Please advise on Discover Card payoff

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Ironchef2
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Please advise on Discover Card payoff

Postby Ironchef2 » Sun Jun 22, 2014 5:49 am

Five years ago my discover card balance jumped to $10,000 as a result of my moving to a new home. I have paid monthly in automatic payments ever since. Today my balance is still $10,000 as a result of the high interest rates charged, so essentially the $10,000 is accumulated interest. Discover has said in the past that they would not cut a payoff deal but have reduced the interest rate for 6 months to 19.9% from 29% on several occasions.
If they would make a payoff deal would $3000 be a reasonable amount. This would be better than a 6% return on $10,000 for 5 years simple interest.
What would you advise? I am open to any options. My present credit score is 608. I need it lower to take advantage of the Affordable Home process and reduce my mortgage rate from 5.5%


augiedog
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Postby augiedog » Mon Jun 23, 2014 2:14 pm

Ask for a permanent rate reduction to 17.9%. They want their money. Why would they give up on $7000?
American Express: Blue Cash Everyday (10k), Everyday, ; Discover It (7.3k) ; Target (2.1k)

Citi: Diamond (2k) ; Bank of America: Cash Rewards (2.6k) ; Capital One: Quicksilver (3k) , Sony ; Chase: Freedom (3.7k), Slate (3k), (Amazon) ; Barclay Ring ; Synchrony: Walmart MC, Amazon, Ebates

MemberSince99
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Postby MemberSince99 » Mon Jun 23, 2014 3:51 pm

I would say if he's not making headway on 19.9%, 17.9% probably isn't going to solve the issue. The issue would seem to be not enough free income to put towards making a dent in the principle amount. The only options to solve that are either increase income by whatever means (raise from work, 2nd job, sell things on eBay, etc) or do something Discover probably won't do like eliminate the interest or cut the amount owed.


That's all you can really do. If option one isn't realistic I don't have a good option 2.

Ironchef2
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Postby Ironchef2 » Mon Jun 23, 2014 4:20 pm

I noticed that you both have several credit cards- why? what are the numbers associated with each one? Thanks for your suggestions.
Another option that has been considered is to Refinace my home at a lower interest rate under the Afordable Home Act and borrow and additional amount to reduce or payoff the Discover card balance. The effect would reduce my monthly mortgage, while paying off the only credit card I have. Also I might find a card that does the 0% on a transfer for a year but that may be a hassle in the long run.

MemberSince99
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Postby MemberSince99 » Mon Jun 23, 2014 5:55 pm

The problem with finding a BT card with your score, assuming it's a FICO is going to be very difficult. I know of few quality lenders who will touch a 608 score. So that's not likely to fly, you would be better off with the refi if you can do that.


Why do I have several cards? Amex Plat for travel, EDP for gas groceries, bills and every day, Associated really because of the limit and my history with them, and Chase because I bank with them now and for the 5% categories and it's a nice limit.


Those are the reasons. The numbers (limits) are next to the cards.

augiedog
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Postby augiedog » Tue Jun 24, 2014 9:27 am

Several cards offer different rewards. I like my Discover because of the 5% categories, American Express has great offers and high limits, and I'm a frequent Target shopper (free shipping online and 5% off).

If you want to balance transfer, the Chase slate has no balance transfer fee upon opening and you can get 0% financing (for a while at least).

I really would ask for a permanent decrease in APR, even if it's not 17.9% like I said. They can give you a counter offer if they're interested. Your interest rate is way too high. My Discover card has 21.9% APR which I still think is too high!

I understand you're in a tough spot right now, but borrowing more money to pay off a balance can get you into even more hot water if you have a hard time paying that off. If you borrow money from your house to pay off a credit card, then you're turning your unsecured debt into secured (Discover can close your account and put it into repayment, but at least you still have a house).

I'm sure if you only make minimum payments then you can lower your score to reduce your mortgage. What is your current rate?

When negotiating to eliminate the balance you owe, mention the amount due to interest. How much is that? Can they reduce how much you owe? (Without taking an entire $7000 off the bill)
American Express: Blue Cash Everyday (10k), Everyday, ; Discover It (7.3k) ; Target (2.1k)

Citi: Diamond (2k) ; Bank of America: Cash Rewards (2.6k) ; Capital One: Quicksilver (3k) , Sony ; Chase: Freedom (3.7k), Slate (3k), (Amazon) ; Barclay Ring ; Synchrony: Walmart MC, Amazon, Ebates

Ironchef2
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Postby Ironchef2 » Tue Jun 24, 2014 10:46 am

Auiedog

My interest rate is5.5%. Yes I was trying to get an idea on what is possible to make a deal with discover. The $10,000 balance is essentially all interest that has acculated over the past 5 years. My original balance has been paid back from my point of view. From their point of view they were happy to take my payments totaling $10,000 and leave me with a $10,000 that I started with. Unless I'm living on a different planet, that is usery to the nth degree. I am at the point of just letting it go in collection and deal with it there.

augiedog
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Postby augiedog » Tue Jun 24, 2014 11:13 am

Wow. That is quite a lot in interest. They can make the account inactive and go into repayment, in which they should be able to give you a desirable APR. If you've been with them that long you shouldn't have such a high APR.
As for them forgiving that debt... make sure they know that is all interest. It should mention that on your statement. Maybe they can take a few grand off, but they are not going to forgive more than half of your balance.
Letting it go into collections is a last resort. They might forgive more than half of your balance. But by then your balance will likely be even higher.

As far as making your score lower, signing up for more credit cards will take points off. Try using those to balance transfer from your Discover. Hopefully that will be enough to lower your mortgage. But I really advise against borrowing money from it to pay off Discover. Letting it go to collections is much better than that and will lower your score. Good luck with this sticky situation.
American Express: Blue Cash Everyday (10k), Everyday, ; Discover It (7.3k) ; Target (2.1k)

Citi: Diamond (2k) ; Bank of America: Cash Rewards (2.6k) ; Capital One: Quicksilver (3k) , Sony ; Chase: Freedom (3.7k), Slate (3k), (Amazon) ; Barclay Ring ; Synchrony: Walmart MC, Amazon, Ebates

takeshi
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Postby takeshi » Wed Jun 25, 2014 11:47 am

Ironchef2 wrote:I noticed that you both have several credit cards- why?

There are a number of reasons why people have multiple credit cards. Just a few:
  • FICO scoring models favor at least 2-3 cards
  • One card doesn't offer the highest rewards for all spend categories
  • Not relying on just one card or just one creditor can be a safety precaution (the old "don't put all your eggs in one basket")
  • Each creditor has a certain amount of credit that they're willing to extend to a given consumer. Having cards with multiple creditors may help with increasing total available credit which can help with reducing utilization which helps with credit scoring

Ironchef2 wrote:My original balance has been paid back from my point of view. From their point of view they were happy to take my payments totaling $10,000 and leave me with a $10,000 that I started with. Unless I'm living on a different planet, that is usery to the nth degree.

They disclosed the APR to you when you received the card. You could have closed it at that point if you did not agree with the APR. It shouldn't be any surprise that a large balance carried over 5 years at that APR would accrue a lot of interest. The high APR is their fault but charging the balance and not paying the applicable interest falls on your shoulders.



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