Debt Paydown Strategy - Saving Money vs. Lower CC Utilization

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Ratfacedudeguy
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Debt Paydown Strategy - Saving Money vs. Lower CC Utilization

Postby Ratfacedudeguy » Sat Jun 09, 2012 9:48 pm

Alright guys, so I'm once again in need of some advice. I recently (last month) processed a balance transfer of all of my outstanding credit card debt of about $3400 (after the 5% BT fee) onto my Discover More card with a 12 month 0% balance transfer offer. Back in March I took out a consolidation installment loan through my credit union for all the debt that wasn't subsequently transferred to Discover; about $7000. I had extremely high utilization up until that point so my interest rate on this is a hefty 17.49%. So I've got these two consolidation loans so to speak running concurrently.

Now, up until this point I've been putting all of my spare pennies into paying down this Discover card to try and adhere to my goal of eliminating all of my credit card debt by this time next year. It just occurred to me though that I would be saving a ton more money if I instead allocated my extra cash into paying down the principal of the installment loan.

My question is, which paydown strategy would work better from a credit scoring standpoint? Pay down the discover quick so after that's done I can focus on the installment loan? Or tackle the installment loan first so I can get that principal balance down to minimize my interest accrual? My Discover is sitting at about 89% utilization, so it's not "maxed" per se, but would I see a better payoff as far as my credit is concerned if I tried to bring that utilization down faster? Or should I go the money-saving route and pay minimal payments on the Discover card and hope that by this time next year there's another balance transfer offer waiting for me? Oh, and the other important thing to note is that there is no prepayment penalty on my installment loan, and it's currently scheduled to be paid off in 4 years if no extra principal payments are made.

Thanks in advance for any help making this decision guys. I hope this makes sense.
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jeffysdad
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Postby jeffysdad » Sat Jun 09, 2012 10:47 pm

Pay as much as you can on your interest/higher interest debt while maintaining your minimum payment on your zero interest debt. Avoiding interest should be your No. 1 priority.
American Express: Blue Cash Preferred (groceries, 6%; gas, department store, 3%); Gold Delta SkyMiles (Delta Air Lines, 2 miles/dollar, free checked bag).
US Bank: Cash+ (utilities, phone, internet, restaurant, 5%; drugstores, 2%).
FIA Card Services: Fidelity Amex (everything, 2%); Fidelity Visa (everything, 1.5%).
Chase: Freedom (rotating, 5%); Amazon (Amazon.com, 3%); PriorityClub (IHG hotels, 5 points/dollar); Sapphire (not in use).

*All cards are registered with PriorityClub IDine program for 8 points/dollar at participating restaurants.

kashmac123
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Postby kashmac123 » Tue Sep 18, 2012 3:51 pm

Try to get another no fee or low fee balance transfer for the $7,000. If not then do as Jeffysdad said.

kashmac123
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Postby kashmac123 » Tue Sep 18, 2012 4:04 pm

Try to get CLI on all your lines that are $5000 or below Then use the 30% rule of new limits to balance transfer or cash
advance ( which ever is less) the high interest loan.

trumpet-205
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Postby trumpet-205 » Tue Sep 18, 2012 7:46 pm

You pay down Discover first, then installment loan.

This is called snowball method, where you pay down the least amount of debt first, and so on. Reason behind it is so you can free up your Discover card sooner. Thereby allocating more money that otherwise would have been tied to minimum interest and minimun payment.
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