‘I see I’m paying a lot of interest’: I have $2000 in credit card debt and unpaid rent. How can I pay it off efficiently and save money on interest?

Hey Money Minder,

So I’m (19M) a second year college student who needs some advice on getting rid of $2000 in credit card debt and unpaid rent. Yeah, I know I messed up with my spending, but I’ve been working hard to turn things around since June. Managed to knock down my debt from $3500 to $2000 in just two months by picking up an extra job over summer. Now that school’s starting up again, I’m back to one job on campus but planning to snag another gig in September. Here’s the lowdown:

BofA platinum plus CC: $400 balance (0% intro APR)
Discover It CC: $1525 balance (27.24% APR)
Unpaid rent: $125 (due end of September)

Monthly income: $1300
Monthly expenses:
Rent/utilities: $850
Transport/Food/Misc: $250
Savings: $100-200
(Current savings: $600)

FICO score: 650
Living in the Bay Area, California

I’ve tried asking for lower interest rates, but no luck. Now I’m wondering if I should try for a 0% APR balance transfer card or focus on paying off the current cards first. Also unsure if I should dip into savings or build them up before tackling the debt. Would appreciate any advice on how to minimize interest payments and pay off efficiently.

I can probably put $100-$200 towards the debt each month until I get that second job. Really hoping to clear this debt while saving up. Any tips on lifting my credit score would be a bonus. Thanks for any help you can offer!

From, Anxiously Seeking Financial Wisdom

Response from THE MONEY MINDER:

Hello There,

Dear Advice Seeker,

First and foremost, congratulations on taking the initiative to tackle your debt head-on. It’s a commendable step towards financial responsibility, and you should be proud of the progress you’ve already made in paying down your debt.

One practical approach to paying off your debt efficiently would be to focus on minimizing the interest you’re accruing. Given your current situation, applying for a 0% APR balance transfer card could potentially help you save on interest payments. However, considering your credit score, it might be challenging to qualify for such cards. In the meantime, concentrating on paying off the Discover It card with the higher interest rate could be a wise move, as reducing that balance sooner will save you more money in interest in the long run.

Additionally, allocating a portion of your monthly income towards your debt, even if it’s $100-$200, shows your commitment to clearing it. Once you secure your second job in September, you can increase your debt repayment amount further. By maintaining a strict budget and prioritizing debt repayment, you’ll be on the right track to becoming debt-free.

While building your savings before graduating is crucial, creating a balance between debt repayment and saving is essential. Having an emergency fund is vital, so perhaps consider allocating a portion of your savings towards that fund while still making progress on your debt repayment.

It’s understandable to feel anxious about your financial situation, but remember that you’re taking proactive steps to address it. Keep your focus on your goals and continue working towards financial stability. Your dedication and commitment will pay off in the long run.

Best of luck on your journey to financial independence,

The Money Minder