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Question By
Batt1eRatt1e

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Where should my tax money go?
So I'm trying to see where I should spend my tax money in a few months. I've got several credit card debts. $8000, $2500, $2500 $2000. Should I put my estimated $5000 tax return into paying off a couple cards or into the big debt? If I pay off a couple cards that's instant money in the bank and credit score improvement for paying it off. If I put money towards the bigger debt will I be able to ask for a lower monthly payment?

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Strategic plan

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You're on the right track either way!  Glad to hear you're thinking like that, instead of buying something you dont need.

The answer:  I think it depends on the interest rates for those debts.  If one is a lot worse than the others...I'd probably attack it first, because you're giving away money every month on a high interest rate.

If all things are equal, I'd use the money like this:

  • Pay off the $2000
  • Pay off the $2500
  • Put $500 in savings.
  • Then roll over every penny of your normal payments from those two you closed onto the other $2500.  Knock it out as fast as possible...and then carry every red cent of those three normal payments onto that big boy ($8000).

*NOTE* The $500 in savings will save your backside next time you have an urgent situation...and keep you from using more credit.  Keep it there as an emergency fund.

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Do what that guy said

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 Just remember that every bit extra you pay will lower the required min payment (not that you should only pay the min).  Once you have a few months of paying way over the extra, call them and ask for a lower interest rate (the worst they can say is no).  If they say yes, then even more money goes to principle and your balance falls even faster.

Good Luck.

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Helpful to 2 out of 2 people

Good point about calling and asking for a lower interest rate.  Worst that can happen is the word "no"

Some companies will work with you to keep your business. 

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