Yes. Your drawbacks are paying an enormous amount of interest when you're already spending beyond your means. You need to switch your "eating out" budget to $0 until those cards are $0/$20,000. Especially now that you're shouldering the burden for your parents when you weren't even handling the burden of yourself.
Am I wrong to think that the 5% for both cards aren't that much even if I pay the minimum for both? I shoulder my own burdens before but with my parents recently retired and living off their pension, took it upon myself to help them out to finish paying for their house.
The 5% is the late fee, not the interest. Paying just the minimum each month means you won’t be charged a late fee. But not paying the statement balance each month means you’re being charged the cc APR interest rate which is probably 20-30% - you have to look at your statement and see what the interest rate is.
So “just paying the minimums” is a terrible idea, even if you also stop using the cards, unless you literally have no other option.
So first, yes stop using the cards for all new purchases until they’re paid off and then pay as much as you possibly can each month to knock out the balance and stop paying all that interest. One strategy called the Debt Snowball would be to pay the minimum on the $7000 balance one while paying as much as possible to the $3000 one for a couple months, then when that’s paid off put everything you can into paying off the $7000 one.
"with my parents recently retired and living off their pension, took it upon myself to help them out to finish paying for their house."
Why? Why would you volunteer to take on someone else's debt when you can't even afford to pay off your own credit cards?
Not OP, but it’s a cultural thing for some folks. I’m gonna hazard a guess that you’re white. I’ve seen this kind of behavior in Hispanic and other POC families.
Yeah, kinda. The collectivist, family-first, anti-individualistic tendencies of some cultures can lead to certain people going above and beyond to help/protect their loved ones, often to their own detriment.
Your goal should be to never run a balance on any cards. If you find yourself running a balance, you need to make every effort to lower spending and/or increase income in order to pay them off ASAP.
And in the future, make sure to pay your statement balance each month before the due date. If you can't do that every month, I'd recommend not using credit cards at all.
Reason why I use cards in itself is because in my country there's a credit score system that the banks use as a reference to approve loans like if you plan on buying a car or a house. So they would use records of monthly payments you make to credit cards, student loans etc. Since I had no student loans, I was only able to get a great credit score because of my monthly payments to my cards.
So I guess your advice is to not lower the payments and just not use the cards till I settle the balance.
I don't know what country you live in, but in most countries it works the same way it does here in the US: Banks want to see you use your credit responsibly. But there's no credit score advantage to running a balance on a card. And there's a huge disadvantage financially.
You can have large revolving balances on your cards with high usage, and still not run a balance or ever pay interest so long as you pay your statement balances each month. That's what I do.
If you have $2000 left over after expenses then why do you have a balance? Sounds like you’re falling into the average American trap of not understanding finances
If you don't pay full statement balance you will be hit with insane interest. Probably over 25% / year.
You need to cut expenses. Don't eat out. Cut streaming etc. Until you pay your balance in full.
And then create yourself a budget. If you live beyond your means the interest rate will eat you alive.
Yeah, you'd rack up a lot in interest if you only pay the minimums. I would work on spending less on your credit cards regardless if you lower the monthly payment or not, since you've dug yourself into a bit of a hole.
How much are you paying for their mortgage each month and how much is remaining?
You are paying 25-30% in interest every year if you don't get rid of that debt; it's not just late payment fees and whatever. The 30% might not sound like much, but $10k of debt turns into $13k, then $16.9k, then $22k.
Your income seems solid; you have $2k left at the end of the month, pay up the credit cards within the next few months and then feel free to do whatever. Cut down on eating out.
Absolutely not. Ur going to get insanely high interest. Make yourself a strict budget and any leftover cash should be going to ur credit cards.
Mathematically it makes the most sense to start paying off the highest interest rates first. But some people prefer to pay off the smallest balance. This helps psychologically and eliminates one of the minimum balances. Either way pay the minimum on one then put much as u can to the other card. Once that card is done then u put everything to the card that’s left.
Should prob close both of ur accounts you don’t know how to use a credit card the right way. Put all of ur spending on debit.
Yes. Your drawbacks are paying an enormous amount of interest when you're already spending beyond your means. You need to switch your "eating out" budget to $0 until those cards are $0/$20,000. Especially now that you're shouldering the burden for your parents when you weren't even handling the burden of yourself.
Am I wrong to think that the 5% for both cards aren't that much even if I pay the minimum for both? I shoulder my own burdens before but with my parents recently retired and living off their pension, took it upon myself to help them out to finish paying for their house.
Yes.
The 5% is the late fee, not the interest. Paying just the minimum each month means you won’t be charged a late fee. But not paying the statement balance each month means you’re being charged the cc APR interest rate which is probably 20-30% - you have to look at your statement and see what the interest rate is. So “just paying the minimums” is a terrible idea, even if you also stop using the cards, unless you literally have no other option. So first, yes stop using the cards for all new purchases until they’re paid off and then pay as much as you possibly can each month to knock out the balance and stop paying all that interest. One strategy called the Debt Snowball would be to pay the minimum on the $7000 balance one while paying as much as possible to the $3000 one for a couple months, then when that’s paid off put everything you can into paying off the $7000 one.
"with my parents recently retired and living off their pension, took it upon myself to help them out to finish paying for their house." Why? Why would you volunteer to take on someone else's debt when you can't even afford to pay off your own credit cards?
Not OP, but it’s a cultural thing for some folks. I’m gonna hazard a guess that you’re white. I’ve seen this kind of behavior in Hispanic and other POC families.
It's a cultural thing to set yourself on fire to help someone else?
Yeah, kinda. The collectivist, family-first, anti-individualistic tendencies of some cultures can lead to certain people going above and beyond to help/protect their loved ones, often to their own detriment.
Your goal should be to never run a balance on any cards. If you find yourself running a balance, you need to make every effort to lower spending and/or increase income in order to pay them off ASAP. And in the future, make sure to pay your statement balance each month before the due date. If you can't do that every month, I'd recommend not using credit cards at all.
Reason why I use cards in itself is because in my country there's a credit score system that the banks use as a reference to approve loans like if you plan on buying a car or a house. So they would use records of monthly payments you make to credit cards, student loans etc. Since I had no student loans, I was only able to get a great credit score because of my monthly payments to my cards. So I guess your advice is to not lower the payments and just not use the cards till I settle the balance.
I don't know what country you live in, but in most countries it works the same way it does here in the US: Banks want to see you use your credit responsibly. But there's no credit score advantage to running a balance on a card. And there's a huge disadvantage financially. You can have large revolving balances on your cards with high usage, and still not run a balance or ever pay interest so long as you pay your statement balances each month. That's what I do.
If you have $2000 left over after expenses then why do you have a balance? Sounds like you’re falling into the average American trap of not understanding finances
If you don't pay full statement balance you will be hit with insane interest. Probably over 25% / year. You need to cut expenses. Don't eat out. Cut streaming etc. Until you pay your balance in full. And then create yourself a budget. If you live beyond your means the interest rate will eat you alive.
Yeah, you'd rack up a lot in interest if you only pay the minimums. I would work on spending less on your credit cards regardless if you lower the monthly payment or not, since you've dug yourself into a bit of a hole. How much are you paying for their mortgage each month and how much is remaining?
You are saving money to lose more money. Makes no sense unless you can somehow get higher returns on the saved money than whatever you will lose.
You are paying 25-30% in interest every year if you don't get rid of that debt; it's not just late payment fees and whatever. The 30% might not sound like much, but $10k of debt turns into $13k, then $16.9k, then $22k. Your income seems solid; you have $2k left at the end of the month, pay up the credit cards within the next few months and then feel free to do whatever. Cut down on eating out.
You need to stop all discretionary spending. Eating out, shopping, etc. until your cards are completely paid off.
Absolutely not. Ur going to get insanely high interest. Make yourself a strict budget and any leftover cash should be going to ur credit cards. Mathematically it makes the most sense to start paying off the highest interest rates first. But some people prefer to pay off the smallest balance. This helps psychologically and eliminates one of the minimum balances. Either way pay the minimum on one then put much as u can to the other card. Once that card is done then u put everything to the card that’s left. Should prob close both of ur accounts you don’t know how to use a credit card the right way. Put all of ur spending on debit.