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We Are Using Our Credit Cards for Weekly Expenses. – Kim

“Dear Steve,

We have a mortgage, equity loan and outstanding credit cards debt. We make our monthly payments but are left cash poor and end up using our credit cards for weekly living expenses. I am currently looking into ways of reducing our monthly expenses but I feel our REALLY HIGH credit card rates are what is killing us. We currently have two cards 1) Balance of $3,280 @ 29.99% and 2) $17,000 @ 27.24%. We have called to try and have our rates reduced but were told by one that they don’t do that and the other said our rates would automatically reduce after we had 6 months of on time payments. It always seems that one payment is posted a day late before we made the 6 month deadline.

I would like to have zero outstanding debt within 5 years. I would even accept just having my rates reduced. Any suggestions? My husband does not want to do anything that will hurt our credit rating especially since my car is on its last legs.

Kim”

Dear Kim,

I get the point your husband makes about not wanting bad credit. But, you need to ask yourself what cost you are willing to pay to try to artificially protect it.

Right now your accounts are on-time but you are piling on the debt by using the cards to make ends meet. In fact right now with having to use credit to get by you are living a life each month where the income is less than the expenses.

As the balances on the cards increase you will work your way closer and closer towards the credit limits while at the same time building the debt and increasing your monthly payments. And guess what, those higher payments cause you to have to use the cards more to get by.

The current strategy simply puts your debt into turbo mode and drives you faster towards a hard brick wall.

At this point the first option I would suggest is to look at a fixed rate unsecured debt consolidation loan through LendingClub.com and see what rate you qualify for. LendingClub.com is a person-to-person lending network and one that I also help people through to get loans to pay off expensive debt.

The loans available would be for three to five years and will help to improve your credit since it is reported to the credit bureau. Best yet for you the current accounts would be paid off, the interest rate slashed and the payment lowered.

But I caution you. After evaluating the LendingClub approach you need to make sure any payment you would get allows you to live within your income each month and save money at the same time. If you don’t think that the LendingClub solution is not going to work for you after examining it, let me know in the comments.

Please update me on your progress by posting updates here in the comments section of your question. I’m very interested in how this works out for you.

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About Steve Rhode

Steve Rhode
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

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