Saturday, December 06, 2008

Will someone please bail ME out?!

Twenty thousand dollars. No matter how I spell it, I owe $20 000 in consumer debt. Sometimes it's all on my one "low-interest" credit card, sometimes it's spread out amongst three to capture low-low interest offers. I don't know the exact figure but I think my combined credit limit is about $50 000, and that includes the line of credit my bank offered me last month. So, I'm using less than half of my available credit. That's good, right?

Like most people with credit card debt, I can't even tell you how it got this high. I'm pretty sure that when I began working full-time after getting my B.A. in 2002 I owed only about $1000 on my credit card. Then the cheques started coming and I started to really live beyond my means. I was getting my hair done once a month. I smoked a pack a day. I frequented a couple of bars and clubs two or three nights a week. I bought a used car, and the Wal-Mart was suddenly that much closer to my house.

I struggled to quit smoking. Every time I would go a day or two without a cigarette I would reward myself with a purchase on ebay. Ebay became a serious addiction for me. Online shopping replaced my trips to the mall. Then I decided to go to Thailand for eight months and even though I received a generous student loan I also used my credit card quite a bit while I was there. I made only minimum payments for months and months. The compound interest snowballed.

Before I left for Thailand I gave almost everything I owned away, and stored a few things at my dad's and brother's. When I returned to Canada I had to start over again, but because I wasn't working I had to use my credit card. I started taking cash advances, which are just brutal in terms of interest.

Then last year I took some really bad advice (from someone planning to be a financial advisor - yikes!) and consolidated all my debts onto one credit card. The compound interest accumulation was/is phenomenal. I have been making the minimum payment of almost $400 a month for almost a year now, and managed to scrape only $1000 of the balance. Then my old car decided to act up and I used the credit card to pay for the repairs, bringing my balance right back up again.

So how do I fix? I'm currently re-spreading the one credit card balance over a couple of other cards that have low-interest offers. I'm going to put as much money as I possibly can on these cards, but when the offers expire in June I'll have to move the balances again. I have the line of credit now, so that will probably absorb some of it, but I don't have a high enough limit to take the whole debt load.

It'll all work out. I just have to be more strategic, and incredibly vigilent with my budget.



2 comments:

  1. Can you get a loan at a lower interest rate?

    I am sure credit cards are a higher interest rate, and you could probably negotiate a lower interest rate if you called them and asked saying that you can barely make payments. (watch Slice.ca - Til Debt Do Us Part episodes)

    Good luck!

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  2. Nope and nope.

    I don't make enough to qualify for a loan without a co-signer, and I did call VISA to ask for a lower interest but I was told that 11.5% is as low as they go.

    I'd like to apply for a Capital One Prime + 4.9 Mastercard, but I don't want another hit on my credit right now. Maybe in a few months.

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Thanks for commenting! I will have it published as soon as I can ~ Karissa