Help me stop digging deeper into credit card debt.
April 10, 2010 7:18 PM   Subscribe

I want to stop using my credit card, but I have one regular (2 or 3 times monthly) expense that I need it for. Help me figure out the best strategy for covering that expense without the card.

Two or three times a month (depending on the month), I see my therapist. Because she does not take insurance, at each visit, I must pay the full cost, which I usually do not have enough cash to cover without making myself perilously low on funds. However, that she does not take insurance does not mean that my insurance does not cover the visits: once I am reimbursed by my insurance, I pay only 30% of the full cost, an amount I can comfortably pay.

I've been paying with my credit card at the time of the visit, but I already had some credit card debt (less than $1000) when I started this setup, and I find it very difficult to pay off the full amount each month (because of my own habits, not because I couldn't afford it), so interest accrues.

How can I fix this situation so that I'm not using the credit card anymore, so I start working on reducing my debt more effectively?
posted by ocherdraco to Work & Money (12 answers total) 1 user marked this as a favorite
Ask your therapist to stagger payment due dates accordingly. I have the exact same insurance situation, and my therapist/grief counselor allowed me to stagger payments in a regular manner.
posted by bunnycup at 7:31 PM on April 10, 2010

Talk with your therapist about setting up a payment plan and pay by check.
posted by dfriedman at 7:32 PM on April 10, 2010 [1 favorite]

I've been paying off my credit card debt for awhile (2 months before it's all gone, wooooo!) and I've got a couple of tricks that help me.

1. Track your expenses, every single one. Figure out how much you are really spending. This is a must, otherwise you will never know what's going on. I tracked a month of mine.

2. I had more than one card to pay-off and I used the snowball method to do it. It sounds like you have one card to deal with, so that may not be a concern, but if you have any other regular payments (mortgage, rent, car, insurance, etc.) figure out what must be paid every month, including your minimum credit card payment.

3. Using your budget created from tracking your monthly expenses, figure out the minimum amount you need to live - food, transportation, tolls, entertainment, whatever - and whatever is left over from that is going to pay off that credit card.

4. So let's say your minimum c/c payment is $50.00, and you have $150.00 left over after all your expenses are paid. Split that total amount ($200.00) 4 ways and pay your credit card on the 1st, 8th, 16th and 22nd of every month. That way you are spacing out your payments, which will accomplish a few things:
You will never have a late payment fee, and if the c/c company screws around by changing your payment date you are covered.
You will be paying off that debt much more quickly than just taking a stab at it every few months
It won't hurt your bank account as much if you spread these payments out over the month

As for the doctor - would it be possible for you to set aside a set amount of cash each week as your doctor fund? If you have direct deposit, you could even set up an auto transfer to a savings account, or even a separate checking account that would be expressly for that debt.

This is turning into a book (sorry!) so memail me if you want more detail. I never imagined I would ever be able to pay off my c/c debt ($25k) but I'm almost there. If I can do it, anyone can.
posted by lootie777 at 7:36 PM on April 10, 2010

Can you set her up to bill you regularly [without having your card] then toss your card in a block of ice and have a set deduction from your bank account to the credit card account and have insurance reimbursements go directly to the credit card account via some sort of transfer [i.e. a set it and forget it thing]? I think if it were me and I had a will power problem, this is what I would do, set automatic bank payments.

If you want to stop using your card, but you need it for this, you have a few choices.

1. stop using your card entirely, pay full price, deal with the one time major cash adjustment [so you are not perilously low on funds] and move on
2. stop using this card, get another one for therapist appointments that has different mojo and you are forbidden to use for anything else
3. pay by check
4. pay cash
5. convince this therapist to take insurance
6. switch to a therapist who takes insurance
7. see your therapist less often
8. convince your therapist to give you sliding scale treatment or a payment plan
9. see therapist only at times where I was flush with cash [if there's timing you can adjust]

I'm not sure if I'm understanding you properly. I'm not sure if the bigger issue is getting out of debt, or stopping using the credit card? Because my read is that you either deal with the perilously low funds by being low on cash, or you deal with it by using the credit card as a float and then something happens and you don't pay it off. So my [rhetorical] questions for you

- how perilous is perilous?
- what about your own habits makes the situation not work that some other scheme would make work? How fixed are these habits?
- is spending less or earning more not an option?
- are small finance charges preferable to seeing your therapist less?

Basically it sounds like you do not have enough money. Nothing wrong with that. That said, if you're trying to pay down debt [good for you!] you also have to be able to manage your own ability to control your finances. So something has to give. You do not have enough money. You need to spend less, earn more, or be able to adjust things in a few fairly predictable ways. The easiest thing to adjust in the whole scheme are your own attitudes [easier said than done, but try asking the bank for more money :)] and I'd look into starting there.
posted by jessamyn at 7:37 PM on April 10, 2010

Why not work out what the average cost is on your credit card each month for your visits and then set your bank account to auto-pay that amount the day after you get paid (or half of it on each payday if all at once would be too much)? That way it gets taken care of and you're not paying interest on it. I use one of my credit cards for nothing but transportation costs and that's a pretty fixed amount so I do the same thing there.
posted by barc0001 at 12:44 AM on April 11, 2010

Assuming that you are stable enough that you can cut back on therapy for a while, this becomes a simple math problem. I love spreadsheets!

Okay, how long does it take to get paid off by insurance? Let's say it's one month. Let's say it costs $300 per visit (to make the math easy) and that you always had 3 visits per month. We know you can budget $100 of income (1/3 of the therapy cost) into this category for every visit. In that case, you could just do this:

Visit 1: don't go; save $100 = $100
Visit 2: don't go; save $100 = $200
Visit 3: GO; pay $300; save $100 = $0; submit insurance claim (you have to always submit your claim immediately after the visit)
Visit 4: don't go; save $100 = $100
Visit 5: don't go; save $100 = $200
Visit 6: GO; pay $300; save $100 = $0; submit insurance claim
Receive insurance reimbursement for Visit 3 = $200
Visit 7: don't go; save $100 = $300
Visit 8: GO; pay $300; save $100 = $100
Visit 9: don't go; save $100 = $200
Receive insurance reimbursement for Visit 6 = $400
Visit 10: GO; pay $300; save $100 = $200
Visit 11: don't go; save $100 = $300
Receive insurance reimbursement for Visit 8 = $500
Visit 12: GO; pay $300; save $100 = $300
Visit 13: don't go; save $100 = $400
Receive insurance reimbursement for Visit 10 = $600
Visit 14: GO; pay $300; save $100 = $400
Visit 15: GO; pay $300; save $100 = $200
Receive insurance reimbursement for Visit 12 = $400
Visit 16: GO; pay $300; save $100 = $200
Visit 17: GO; pay $300; save $100 = $0
Receive insurance reimbursement for Visit 14 = $200
Visit 18: pay $300; save $100 = $0
Receive insurance reimbursement for Visit 12 = $200
Visit 19: pay $300; save $100 = $0
Receive insurance reimbursement for Visit 16 = $200
Visit 20: pay $300; save $100 = $0
Receive insurance reimbursement for Visit 17 = $200
Visit 21: pay $300; save $100 = $0
Receive insurance reimbursement for Visit 18 = $200

You arrive at a situation where you have pre-saved for your therapy visits. It's not as complicated as it looks: you go once a month, twice. Then you go every other time, four times. After that, you can go every time. Skip skip go, skip skip go. Skip go, skip go, skip go, skip go. Go, go, go, go, go... You can modify this to figure out something that works for you; e.g., if you only want to submit your reimbursements at the end of each month, you'd go once a month, three times. Then you'd go every other time, six times. After that, you could go every time. Alternatively, to avoid skipping a week, you could just cut back your spending elsewhere and save "$800" (weekly submittals) or "$1200" (monthly submittals) (in quotes because you'd need to modify that based on your actual therapy cost), then disable your credit card.
posted by salvia at 1:11 AM on April 11, 2010 [2 favorites]

Whoops, Visits 18-21 should also say GO above.
posted by salvia at 1:14 AM on April 11, 2010

Assuming you are fiscally responsible and don't need help paying down your established debt AND that your insurance company reimburses you in a fair time frame, you could just get anohter credit card to use exclusively for these therapy sessions and pay it off every month after receiving insurance reimbursements.
posted by WeekendJen at 9:48 AM on April 12, 2010

Response by poster: - how perilous is perilous?

Potentially having zero available funds for days at a time.

- what about your own habits makes the situation not work that some other scheme would make work? How fixed are these habits?

Heh. I have ADHD. The therapist is to help me with my ADHD (and she's a specialist; I tried to find a cheaper and/or insurance accepting therapist, but none had experience with ADHD, and since that's the whole point, going to them would be pretty useless). My ADHD makes dealing with things like multi-step bureaucratic processes (like this one) really, really difficult. So, yeah, I am looking for something that's a set it and forget it solution.

- is spending less or earning more not an option?

Not currently, but I'm planning to move this summer to a cheaper apartment, partially to give me more breathing room on this very thing. Earning more isn't really an option.

- are small finance charges preferable to seeing your therapist less?

That's an interesting way of putting it. I'm not sure. I'll have to think about that. I find my therapist's help to be really valuable to me, but being in debt (and increasing debt) stresses me out so much that it might negate the positive effects of seeing a therapist in the first place.
posted by ocherdraco at 10:34 AM on April 13, 2010

Response by poster: Also, salvia, that plan looks awesome, but just isn't going to work for me. I know you say it's not that complicated, but it's still more complicated than I can handle.
posted by ocherdraco at 10:36 AM on April 13, 2010

Best answer: It might be easiest then to have a plan that is basically an NLP thing like

"My therapist costs $300 this month, $320 next month and $340 the following month. Then I move and she costs $300/month again." [i.e. you will pay a fixed amount of minorly increasing finance charges for three months, you can put that in your budget, you will promise to put insurance reimbursement directly towards your credit card and have at least a predictable situation if not an optimal one]

I'm familiar with the ADHD stressmachine [through living with someone with it, not having it myself] and it seems to me, as a removed but friendly individual, that the most helpful answer to this question may be "No, there is not a better way to do this than you are doing now. You are doing fine. If you are really moving in a few months, this is a three month problem that is more easily solved by the application of $40 in finance charges and a new living situation over the summer than any tricksy math right now." Sorry if that's not super useful.
posted by jessamyn at 10:40 AM on April 13, 2010 [1 favorite]

Response by poster: Okay: "There is not a better way; you are doing fine," is going to be my answer. (I think I need to print that on a card and keep it in my wallet or something.)
posted by ocherdraco at 1:23 PM on April 13, 2010

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