Need credit cards debt advice
January 14, 2010 3:47 PM   Subscribe

Help with credit card debt! As a recent graduate struggling to pay off my student loans, I want to get a handle on my debt situation. I have about $6000 in credit card debt, all on 3 cards with bank of america. B of A just raised my interest rates to about 25% each. I have tried to transfer my balances to other cards with lower interest rates, but no cards will let me because my balances are too high! Help!

Is there another way to consolidate credit card debt without it impacting your credit rating and if you don't quality for new credit cards? I don't ever need to use my credit cards again, I just want to pay them off. Thank you so much!
posted by tessalations999 to Work & Money (14 answers total) 6 users marked this as a favorite
I suggest going to your bank and talking to a representative. Try to secure a line of credit; they generally charge prime + a few percent depending on your credit rating.

This is something I was able to get in Canada YMMV.
posted by axismundi at 3:54 PM on January 14, 2010

It depends entirely on your credit score. If you can get approved for a personal loan, that'll surely be at a lower rate, but if you're carrying a high debt-to-income ratio, that might not happen.

You may have to think of novel solutions, like having someone you know (a relative) lend you the money and either trust you to pay them back or set up a Circle Lending-type account.
posted by xingcat at 3:56 PM on January 14, 2010

Yeah if you have something you can put up as collateral--say a car or the title to a house or stock in a company--you can get a secured loan with a lower interest rate. Of course, if you miss payments on that loan you're equally screwed.

Alternatively, perhaps there is someone who can loan you $6,000 and you can pay off your credit cards in one fell swoop and pay back that person at a much lower interest rate. $6,000 may be doable to some people. Or it may be impossible.

But in the grand scheme of things, $6,000 in credit card debt is not that significant, though the interest rate surely will increase that over time if you don't start dealing with it right away.
posted by dfriedman at 3:57 PM on January 14, 2010

it is always worth it to try and call bank of america to see if they'll lower your rate. Usually banks will review your situation twice a year.
posted by TheBones at 4:04 PM on January 14, 2010

"Not that significant" meaning other people have muh larger balances. I understand it's significant to you.
posted by dfriedman at 4:05 PM on January 14, 2010

Try a non-profit consumer credit counseling service/agency. They will not consolidate your debt but they can negotiate with your creditors for a much lower interest rate. You would make a single monthly payment to the agency - which they disperse to your creditors.

One word of caution - these agencies usually put people on a pretty aggressive payment plan - you will not have much say in what your minimum payments will be if you want to enroll in a program. The good news is that most of your payment will go towards principal and if you stick to the program, you should be out of debt in 3-4 years.

As for your credit and learn. Your credit is already pretty banged up so no use fussing about it now. The only thing you can do now is pay off what you owe quickly and don't make the same mistake again.

And oh case you were thinking about it...don't even consider going into more debt - even if you think it's in the service of paying off what you already owe.
posted by space_cookie at 4:13 PM on January 14, 2010 [2 favorites]

We had a similar situation with B of A (blasted evil empire that it is), and we declined the new rate. It closed our credit account with them and probably impacted our credit score somewhat, but we're not planning to buy a home or car anytime in the next five years so we figured it was worth it. You may want to see if it's not too late for that option.
posted by chihiro at 4:15 PM on January 14, 2010

Head to a credit union for a personal loan. I recently consolidated about that much consumer debt onto a 8.99% 5-year personal loan (law school was expensive). Your credit is going to have to be pretty shitty for them to turn you down, as you aren't actually asking for more credit.

Get the personal loan, then cut up your cards and make a budget. This can be made to work. Make your payments, and your credit score might actually go up.
posted by valkyryn at 4:20 PM on January 14, 2010 [1 favorite]

I'm with xingcat - this may be one situation in which you actually could benefit from a personal loan. You can get these from, e.g., Discover. Google "discover personal loan" - I have no affiliation with Discover, I don't recommend them over anyone else, I just know they offer this type of product.

What you'll do is apply for a fixed amount of credit with a fixed payoff schedule (typically 24, 36, or 60 months) at a fixed interest rate. It may be substantial - maybe 10+% - but probably lower than your current rate.

This may be useful in your situation because it saves you money over your revolving interest rate, the payments are predictable, and you can't (easily) add more debt on top by simply whipping out a card next time you're at the store - though they may send you ads to entice you to increase the line. So it goes.
posted by rkent at 4:22 PM on January 14, 2010

If you belong to a local bank or credit union, you can apply for a debt consolidation loan. However, if you are declined, it will affect your credit. In today's economy, a lot of small credit unions are being much more careful about who they lend to.

I was in this situation and had to negotiate a lower monthly payment and do that for a while until I had more money to pay them off in larger chunks. I'm sure I paid them tons of money in interest over that time, which sucks, but at least I'm out from under it now.

Something else: I have a Citi credit card that I just paid off, but a couple of times I forgot to make my monthly payment. It wasn't super late, but when I went to pay it online, it made me fill out this questionnaire about why I couldn't pay it, and when I could pay it again, and what source of money I'd be using, etc. It offered me deals where I could get a lower APR, or some other options. I didn't take them because I had the money, but had just forgotten to pay. Maybe these types of options are available through BoA?
posted by ishotjr at 4:29 PM on January 14, 2010

With no significant employment history and a high level of debt for your income, I think people are a little bonkers if they think you'll be able to get a personal loan to cover it (especially under the new lending rules), but by all means try.

We had a similar situation with B of A (blasted evil empire that it is), and we declined the new rate. It closed our credit account with them and probably impacted our credit score somewhat, but we're not planning to buy a home or car anytime in the next five years so we figured it was worth it. You may want to see if it's not too late for that option.

I came to say more about this, because I just went through this process with B of A, dropping my rate from 29.99% to ~10%. The effect of it closes your revolving credit account and converts the balance to a 60 month installment loan. On $10,000 of debt, this took my monthly payments from about $400 minimum to $210 flat for 60 months. There is no advance prepayment penalty, meaning that if I develop a good savings account or have a windfall, I can pay off early.

Some further comments about the process: You typically need to show financial hardship, i.e. for me there was a layoff in the family. They will ask about your income and your other obligations: rent, utilities, food, car payment, student loans, etc. You must be "approved" for the program, i.e. it won't be granted to give you the convenience of a rate reduction, rather if your expenses are so close to income that you cannot reasonably pay. A big warning is that if you apply for additional credit with any other creditor during the time of the installment loan, B of A reserves the right to cancel the arrangement and re-instate the original interest rate (on grounds, they say, that clearly your financial circumstances have improved, since you are obtaining new credit).

I am sure this had some kind of effect on my credit score, but for me, those are teardrops of a tiny bunny in all the oceans of the world. The worth of my credit score is far outshone by the worth of not becoming delinquent on multiple obligations, as would have happened had I continued the pre-reduction minimum payments.

Also, see these "secret backdoor" phone numbers for B of A published by Consumerist, if you want to give it another go.
posted by bunnycup at 5:24 PM on January 14, 2010 [2 favorites]

I recently got a secured loan at my credit union at a 4.7% interest rate. Granted I no longer own my car, the credit union does, but I'm also not carrying over $7000 of credit card debt at 26% interest.
posted by elsietheeel at 5:33 PM on January 14, 2010

Nthing space_cookie - I used to get out of way (...way) more CC debt than you are currently carrying. It took about 3.5 years of aggressive payments, but I saved tons on interest. CCCS will figure out a plan to get you out of debt in less than 5 years. They charge a monthly fee, but it's a not-for-profit, and the fee is way less than I would have lost in interest otherwise (YMMV, my fee was $19). If you are really in a bad place, they will lower or waive the fee so you can afford the payments.

As far as this hurting your credit - I had about 8 cards in the plan total. Some of them closed immediately upon me entering CCCS's program, some I am still unable to re-open now that I am paying my CCs off every month (I use credit cards almost exclusively for extended warranty protection on bigger purchases). I was able to buy a car and a house while in the program at good interest rates. Some of the creditors mark your file as "in a credit counseling program" and potential new creditors will see this. I have been out of the program for 2 years and my credit score is nearly immaculate.
posted by getawaysticks at 5:56 AM on January 15, 2010

One thing about balance transfers: yeah, the new card may have a 0% interest rate, but there are almost always transfer fees. These can amount to a few percent of the amount transfered, which can be quite a bit. So yeah, there isn't any interest, but don't think you can do this cost-free. You can't.
posted by valkyryn at 11:14 AM on January 15, 2010

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