 

[tinyrev]

@someorder2 Thank you for replying. Well there is reason to think about the 0 interest one bc I only have 21 months to pay it off. I could put my whole budget to the higher interest card but would I pay off the 0 interest one in time… ??
That is the math part that has me stumped

 

[milki]

@tinyrev Did the math, if you pay 700 bucks total no matter what towards credit cards you would pay $2,505 in interest under your current strategy.

If you pay off the one with interest first then do 0% you would be done 2 months faster and only pay $1,515 in interest.

Save yourself 1,000 bucks and pay the one with interest off first! Your fear is that if you don’t pay off the 0% in 21 months then you’ll start accumulating interest… you are already accumulating interest on your other card. Hope this helps.

 

[milki]

That’s also assuming $200 min payments for each. If you can put even more towards the interest it’ll go faster and save you more money

 

[tinyrev]

@milki Thank you! I was doing the math and found I would need about 16 months to pay of the 0% card and I just dk if I’ll pay off the 15% card in time to do that, given that I have a 21 month deadline before the 0% ends and higher rate kicks in

 

[milki]

@tinyrev Trust me, the right move is to let the 0% wait until you’re done with the other one. Tell me, what’s worse.

15% loan on 9500 for 16 months just sitting = 1800 in interest that you pay. And that’s before you’d even start. Add 800 on interest for the time it take to pay it off. 2600.
Or not having the other card fully paid off but close later on when the high % starts.

You were asking for the math, and the math says to take advantage of it being 0%. I expect you to save over 1,000 if you do this strategy. If you do the other strategy I anticipate the credit card company’s will make an extra 1,000 minimum off of you

 

[tinyrev]

@milki Thanks. Well the 15% wouldn’t be just sitting bc I would be paying towards it.

The problem w the 0% balance transfer cards is they can tag on all the missed interest from the intro period if you don’t pay the whole thing off before the end of the intro. I will verify this but this is what I was warned about by my financial planner. Thus the strict 21 month deadline.

I’ll verify this though, you make a good point!

 

[milki]

@tinyrev Interesting. I’ve never heard of these cards having this. I believe that is a misunderstanding and what they actually mean is that the high interest rate will start again but with whatever balance you have leftover.

I would highly recommend reading the details on this card and show your findings to your planner. Good luck!

 

[joannemaree]

@milki It’s probably not a misunderstanding. Banks lure people in with these 0% balance transfers, hoping they don’t pay the balance off by the deadline. Banks are in the business to make money.