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URL:  http://boards.fool.com/now-the-only-card-with-a-really-horrible-18528551.aspx

Subject:  Re: CC debt again... Date:  2/2/2003  9:17 PM
Author:  FuskieFool Number:  151036 of 308881

Now, the only card with a really horrible interest rate is MBNA. Shall I try and do a BT to Citi (who have always been unfailingly nice to me and always given me a great rate) or shall I not bother given that I hope to have it paid in 4 months anyway?

First question is how much would you save for those 4 months. Second question is why not BT to the CU card which is 2 percentage points less.

I guess I have focused on the high-interest debt till now, all the way down to MBNA and then once MBNA is paid, (at that point I have eliminated 2/3rds debt) which way should I go???

There is another way to look at your priorities, although not all Fools agree with me on this. First priority is the car - reposession is not something you want to risk. Then look at the amount of finance charge from each credit card, and pay off the highest first.

The idea here is that you are losing money on the interest payments, so you try to reduce your losses. Sometimes a high balance on a low rate is more costly than a low balance on a high rate. For example, by my math, your MBNA finance charge is $431 but your CU finance charge is $590. Wouldn't it make more sense to reduce the debt costing you $590 a month rather than $431?

Of course, this method of debt management requires monthly review. As the CU debt goes down, the monthly finance charge will god own too, eventually to the point that your MBNA is costing you more and you should reprioritize.

Another variation of this method is to pay the finance charges on each card and then pay down the principle on the card with the highest finance change. This way you prevent any of your debts from growing while you pay them down. It can be frustrating when you keep making payments and yet your debt keeps growing.

right now I'm only putting in 3% so as to get the 3% match from my company.

Sure you can save on your taxes by increasing your 401K contribution, but will the amount you save make a substantial impact on your debt? Will your money work harder in the 401K building your retirement than it can reducing your debt? For some 401K plans, if well managed, the answer is yes. Many people have lost faith in their 401Ks, and you are the only one who can answer that question.

Best of luck, and let us know what you decide and how it is going.
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