I have been interested in personal finance for a long time, maybe 10 years or so. It first peaked my interested when I was struggling with the all too common “too much month left at the end of the money.” As a result of this interest, I sometimes get asked for financial advice by friends. I have no problem with this, however it seems like they do not really want help at all. And that is frustrating as it is a waste of my time. Yet, I still take the time to try to help just in case the person asking is actually serious about it this time….but they never are.
Just last week a friend emailed me about the best way to pay off her credit card debt. Let me give you a little background info on her – she has lived with her parents for the past 12 years (maybe 11?) and has had a job the entire time that pays her over $40,000 and she gets a high dollar Christmas bonus every year. She has no student loans as she paid them off years ago. She did finance a new car a year ago but had several years before that where she was driving a paid off car. She rarely has big expenses like travel. And I think she either pays zero rent to the parents or very little to them. With that in mind, she SHOULD have zero debt, but alas, she likes to spend money on herself – and a lot of it by doing things like regularly hanging out at bars and dining out with friends.
So, fast forward to her emailing me. She has almost $20,000 in credit card debt spread across four cards with rates as follows:
- one card at 11.99% with $4,613 balance
- one card at 24% with $9,535 balance
- one card at 27.99% with $3,604 balance
- one card at ???% with around $1,900 balance
She contacted me because she wanted to know if I have any experience with peer-to-peer lending because she is interested in consolidating her debt into one monthly payment. I told her that the best plan of attack would first be to see if she could get an 0.00% balance transfer offers to get those high interest balances taken care of. Her response?
“I don’t really like the idea of opening up more credit cards to do the balance transfers – if I even could get approved for a high enough limit to transfer them…which I doubt? I’m not sure how that all works. But I already have a bunch of cards to keep track of. “
So, I told her that she could certainly do peer-to-peer lending, but that the percentage rate would be based on her credit profile and that by going the balance transfer route she could more quickly get her monthly payment amounts reduced by paying things down. And then I sent her to Credit Sesame to check her credit score for free.
While on the Credit Sesame site, she was shown information on an 18-month 0% balance transfer offer from Discover Card and actually ended up applying for it. But, when the card arrived she was upset because the credit limit was not as high as she wanted. So, I told her to transfer as much as possible from card #3.
She bought an iPhone with the new credit card instead.