Question:
Dear Steve,
I’m 53; I have a 16-year-old at home still. I have a small daycare. 12 kids, I went through a divorce, and the judge gave me all the secured debt. 30,000. I have gotten it down to 20,000 since January 19’ I have used a Discover credit card, but now I can’t find an interest-free cc and need one now.
Can I have my cc negotiated down without it hurting my credit?
Kellie
Answer:
Dear Kellie,
It sounds like you are doing the best you can in difficult times. These issues are difficult because they involve fundamental bedrock financial issues that are hard to change.
It seems several issues are going on here.
1. Income Does Not Meet Demands
I would safely bet that some expenses have landed on the Discover card as you’ve been struggling to makes ends meet. Or at the very least, that you previously transferred an existing balance to the Discover Card.
There are two fundamental ways to deal with unaffordable debt. You can pay it in some way, or you can eliminate it legally.
2. Living Within Your Income
It’s not enough to be able to fit your expenses inside your income. You have to reduce them down low enough where you have money to pay down the debt if that is what you want to do. But you also need to leave enough room to put money in savings and even think about saving for retirement. My experience tells me that it is probably very difficult or impossible for you to do at this point.
Focusing extra money just to reduce debt is not the recommended path. It is better to get out of debt slowly and protect yourself with savings. To do that might require radical change.
3. Balance Transfer Cards Are a Gimmick
The entire reason balance transfer or low-interest rate credit cards exist is that they are a gimmick to get people to switch and get trapped. Then the interest rate goes way up, and the trap has been sprung.
Counting on a low-interest rate or balance transfer card to be waiting for you when you need it is not guaranteed at all. Many factors can influence your ability to get a card. For example:
- The current economy.
- Creditor risk appetite.
- Your debt-to-income ratio.
- Too much credit available.
- A spotty repayment history.
- The weather. Offers change with the way the wind blows.
4. It’s Time for a Real Solution
This might be the time for a real examination of your current personal financial situation so you can come up with a plan that can deal with the current situation and get you pointed in the right direction to achieve your future goals.
One option here if you can afford your current monthly payment on the Discover card, but you are looking for a lower interest rate, is to think about putting that card into a credit counseling program. Your interest rate would be low, but the card would be closed.
If you wanted a second opinion on your situation, contact my debt coach friend Damon Day. He can look at what you are trying to achieve and get you pointed in the right direction.
You are not alone. I'm here to help. There is no need to suffer in silence. We can get through this. Tomorrow can be better than today. Don't give up.
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