paying down debt
Hi Terry. Love your appearances on WGN .
I recently got a new credit card with 0% interest until next June. My goal was to use it to pay off some of my smaller credit cards. In the interim, I used the stimulus check to pay off smaller ones and now have only two major balances. While I learned (the hard way) not to pay off everything completely – because it sends out a red flag and lowers my score…??? I am not sure whether to use the new card for a balance transfer on the bigger card balance (which would exhaust the entire new card available credit) – or use it to “pay off” the smaller balance” card. Common sense tells me one thing but I’m not as financially intelligent as you. Please advise!
(For informational purposes, one card is about $2800, the other about $4200. The 0% card has a $4500 limit, and I do make more more than the required payment on all of my cards each month.)
Thanks so much,
Terry Says
Wait, paying off balances doesn’t necessarily lower your score — especially if you close the card. That means you have less “available credit” so you are actually less risky. The best credit score will come if you have one or two cards that you use regularly and PAY OFF IN FULL every month!
That is your goal. Unless you are about to buy a house, car, or life insurance, the current swings in your credit score are not important to you. What IS important is paying down those balances asap. You know the 0% card will likely jump to a higher rate than the others when the “free” period expires. So if it’s June 2021, then move the smaller balance to that card, paying every month. And pay DOUBLE THIS MONTHS MINIMUM — same amount every month — on the larger balance. You can get this done!
