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I currently have a target credit card that has reached its $ 500 limit and is now just gaining interest at a very high rate (about 20%) I also have a bank of america mastercard with a 14% interest rate. I want to close the target account..Is it a smart move to transfer the target balance to the mastercard?

4 Thoughts on Credit card help? Is it best to consolidate your debts to one card?
  1. Reply
    December 30, 2012 at 4:26 pm

    Check on the fee you’ll pay for the balance transfer. You might be better off if you focus on getting the Target card paid off.

  2. Reply
    Jeanne R
    December 30, 2012 at 5:03 pm

    Please don’t “consolidate” your debt. You will just end up owing more money and for a longer time. You probably can not get rid of all of your debts all at once, but you may be able to do it in a (relatively) short period of time. Of course that depends on the amount of debt and your income.You can jump start your payoff by having a garage sale and selling anything that you no longer use and you should consider getting a temporary part time job until you get everything paid off. Here is a plan that will help you. If you work the plan, the plan will work for you:
    1. Make a budget. Make the budget a week before you get paid. A budget is not a punishment! It is a tool which will free you from ever having to worry about money again. Put everything in your budget. Especially those annual, biannual, or quarterly bills like car registration, insurance, etc. Give every dollar you are going to bring home the name of where it is going. Add an “emergency fund” category to your budget for 25 dollars and save up until you have 1000-1250 dollars. Your emergency fund will help keep you from getting into new debt because of an emergency. If you can, set up a direct transfer to a savings account for your emergency fund. That way it moves automatically and you don’t even have to worry about it. You must cut your spending and live on less than you make.

    2.First get current on all of you debts and make no more late payments. Stop using your credit cards immediately. Do not take on any more debt. Credit cards are like quicksand only the death is much slower. Make a list of all of your debts in order of highest interest rate to lowest interest. Use cash only for your spending from now on.

    3.Pay the minimum due on all of your debts and then put your extra money towards paying off the highest interest one first. After you get that one paid off, you put the money you were paying on debt #1 (the minimum payment and the extra payment) towards debt #2. That will pay debt #2 off faster. When that is paid off, you put all three payments towards card #3 and that one will be paid off pretty quickly. As an example:

    To start :
    Debt #1 (highest interest): minimum payment+ extra payment
    Debt #2 (middle interest): minimum payment
    Debt #3(lowest interest): minimum payment

    Debt #1: paid off
    Debt #2: minimum payment from Debt #1+ Minimum payment from Debt #2 +extra payment
    Debt #3: minimum payment

    Debt #1: paid off
    Debt #2: paid off
    Debt #3:Mimimum payment from card #1+ minimum payment from Debt #2+ minimum payment from Debt #3+ extra payment.

    That way, you will get them all paid off, on time, and pay the least interest. It will also help towards rebuilding your credit since you will no longer have any late payments. This works no matter how many different debts you may have.

    4. After you get all of your debts paid off, add to your emergency fund until you have 6-12 months of income saved up. Put that emergency fund money into a liquid money market fund or into a Bank of America no-risk CD so that if you need the money you can take it out without penalty.

    5a. When you have your emergency fund in place, add a category for “fun” to your budget. Save for a holiday, a vacation, a big screen, or dinners out, whatever goal you want. Remember to enjoy your life.

    5b. When you have your emergency fund in place, start saving for your retirement. Join the 401(k) plan at work and contribute the maximum. Your employer probably matches at least part of your contribution so why give up free money? Open a Roth IRA and contribute the maximum on a monthly basis. If you start saving for your retirement now, you will probably retire a millionaire.

    5c. When you have your emergency fund in place, start saving for your next car. Only buy cars, or other things that depreciate, with cash. Save up for a nicer car. That way you get the interest instead of paying the interest.

  3. Reply
    December 30, 2012 at 5:38 pm

    No, it’s never better to close a credit account. Your score will drop for 2 reasons. One – the account is no longer active and can’t be used to calculate your credit score. Two – the account history will be deleted and won’t be calculated in your credit score.

    The target card limit is only $ 500 to begin with so start by paying down the card to at least bring it current. Until you do so you’ll be paying mega interest on the balance and your score will take a dive for your credit utilization being too high.

    If anything use the Mastercard (because it has the lower rate)
    to pay off the Target card so you can get rid of that high interest but again do not close the account.
    Then start paying off your Mastercard right away and don’t be late on any payments.

  4. Reply
    Jenny S
    December 30, 2012 at 6:03 pm

    Its always good to manage money with some common sense. I think you should get another credit card that has low fees and try to manage it better with all your balance on the new card. I saw some very good cards on the following site. Some even had 0% APR for 12 months which could help you save a LOT.

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