Increase in limit....

iVillage Member
Registered: 04-30-2003
Increase in limit....
20
Mon, 12-06-2004 - 1:49pm

At first, I thought this was a bad thing.....but, I started to think....and I was wondering your opinion on this.


I have one card that has $7k on it with 25% apr. I plan on paying off the card that just got the increase ($2k @ 14%) and another one ($1k @ 13%).


Would it be smarter to concentrate on OTHER cards that I have (I have like another 5 or so), or should I start doing the "transfer" game? As in transfer say, $3k to the 14% card and 1500 to the 13% card and pay those off, and keep transfering from the $7k card until the balance is paid off..........


and leave my other cards just where they are (pay minimums, but get rid of that 25% card)?


ugh. lol. I never know what is the best route. I mean, at least that is 10% difference.


Any suggestions? Your thoughts? Did I totally lose you?





my pet!

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iVillage Member
Registered: 02-19-2004
Mon, 12-06-2004 - 11:27pm

Thanks for posting all that. I had to wait for dd to go to sleep, and it did take longer than 15 minutes to run through the scenarios, less than an hour though.

I ran 3 scenarios. The first one is targeting the highest interest cards first. The second is focusing on lowest balances first. The third is paying off Card 2 and when it gets to zero, transfering the balance from Card 5 and then from Card 8. Before I did all that, I set it up if you just paid minimums and no extra. Using this model, you'd pay $18,682 in interest and you would not be out of debt until October 2019 (this is not even targeting or paying extra, only paying minimums until paid). I did it just to see, the scenario's below assume that when you pay a card off, you add that payment to the next target card. Just to note, I didn't assume you'd pay off Card 3 and transfer the balance because it looks like the limit is $1,000 and you'd get more benefit by paying off Card 2 and just transfering to that one.

Scenario 1 (target high interest cards first)
Under this scenario, you'll pay $4,065 in interest and be out of debt by December 2006. The first target card, Card 5, will be paid off February 2006. This is without transfering any balances.

Scenario 2 (target low balances first)
Under this scenario you'd pay $7,337 in interest and be out of debt September 2007.

Scenario 3 (pay off Card 2, transfer Card 5 balance twice, then transfer card 8 balance)
Under this scenario you'd pay $4,072 in interest and be out of debt by December 2006 (the same as scenario 1). It looks like you'd end up paying around the same amount of interest to Card 5 whether you send the $400 extra each month to Card 5 directly ($1,133 in interest paid to Card 5, paid off Feb 2006), or whether you focus on Card 2 and then transfer Card 5 balances each time Card 2 is at zero balance ($1,113 paid to Card 5, fully transfered to Card 2 by Oct 2005).

So I don't think transfering the balances gets you much. If you had to pay a fee to transfer, then it would actually cost you more than just targeting Card 5 to begin with. The only difference is that by targeting Card 5, you'll have it paid off in February 2006, and by transfering balances around, you'll be done with Card 5 in October 2005. But again, you'd have to transfer the balances twice since the limit on Card 2 is only $4,000, and if they charge you for transfers then you'd be losing money - on top of the fact that in October 2005 the remaining balance from Card 5 is sitting on Card 2 and you'll pay more interest to Card 2 becuase of that. But overall, both Scenario's 1 and 3 have you out of debt at the same time and paying the same in total interest.

The other thing to consider is that after a year of never paying late and paying balances down, you may find some limits go up even more and you can negotiate even lower interest rates. That will help you pay them faster.

Since I put this together, I can email you my spreadsheet if you want. Email me at firstamendment@verizon.net if you want it.

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iVillage Member
Registered: 04-30-2003
Tue, 12-07-2004 - 1:06pm

Wow! I'm surprised it does nothing. hmmm......


I will email you so I can see the spreadsheet that you use. Maybe it's easier than that snowball chart to move thigns around.


BTW, a BIG thanks for doing all that.







my pet!

iVillage Member
Registered: 02-19-2004
Tue, 12-07-2004 - 1:15pm
No problem. I have it at home so I will email you back with it tonight.

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iVillage Member
Registered: 04-30-2003
Wed, 12-08-2004 - 2:43am

And there you go. My APR went up to that 25% in August, and in October, they upped it to 27%. I think I'm going to ask for it to be decreased, and then close the account down, this is ridiculous.


And did I get any notice? Nope.


I wish I could get another card with a limit high enough to transfer, but I can't. =( AUGH!







my pet!

iVillage Member
Registered: 02-19-2004
Wed, 12-08-2004 - 10:11am
Hang in there. When you get the MBNA paid off, you will start paying off the other one's and if you have paid on time in the recent past they will start upping your limit - at some point you will have at least one other card with a high limit and a decent rate to transfer balances too as long as you stick to your plan and keep payments ontime, I am sure of it. I have an MBNA and I hate them too. Mine will be paid off in one week. I had it paid a year ago and then I used it for a number of things. Once I had it paid down they started upping my limit and agreed to lower my rate. I don't really care, I'm not going to use that card again. The that paying on time and paying down my debt did for me was to improve my credit, and that gave me access to other cards with decent rates. I will pay off my MBNA this month and I just transfered the balance on my Chase to a new card with 0% until November 2005. I would never have been able to get a brand new card with no interest and a $6,500 limit a year and 1/2 ago. You will get there too. Just hang in there.

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iVillage Member
Registered: 04-30-2003
Wed, 12-08-2004 - 11:44am

Thanks.


Do you think that it'll help my credit more if I pay off a ton of small ones, or the big one? I konw it may push my debt farther back, but to be honest, I want that MBNA closed. I'm thinking of just transferring it to that other larger card, pay that off, transfer until it's gone off MBNA, and then start paying other off. I'd rather let the money sit at 14% instead of 27%. This is nuts.


I guess psychologically, it's nicer to pay off many small ones, than one large one, but you know. WE do what we gotta do. ugh!


See, the hard thing is that if I concentrate on MBNA only, I won't pay it off until about March 06. And that would drive me nuts knowing I paid off only one thing in about a year and a half. Psychologically, I'd be frustrated and even more angry.


lol. AUGH. I just need to win the lottery. I'll take a million, I'm not greedy. =)








my pet!

iVillage Member
Registered: 02-19-2004
Wed, 12-08-2004 - 12:05pm
It's a tough decison. I would not pay them all off in order of size becuase according to my calculation, you would end up paying several thousand more in interest. If you want to pay off one small one to get a psychologocial benefit and then focus on MBNA that would probably be fine. If MBNA isn't your first target card, it should be your second at least. I do think one of the best strategies to get a card to raise your limit is to pay the balance and let it sit at zero. My MBNA and Chase cards both increased thousands of dollars after I paid them off last year. So if you pay off the smallest one, and keep paying all payments on time to all your cards to improve your credit score, you may end up with a higher limit card you can transfer to.

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iVillage Member
Registered: 04-30-2003
Wed, 12-08-2004 - 12:20pm

Thanks.


This is what I was thinking. Pay off the card with $2k, but has a $4k limit. Ask for an increase in the limit and hope I can transfer a chunk of the $7k card.


I was also thinking of asking them NOW for another raise, cuz I want to do a balance transfer. Heck, it's tons of money involved for that new card.


Your thoughts?


btw, thanks again, this is hleping me focus on what is more important.








my pet!

iVillage Member
Registered: 02-19-2004
Wed, 12-08-2004 - 12:26pm

I don't know how it really works, but I think if you call and ask for a limit they will critically look at your credit to make the decision. If you pay it off and let it sit at zero balance for a few months, they may increase it on their own. I have a theory that their computers go through the files and automatically up the balance on cards with zero balance and no recent activity in order to get you to use the card again. Even if they don't do it automatically, if you pay it off and wait a couple months, then call them up and say, 'hey, I really want to use this card again, i'd transfer my balance if you increase the limit' they will be more motivated to do it.

Creditors like to extend credit when you 'appear' to not need it.




Edited 12/8/2004 12:27 pm ET ET by firstamendment

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iVillage Member
Registered: 04-30-2003
Wed, 12-08-2004 - 12:27pm
Thanks. I think I'll do that. Then at least I'd be saving over 10% in finance charges. ouch!








my pet!

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