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Am I Better Negotiating a Lower Pay Off or Just Pay them Off in Full? – Shannon

“Dear Steve,

I am a college student and since I’ve been in college I have acquired some credit card debt. Within the past year I found a better paying job and have been able to pay down my debt. I haven’t been late on any payments and I have been paying more than the minimum. All of my credit card accounts are in good standing. I don’t know if this matters but my credit score is “Good”. I have come across some extra money and want to pay off all of my credit card debt.

Before I just go ahead and payoff all of my credit card debt, would I be able to/would it be worth negotiating a lower amount than what I owe on the cards with higher balances? Or should I just pay them off? If I can save a couple hundred bucks by doing so I would like to.

Shannon”

Dear Shannon,

I would suggest that the modest savings you may experience would be greatly offset by the credit hit you’d take to be 90-120 days late on your cards to talk about a settlement.

If you have the cash, pay the debts off in full. The improvement to your credit report and credit score will be a real bonus for you.

Just remember to NOT close your two oldest major credit cards when you pay them off. Leave them open to boost your credit score since the longer history carries more weight.

Please post your responses and follow-up messages to me on this in the comments section below.

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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.
  • Steve Rhode

    All you really need to build good credit is to deal with the bad stuff and resolve it and keep your two-three oldest cards open to get the benefit of the length of the history.

    What you could do on that low limit card (How low is the limit?) is ask them how you could apply for a limit increase. This is not so you can run wild with the card. It is simply so when you use the card any balance you may put on it, which may be reported before you pay it off, is not more than 33% of the limit.

    Interestingly the APR is the least important factor of any credit card as long as you pay off the balance in full by the due date. Why? No interest charge because no balance is carried forward.

    Just use the cards for gas, groceries, or a casual transaction and then pay the cards off as soon as you get the statements. You don’t need to carry a balance.

    Using credit does not equal being deep in debt no more than owning sharp kitchen knives leads to murder.

    Keep me posted, please.

  • Shanoelissa

    Steve,

    I called them today and the account is closed. They said once the account is paid off I will receive one more statement from them and after that everything is done. I did have one more question..sorry. So I do want to keep some of my cards, I am going to do what you suggested and keep the oldest two I have. Although I do have one card that has a very low limit (so low I don’t think it’s really worth keeping) and I have been thinking about just closing the account. I spoke with them the other day and I even asked them why I should keep my account open with them and all they could say is that they were a very conservative card company. I have no idea what that means but all they could do for me was lower my APR. What do you think? How many cards is too many cards? I don’t plan on ever getting back into the situation I was in but then again you never know what’s going to happen.

    Thanks for all of your help,

    Shannon

  • Steve Rhode

    Shannon,

    Even if you are still getting statements they may have still closed the account. Just give them a ring and ask them about the status of the account. If it is closed, it is not necessarily a big deal since they have a right to do that but ask them if it is possible to reopen the account?

    Let me know what you find out.

  • Shanoelissa

    Steve,

    The oldest card I have was opened when I was 18 (I’m now 25 going on 26). This card was unfortunately closed by the bank due me going over the limit, although I don’t think it is technically closed seeing as how I still get monthly bills and still owe them money. I was going to officially close the account since I can’t buy anything on it anyway. Is this what I should do? I do however have other older cards that were opened when I was 19.

    Thanks for your help,

    Shannon

  • Shanoelissa

    Steve,

    The oldest card I have was opened when I was 18 (I’m now 25 going on 26). This card was unfortunately closed by the bank due me going over the limit, although I don’t think it is technically closed seeing as how I still get monthly bills and still owe them money. I was going to officially close the account since I can’t buy anything on it anyway. Is this what I should do? I do however have other older cards that were opened when I was 19.

    Thanks for your help,

    Shannon

    • http://GetOutOfDebt.org Steve Rhode

      Shannon,

      Even if you are still getting statements they may have still closed the account. Just give them a ring and ask them about the status of the account. If it is closed, it is not necessarily a big deal since they have a right to do that but ask them if it is possible to reopen the account?

      Let me know what you find out.

      • Shanoelissa

        Steve,

        I called them today and the account is closed. They said once the account is paid off I will receive one more statement from them and after that everything is done. I did have one more question..sorry. So I do want to keep some of my cards, I am going to do what you suggested and keep the oldest two I have. Although I do have one card that has a very low limit (so low I don’t think it’s really worth keeping) and I have been thinking about just closing the account. I spoke with them the other day and I even asked them why I should keep my account open with them and all they could say is that they were a very conservative card company. I have no idea what that means but all they could do for me was lower my APR. What do you think? How many cards is too many cards? I don’t plan on ever getting back into the situation I was in but then again you never know what’s going to happen.

        Thanks for all of your help,

        Shannon

      • http://GetOutOfDebt.org Steve Rhode

        All you really need to build good credit is to deal with the bad stuff and resolve it and keep your two-three oldest cards open to get the benefit of the length of the history.

        What you could do on that low limit card (How low is the limit?) is ask them how you could apply for a limit increase. This is not so you can run wild with the card. It is simply so when you use the card any balance you may put on it, which may be reported before you pay it off, is not more than 33% of the limit.

        Interestingly the APR is the least important factor of any credit card as long as you pay off the balance in full by the due date. Why? No interest charge because no balance is carried forward.

        Just use the cards for gas, groceries, or a casual transaction and then pay the cards off as soon as you get the statements. You don’t need to carry a balance.

        Using credit does not equal being deep in debt no more than owning sharp kitchen knives leads to murder.

        Keep me posted, please.

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