Hope everyone had a GREAT weekend. I'm starting off this week with a little update on the $0 Balance Challenge. I got an email a little while ago from a woman who's looking to get rid of $8,157.47 in credit card debt over the next 12 months:
In June 2008 my graduation present to myself was Suze Orman's Young, Fabulous & Broke. I was constantly being harassed by creditors. Suze said I should pick up the phone and talk to them, so I did. I set up a payment plan $80 per month on one card, $120 per month on the other. I haven't missed or been late on a payment.
The great part of the arrangement was that they cut my interest rates and there are no late fees. The bad thing is that the cards are closed. At the time I didn't realize that they would be closed or what that would mean for my credit score. I am now working to pay the cards off and since my score is too low to get a credit card, I am thinking of getting a secured card to help rebuild my credit.
Card #1 $3,175.49
Card # 2 $4,981.98
I will definitely have the 1st card paid off w/in the next year. If I have most of the 2nd one paid off by then I will be extremely happy. The goal I'd already set for myself was to have 0 credit card debt by my 25th birthday. Also, I ran up my cards on books, flights back home for the holidays, a car that kept breaking down, etc. Eventually, I stopped using the cards, but since I couldn't pay, the interest rates and late fees kicked my butt.
This is a great example with a lot of lessons in it for those taking the challenge. Among other things, the writer noted that she is working part time and has student loans to pay, as well. This is a pretty common situation for recent college grads, many of whom find themselves underemployed and stretched with debt once getting out of school.
For someone working part-time and living on their own, it might be a bit of a stretch to pay off nearly $9,000 of debt in 12 months. According to Bankrate.com's credit card calculator, it would take monthly payments of $279.55 to pay off the first card in a year's time, assuming an APR of 10.25 percent and no other fees, and $438.57 to pay off the second card. Right now her payment arrangement calls for far less than that, so getting to zero won't happen unless there's extra money in the budget for more payments.
Still, that's OK. There's a workable plan in place and since the cards are closed, there won't be anything new added to the balance. If she's diligent, she'll be celebrating a zero balance before too long. Good luck.
image courtesy freedigitalphotos.net