Just paid off Credit Card, now what? (pay, taxes, rate)

[leadingedge04]

So I just paid off one of 3 cards. I had a $500 Capital One card which I now brought the balance to zero. I plan on paying off a Target card that is $500 (which is down to about $300 now), and a big card balance of $5,000.

With one card down, what should I do? Should I continue to use it with small pays (eg gas) and pay it back monthly to restore my credit? Should I keep it open and put it in a drawer somewhere (or even cut it up)? I was told that my credit would dip a bit if I closed a card, is that correct?

Thanks!

[NJBest]

Using it and paying it off monthly for required expenses (such as gasoline) is a good idea as long as you stick to paying it off.

It's not in your best interest to close a card when you have a balance on another card. It will dip your score.

[wheelsup]

I've had cards with 0 balance and not used them for years. Probably better for simplicity's sake to use one card at a time.

[petch751]

Originally Posted by leadingedge04

So I just paid off one of 3 cards. I had a $500 Capital One card which I now brought the balance to zero. I plan on paying off a Target card that is $500 (which is down to about $300 now), and a big card balance of $5,000.

With one card down, what should I do? Should I continue to use it with small pays (eg gas) and pay it back monthly to restore my credit? Should I keep it open and put it in a drawer somewhere (or even cut it up)? I was told that my credit would dip a bit if I closed a card, is that correct?

Thanks!

I've been where you are and if I could help even if just by providing you a plan to become debt free it will be worth forgoing sleep right now. Remember, every time you use debt you are spending some of tomorrows paycheck. Because you have to pay interest you are also throwing some of tomorrows paycheck away. Debt robs you of your peace of mind and will only keep you in the rat race. Being debt free is worth it believe me!

First I would like to say CONGRATULATIONS on paying off one of your credit cards and being responsible enough to catch yourself before your debt got out of control. Take a couple of minutes to smile and feel that success and be proud for doing it. Ok, on to the becoming debt free plan.

DEBT FREE PLAN

Don't Make More Debt:

Put The Card Away:
Most people fail at becoming debt free because they fall into the same trap of paying off a credit card which frees up available credit, then they use the credit card "just this one time". Don't fall into the credit card trap. Put the card away for now. When you pay off all your credit cards you will remember how you worked hard to get to being debt free and hopefully you will have learned how to manage your money. You will most likely want to use credit cards again but this time you will only use them in the amount that you can pay the cc off in full each month.



Become Aware

Become Aware Of Money You Are Throwing Away:
Get a notebook and call it your something like "become debt free notebook. Get your 3 credit card statements together, write down the credit card company and next to it write down how much interest you paid to each company. Add the interest paid for the total interest paid for that month. Summarize below this months entry by figuring out and writing down how many hours you had to tolerate your job to pay the interest only portion. Also write down what you could have bought had you not thrown your money away (interest payment).

The point is to make yourself become more aware of how much money you are throwing away. You can use all the ammo for your mind you can get because the world is always showing us more neat stuff to buy. The world is geared toward getting us to part with our money.



Paying Down Debt - Snowball
Many people use the snowball method to become debt free but you must be determined to stick with it. It worked for me. See snowball plan below.

Doubling Up On Card Two:
Take the money that you were paying CC 1 and add it to CC 2 payment and pay CC2. Don't be tempted to sift off $10. Before you know it credit card two will be paid off.

Triple Up on Card Three:
Take money paid to card 1 + card 2 + card 3 and send the (total amount) to pay card three. Keep doing this until credit card 3 is paid in full. Before you know it cc 3 will be paid off.

If you can squeeze even an extra $10 - $20 on top of the scheduled payments every month it will get you debt free faster.



You Are Now Debt Free:

Enjoy having more money in your pocket
You will have an excellent credit score (lots of value)
You will have learned how to handle your money
Becoming a lot smarter than most people
And congratulate yourself for becoming debt free (most people aren't)

Last note:
The above plan worked for me and I was in much "worse" shape than you. I did work an extra job to fast forward the plan and mostly I learned from my mistake. Because I am not saddled with debt it actually feels like I am kind of rich. I can have almost anything I want (although not everything). I wish you success!

You can go to www.fico.com and get your report. There are also other people in the same position there.

Start saving at least part of your money (emergency fund)

Come back here and post along the way. I hope this helps because it will be one of the most important things you do.

[madhurajoshi]

Yes,I think you should continue to use it with small pays because its a best way if you pay off your credit card.My one friend also had a same problem but after she made small pays all is solved.

[Captain_Fingers]

Originally Posted by madhurajoshi

Yes,I think you should continue to use it with small pays because its a best way if you pay off your credit card.My one friend also had a same problem but after she made small pays all is solved.

For what its worth, let me give you a little input from experience.

First off, congratulations on paying off one card. Your next step should obviously be to pay off the rest of the cards. Once that is done, pay off the car, then the house. People may have differing opinions about the value of paying off the house, but you can cross that bridge when you get there. I went through those exact steps several years back, and have never regretted being completely debt free - which I have been for more years that I can remember now. Its not easy, but its simple and most definitely possible. It just takes a whole lot of discipline.

With respect to using credit cards in the future, you should never stop using them, because your credit score is positively impacted by using them and paying them off. I charge everything I buy, keeping track of exactly how much I have spent, then I pay off the card(s) every month - no interest, and a lot of convenience! I'm the kind of guy that credit card companies hate!

Once you're able to manage this kind of spending, you can actually start taking advantage of credit cards even more. You can find cards that have no annual fee, but have no perks. You may want to go that way. Or, you can find cards that give you all kinds of perks, like hotel rewards, or miles, but have an annual fee. Sometimes you can even get around that by canceling the card at the end of the first year - which is usually free - and getting another card. Occasionally, the company will give you another fee-free year. I've used this ploy for years. You can use them to pay essential bills - I once used a credit card to pay my property taxes and got a trip to Europe for free.

Good luck to you!

[Captain_Fingers]

Originally Posted by petch751

I've been where you are and if I could help even if just by providing you a plan to become debt free it will be worth forgoing sleep right now. Remember, every time you use debt you are spending some of tomorrows paycheck. Because you have to pay interest you are also throwing some of tomorrows paycheck away. Debt robs you of your peace of mind and will only keep you in the rat race. Being debt free is worth it believe me!

First I would like to say CONGRATULATIONS on paying off one of your credit cards and being responsible enough to catch yourself before your debt got out of control. Take a couple of minutes to smile and feel that success and be proud for doing it. Ok, on to the becoming debt free plan.

DEBT FREE PLAN

Don't Make More Debt:

Put The Card Away:
Most people fail at becoming debt free because they fall into the same trap of paying off a credit card which frees up available credit, then they use the credit card "just this one time". Don't fall into the credit card trap. Put the card away for now. When you pay off all your credit cards you will remember how you worked hard to get to being debt free and hopefully you will have learned how to manage your money. You will most likely want to use credit cards again but this time you will only use them in the amount that you can pay the cc off in full each month.



Become Aware

Become Aware Of Money You Are Throwing Away:
Get a notebook and call it your something like "become debt free notebook. Get your 3 credit card statements together, write down the credit card company and next to it write down how much interest you paid to each company. Add the interest paid for the total interest paid for that month. Summarize below this months entry by figuring out and writing down how many hours you had to tolerate your job to pay the interest only portion. Also write down what you could have bought had you not thrown your money away (interest payment).

The point is to make yourself become more aware of how much money you are throwing away. You can use all the ammo for your mind you can get because the world is always showing us more neat stuff to buy. The world is geared toward getting us to part with our money.



Paying Down Debt - Snowball
Many people use the snowball method to become debt free but you must be determined to stick with it. It worked for me. See snowball plan below.

Doubling Up On Card Two:
Take the money that you were paying CC 1 and add it to CC 2 payment and pay CC2. Don't be tempted to sift off $10. Before you know it credit card two will be paid off.

Triple Up on Card Three:
Take money paid to card 1 + card 2 + card 3 and send the (total amount) to pay card three. Keep doing this until credit card 3 is paid in full. Before you know it cc 3 will be paid off.

If you can squeeze even an extra $10 - $20 on top of the scheduled payments every month it will get you debt free faster.



You Are Now Debt Free:

Enjoy having more money in your pocket
You will have an excellent credit score (lots of value)
You will have learned how to handle your money
Becoming a lot smarter than most people
And congratulate yourself for becoming debt free (most people aren't)

Last note:
The above plan worked for me and I was in much "worse" shape than you. I did work an extra job to fast forward the plan and mostly I learned from my mistake. Because I am not saddled with debt it actually feels like I am kind of rich. I can have almost anything I want (although not everything). I wish you success!

You can go to www.fico.com and get your report. There are also other people in the same position there.

Start saving at least part of your money (emergency fund)

Come back here and post along the way. I hope this helps because it will be one of the most important things you do.

I should have read your post before throwing my two cents in. Excellent step by step approach, and highly recommended.

[petch751]

Originally Posted by Captain_Fingers

I should have read your post before throwing my two cents in. Excellent step by step approach, and highly recommended.

Thank you. My post was long so I understand but you took it a step further and bring up an important point. I agree. The OP will be establishing credit as long as he continues to pay down his debt. He is showing a history of paying on time. (don't use the grace period) pay before hand to allow a little leeway in case something happens.

Then Captain_Fingers idea kicks in. Keep using your credit card only this time you are using the credit card company instead of them making money on you. I'm also one of those customers cc companies hate. I use my cc to buy everything and get air miles and hotel stays for free. I ALWAYS pay my card off in FULL every month. I travel to Florida free every year to get out of this bitter cold using my air miles and get free hotel stays. I have enough air miles for two and we will be traveling to Italy next.

Years ago I was laid off and got into an accident. Even though I didn't have a job my credit was so good I bought a car on signature. As soon as I got a job my first order of business was to pay the car off.

When I went to get a mortgage during the hardest time to get a mortgage (that was 2 years and 1 month ago) they kept saying I was golden. Getting a mortgage at the best rate available was a breeze. I put down 20% to avoid paying PMI too and had a years of emergency fund. Mortgage companies like to see both of these and it is smart to do this. I also borrowed less than they said I was eligible to barrow and now have enough to pay the house off today. I am a little nervous because of Obama but just put another huge payment for this month. Next month I will most likely pay it off in full. I am so excited that I will be completely debt free.

I sure hope my and other peoples post encourages you because remember I was "way" worse off and if I didn't get control when I did I COULD have been on my way to possible bankruptcy due to "MY OWN" stupidity. No one else's fault, not the banks fault, no one's fault for tempting me into spending. MY fault.

The whole point of telling you this is I have learned that if you control your spending, put money aside you have more control over your life, you are happier and lending companies will trust you and want to work with you.

[dmv101010]

Lock up ALL of your cards.

Establish a savings account and an emergency fuind (EFUND). Yes, these are two different things!

[snowdenscold]

Do you have to call it an EFUND for it to work?