Account Forensics! Where My Money Went

So I have $20,000 in credit card debt. There is a large part of me that doesn’t want to think about where the money went. It feels like a pointless endeavor—painful, even. The money is gone. I’m not getting back. And I basically know that I spent it on nothing. It seems better just to forgive myself for it, accept it, pay it down, and move on.

But I’m also curious, in part because I never actually felt like I was doing anything extravagant—I was just living my life, man. I’m particularly interested in figuring out what kind of life I was living—was a living the life of a person who makes $60,000 a year? $70,000? More? So I’m going to figure that out. First off, a look at the six cards:

American Express, Costco
APR: 13.24%
Balance: $381.92
Minimum Payment: $35

This was a dormant (and cut-up) card for a long, long time until I ordered a new one in January (for emergencies, right) and then put half of whatever I bought at Ikea on it. I did buy a mattress. I did not buy a bed. 

J.Crew Card
APR: 24.99%
Balance: $604.10
Minimum Payment: $31

I rationalized opening this card as a way to keep track of my spending while working at the store during the holidays. The only perk of the card was that it kept my expenditures under $650, the limit on the card. I still don’t have anything to wear.

Visa, Barclays US
APR: 22.99%
Balance: $1,753.43
Minimum Payment: $20

Another card that had been long-dormant since its initial pay-off, I started using this card again when I went to London in the fall. Most of the balance is from that trip, and the remainder seems to be assorted crap.

Visa, Bank ofAmerica
APR: 13.99%
Balance: $3,850.19
Minimum Payment: $56

Longest held card. I’ve had this thing forever. Have paid it off and built it back up two or three times. Used a balance transfer check from MasterCard in the fall to pay off half of this bill so that my $291 monthly payments would go way down. Haven’t used it since (not out of self control, though—I cut it up, and when got desperate and ordered a new one it got sent to my parents’ house, and there was no way I was going to get them to forward it to me).

MasterCard, Citi
APR: 0.0% until 8/1, then 19.99%
Balance: $3,866.49
Minimum Payment: $57

Have had this card for a bit and was not being used, but then they sent me a $3,800 balance transfer offer right around the time that I as wondering how I was going to pay my Bank of America minimum payment: serendipity. The remainder of the balance is straight-up life costs, you know, like coffee, wine, and snacks.

Visa, OnPoint Community Credit Union
APR: 8.9%
Balance: $9,492.77
Minimum Payment: $281.00

I opened this card when I got my checking account at the credit union in 2007. The plan was to transfer my Bank of America bill to this card to take advantage of low interest rate and have all accounts in one place. Fatal flaw in this plan was that I didn’t close the Bank of America card after I transferred the balance. Second fatal flaw: I connected this card to my checking account for overdraft protection “for emergencies,” and then never worried about my rent check bouncing ever again. This is basically what I’ve been living off of for the past year(s), even though I’ve been hovering near near the $9,500 limit for … awhile. Each time I made a payment, the balance would down, then I’d buy things, and it’d go back up.


17 Comments / Post A Comment

sox (#246)

My little joke I like to make about this is that I’m still paying off drinks I threw up in dresses I don’t own anymore…from 2001. Wish I could say I’m all clear now, but I’m actually still paying it down :(

I have a credit card question (OK, two). I am currently paying off about $2,300 in credit card debt. My Capitalone card has a reasonable 8.9% APR, and I will likely keep it for emergencies. My oldest card (citibank) has an APR of freaking 20.99%(!?!) but it is also my oldest credit card.

Two questions: 1) Should I cancel my citibank card? The APR is out of control, but I am afraid of canceling it because my second credit card is only from 2009 and the citibank one is from 2007.
2) Should I apply for a credit union credit card with a much lower APR maximum. Also, should I take advantage of it’s 1% APR on balance transfers since the 20.99% APR is so so high?

acid burn (#113)

@myrna.minkoff I don’t actually know anything about how balance transfers work but it seems like the priority would be to get the balance off of the high APR card, so you’re not paying crazy interest. Do you think you would be able to resist spending money on the Citibank card if the balance went down? If so, I’d say get the balance off (or down) and then keep the account open but don’t use it.

Mike Dang (#2)

@myrna.minkoff If I were in your position, I would close the account. It will slightly affect your credit score, but holding on to a bad financial product isn’t worth it. You can get your credit score back up quickly enough simply by making all your payments on time and keeping your balances low. Also, you can also try calling Citi and telling them you want to close your account unless they’re able to reduce your interest rate. They might be willing to do that to keep you as a customer. And you can do a balance transfer, but it’s more important to pay off your debt that shuffle it around from card to card. Shuffling it around will hurt your credit score. Paying it off will help.

vunder (#752)

@myrna.minkoff Unless you have a particular reason to be thinking right now about your credit (say, you’re going to buy a new car), I’d pay it or transfer and then cancel it. That said, if you want to keep it, make sure you keep it active a little too. I have a second card that I use to buy a plane ticket every once in a while, and then I pay it off right away.

dotcommie (#662)

@myrna.minkoff yes, things like closing a credit card are only on your report for a short period of time. i don’t think you’re gonna buy a house or anything in the next year, so i’d just take the hit now and save a bunch of money in interest. also, the older credit card still counts towards the length of time you’ve had credit, even if you close it, which is another factor on credit reports.

ElBlynx (#499)

You can do it, Logan! We (the royal version) are rooting for you!
Mike, you are going to tell us the strategy, right? Riiiiiight???? Avalanche vs. Snowballing? Should we creating two alternative timelines to decide what will ultimately make Logan the most debt free and happy?

Timeline 1: JCrew, Barclay, Mastercard, BOA, Costco, Credit Union
Timeline 2: Costco, JCrew, Barclay, BOA, Mastercard, Credit Union (oops, this is the order they are in)

Can you calculate which will save the most money over the long term based on knowing how much Logan can contribute to debt each month? What is the most likely to succeed?

Spinach Party (#253)

@ElBlynx Yes, I’m super curious about which strategy you guys use! It’s always interesting how people decide to pay things off. I think I would always go with paying off higher interest debt first, since when you run the numbers, usually this costs the most. But being able to completely pay off smaller balances in total brings such a feeling of accomplishment… I guess it all comes down to what method is more motivating for each individual.

Smallison (#155)

What I want to know is, how is your minimum payment so small on the cards with $4k-or-so balances? I have a card with a similar interest rate and balance, but a much higher minimum. I’ve tried to have the card company lower the interest, but they weren’t able to. If you have tips for how to get a lower minimum payment, I’d love to hear it and try it out!

@Smallison I would also love to hear the answer to this. I’ve increased my balance twice in the past year (once because I legitimately needed to for my work-related expenses, second time because I “legitimately needed to” to pay for a vacation I was taking) but my minimum payment has remained that had my travel expenses on it.

i guess this is an evil credit card scheme because if I spend $1400 and can only pay back $10 then i’m racking up insane interest and also can’t use my card unless i apply for a higher balance so …

@redheaded&crazy ugh i wish i could edit my last comment as one sentence is missing a big chunk of … words. anyway yeah my min payment has remained the same even during the month that had my travel expenses on it

Smallison (#155)

@redheaded&crazy Yeah, even when I had a lower balance on the card, the minimum payment was still high. I pay above the minimum every month, I just with it was lower, so more of my money would pay off the actual dollars and not the interest. :(

Smallison (#155)

@Smallison *wish, not with. I also wish we could edit comments!

Mike Dang (#2)

@Smallison We’re trying to get edits working again on commenting. Sorry about that, you guys.

After the Credit Card Act of 2009 was passed, banks were required to raise your minimum payments to a certain level (check the fine print), to get you to pay off your debts faster. This was because banks were making a killing off of people who paid the minimums, but weren’t actually paying back any of the principal—they were essentially giving the bank their money every month and not getting anywhere.

You can try to negotiate a smaller minimum payment with your bank, but this may not be possible until you miss a few payments, which proves you can’t make the minimum payments (and you certainly don’t want to do that). You can also try transferring the balance to another card which may require a lower minimum payment (again, check the fine print). I don’t suggest any of this though unless it’s a last resort. Once you start paying back more principal, the minimum you need to pay every month will gradually drop.

Smallison (#155)

@Mike Dang I will have to try negotiating. I did try to get the interest rate down last year (which worked for a different card), but it was a no-go. I’ll have to try again! Thanks!

Dear Logan, while I would not wish a $20K debt on anyone, I am very happy to have discovered your writings. You see, today I also came out about my balance. The real balance, in horrifying exact numbers. The numbers are pretty close to yours, and as my parents were also bent on making sure I graduated without debt, I can’t explain it away with student loans. It’s all from retail, vacations, and generally fine living for the past couple years (for a $30k creative). Anyhoo, I look forward to reading more!

Those APRs make me want to cry. That is just highway robbery. I think there might be some psychological weirdness going around about closing the accounts that are 28% or whatever. You (and me and half my friends and so many people, seriously) are not buying a house anytime soon. No one will give you a mortgage. No one is going to lend you money that you should borrow. Get rid of those damn cards! You (the universal you) can’t control yourself and having a J Crew card around or anything with room on it is basically a flap of heroin cunningly arranged next to a syringe. Pay it off or put it on the big one with the lower APR and cut it up and then cancel it. Get rid of those damn things. Call your credit company. Tell them you are thinking of declaring bankruptcy. Talk to their manager. Ask and then beg them for a lower interest rate. They can do this, they will do this.

This blog is making me so much more responsible with my money. It’s becoming my favourite one here. It’s reminding me of when I declared bankruptcy when I was 21 with $21,000 worth of credit card debt and assorted others. The anxiety of all these open balances cannot be allayed by spending more money. It can’t. And that’s the only reason you can’t close those cards. Kill them with fire. Make a thing out of it. Post a video of squirting gas on them while on the phone with customer support cancelling them. DOOOOO EEEEEET!

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