'I vowed to never be in a situation like that again': I have $10K in credit card debt. Should I pay it off in one payment or break it into smaller payments? Help!

Hey Money Minder,

So, I had a rough financial start, but I promised myself to never let that happen again once I started making my own money. Everything was going well until life threw a curveball – school fees, moving expenses, job loss, a major car crash, low wages, you name it. Cut to the chase, my main credit card is maxed out and I owe a little over 10K. The interest is eating away at my chances of paying it off quickly, so I got approved for a loan. Now, here’s my dilemma: when I get the loan, should I pay off my credit card in one shot or split it into smaller payments? And should I clear the whole debt? I’ve heard conflicting things about having zero balance on your card hurting your credit score, but I’m starting to think it’s just a myth. Any advice would be awesome 🙂

Cheers,

Savvy Spender

Response from THE MONEY MINDER:

Hello There,

I understand the frustrations and challenges you are facing with your current financial situation. It is commendable that you have taken steps to address your debt by applying for a loan. Congratulations on taking this first step towards financial stability.

In terms of how to use the loan to pay off your credit card debt, it is advisable to pay off the entire balance of your credit card in one lump sum. This will help you eliminate the high-interest debt and save you money in the long run. Making smaller payments may prolong the repayment process and result in more interest paid over time.

Regarding the concern about having no balance on your credit card negatively impacting your credit score, it is indeed a common myth. Paying off your credit card in full does not have a negative impact on your credit score. On the contrary, it demonstrates responsible financial behavior and can improve your credit utilization ratio, which is a key factor in determining your credit score.

Moving forward, it is important to create a budget, set financial goals, and avoid accumulating new credit card debt. Focus on making timely payments on your loan and any other financial obligations to rebuild your financial health. Remember, financial stability is a journey, and it takes time and persistence to achieve your goals.

All the best from THE MONEY MINDER on your journey to financial freedom. If you need further assistance or advice, feel free to reach out.