Financial advice please

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Happy Friday to the forum.

I’d like some financial advice, hence this anonymous post on an alternate account (with the blessings of the almighty MickeyD, god bless his socks.)

I’ll not get into the reasons behind the current financial scene and would prefer constructive advice to ridicule, shoulda-woulda-coulda and such. That said, it is Friday so I shall brace myself.

I have the following financial setup.
FNB credit card - 21.5% interest rate, R20,000 limit.
Woolworths credit card - 21.5% interest rate, R20,000 limit.
Bluebean credit card - 21.5% interest rate, R10,000 limit.

All credit cards are more or less maxed out.

Edgar’s account - R4,500 limit, about R4, outstanding.

Vehicle + insurance - about R3,000/month.

As you can see, it’s a lot of accumulated debt which essentially eats any liquid finances, so it becomes a case of paying all monies owed, then using credit card for petrol, food etc which just maxes it out again.

I earn R15,000 gross, take home is about R13,074.

So I’m starting additional work for additional income, but also trying to fix the debts as a priority.

My question then:

Is it faster to pay off the R10k CC and close it, then put that money toward another CC (Thus not paying bank charges and interest in a 3rd card); or is faster to put money toward one of the higher value cards, this paying interest on a lower amount?

I don’t know how to do these calculations so I would appreciate sound advice on this.

The interest rates are very high, which is part of th issue, other than my poor spending habits in the past.

Also, a consolidating loan would theoretically be cheaper I imagine (used to pay off and close the CCs) but does anyone have experience with this?

Thanks in advance.
 
I tried the personal loan route once, and it is quite expensive because of the monthly fees involved. The interest rate is comparable to that of a credit card, but you also have the fees. That being said, credit cards have their fees too.

At your earning and indebtedness, you might not even be able to take out a personal loan. So that might not even be an option.

Have you approached a debt rescue agency?
 
You should really talk to a proper advisor but,

Simple rule of thumbs around debt:

1. Settle highest interest account first
2. If you can consolidate and stay disciplined, transfer debt to lowest interest vessel and cancel others
3. BUDGET! <- this works wonders, as a household with a single working parent and two kids and spouse, we'd never make it if I didn't watch like a hawk.
4. Learn to go without. Take a very big stick to your expenses and cut back until you are happy to be able to have a decent debt repayment for yourself. Not saying put it away as savings ( kind of stupid to be saving 5% when paying off 15%, thats where the disipline comes in).

Normally short term debt is the highest : Personal Loans, Store Cards, Credit cards & Overdraft, Vehicle financing , Home Bonds in that descending order.
 
First and foremost is to kill the highest interest first which I would assume to be the credit cards. So kill the R 10k one first then move on to the next. The quicker the better.

If you need breathing space maybe try a consolidated loan to cover all your cards in one payment, but this will only work if your interest rate is much lower and you pay what you would have paid on your credit cards into your consolidated loan. This takes discipline, If you don't have that don't even try. Then just kill your credit cards as quickly as possible and once the R 10k is dead, use that money you would have paid and add it to paying off your next card and so on.
 
Also look for expenses that you can cut. Cellphone contracts, cellphone spend, DSTV, Netflix, home Internet, it all needs to basically go.

It will be tough but you are in a lot of debt!
 
Your credit card interests are all the same, so I would tackle:

1. 10k first so you can kill the fees associated with it
2. Whichever of the other two has the higher fees and least reward benefit
 
With the assumptions that you pay 21.5% interest, your total debt is 54,000 (20+20+10+4)
and your repayment terms are 60 months. You need to pay a minimum of R 1,500 per month (in total to all the creditors). Rather though R 2,000 per month.
At this point your interest is adding R1000 a month to your debt.

Like the others said, go for the highest interest rate first, Budget your monthly income & expenses.
Always pay your expenses first, and "wants" at the end...most people get that backwards.

The R2000 payment means you pay off the debt in 3 years.
What you need to understand is that this is quite serious because it means your not
going to add ANY new debt in 3 years, which is unlikely.
The more seriously you take the situation now the easier it will get going forward.
For example not going out over weekends and saving an extra R 500 could mean
years off stress (as you could see between the R1500 payment and the R2000 payment meant 2 years)


Good luck
 
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Try get a loan to consolidate the credit card debt (even at a similar interest rate).
There will just be the monthly loan fee (R60) instead of 3 credit card fees.
I'd advise going to a bank and not a micro-lender to consolidate, if possible

Take out the loan with a reasonable loan term. The loan term should have a monthly repayment that still hurts but also gives you some breathing room for your living expenses.
As was mentioned above, look at what you can cut back from your lifestyle, and put in extra above your installment each month to pay down the loan quicker.
 
I agree with what Kosmik said - you need a budget.

It seems as if your monthly expenses presently are more or less what is available between the three cards, so you never get to a scenario whereby you are paying off more than what you are consuming. The ideal would be to pay R4k and use R3k, thus reducing the total amount owed to R49k and doing the same next month to have the total owed reduced to R48k. But due to no budget, you keep going back to R50k debt (R20+R20+R10).

I fell into the same trap when I was 15 years younger. I would get to the end of the month and see there is R500 available on the card, so I'd go to the movies. If the R500 was not available I'd stay at home. But my credit card was always maxed. Now I have a specific entertainment budget and once that's been spent (whether it's movies, dining out or gaming) then I don't get more entertainment that month. This way I have a specific amount that gets saved each month too.

For you that savings amount will initially be used to service this credit card debt, but once you get to the point where you don't have any debt anymore, you need to start putting those instalments into the savings category.
 
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I got some advice from FNB - regarding the CC credit interest % - try to get an overdraft arranged with them (go to FNB) and then use the overdraft to squish as many of the CC bills as you can. The overdraft will only cost you money when you use it - and carries a much more favourable interest rate. I think mine was something like 11% or something silly (for my credit profile) - that allowed me to squish a revolving loan I had at 21.5% and start climbing out of the debt cycle.

All the advice is always - pay off the biggest interest bearing card that you can and work through the rest. You can also look at getting a personal loan to consolidate all your debt into one interest bearing payment. Check what options you have - and of course with a loan - you can choose the best repayment term for your budget.

I would suggest you kill all CC's that are not with your bank directly (if you have a FNB account - then kill the blubean and woolworths cards. Also - cut them up so that you can't use them again (to keep afloat in an emergency) - i will prevent you from getting tempted to just "put it on the card and everything is okay" ...
 
All the above and draw up a proper budget. Focus everything on killing the card with the lowest balance. Cut it up so that you can't use it again.
 
I would seriously caution against getting more debt to try and consolidate this or only get a marginally lower interest rate.
 
Consolidating via another loan is fine, but you need to understand that you can't use your cards until that is paid off.

In fact if you do decide to take out a loan, you should cancel your cards immediately and focus on paying back the loan along with your usual monthly expenses. This will force you into taking cost-saving measures because you won't have the money for it, and won't be tempted by having any credit available.

Gonna make some assumptions here - you could then look at cancelling your DSTV, dropping to the bare minimum internet that you need, cut out takeaways, quit smoking, going on a lower medical aid tier etc.

The biggest thing here is to get rid of the cards and any credit available to you ASAP, because you're not a responsible user of credit, and I'm not ridiculing you by saying this. Consider it a lesson learnt...
 
Would seriously advise creating a budget and looking where the expenditure is going. A year or so ago I sat down and looked at every expense closely and found a number of items that could be reduced for example going to prepaid used to be R1200 a month now R200. That's a saving of 12k a year. Managed to change insurers and saved R500 a month that way that's R6k a year. These are just two items those two alone saved me R18k a year and that's not a small sum at all. It does take discipline my wife and I have what we refer to as the "receipt jar" every receipt we get goes in there and she logs it onto excel at the end of the month I can track every months spend on everything since the day we got married and can closely see what goes where. This is absolutely key to good money management.

If you don't track your spend it will get the better of you.

All the best I really wish you well, I can imagine its not going to be easy.
 
cyberbob1979 said:
I got some advice from FNB - regarding the CC credit interest % - try to get an overdraft arranged with them (go to FNB) and then use the overdraft to squish as many of the CC bills as you can. The overdraft will only cost you money when you use it - and carries a much more favourable interest rate. I think mine was something like 11% or something silly (for my credit profile) - that allowed me to squish a revolving loan I had at 21.5% and start climbing out of the debt cycle.

All the advice is always - pay off the biggest interest bearing card that you can and work through the rest. You can also look at getting a personal loan to consolidate all your debt into one interest bearing payment. Check what options you have - and of course with a loan - you can choose the best repayment term for your budget.

I would suggest you kill all CC's that are not with your bank directly (if you have a FNB account - then kill the blubean and woolworths cards. Also - cut them up so that you can't use them again (to keep afloat in an emergency) - i will prevent you from getting tempted to just "put it on the card and everything is okay" ...
Click to expand...

Strange , my overdraft is about 3% higher than my credit card BUT the BIG problem with leveraging a overdraft, is that you are charged interest FROM DAY 1. Credit cards only accrue interest on new purchases after 55 days.
 
Kill the Edgars card. You get charged monthly even if you don't use it.
 
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