So, I missed a payment on my credit card with the highest interest rate. I’m young, under 25, and I’ve learned my lesson about credit cards. I’m being much more careful now. This card has around $11,000 on it, and I’m thinking about pulling out $4,500 from my $9,000 401k. I have other cards too, but I can manage those. It’s just this one with high interest that’s stressing me. Any advice would be great. My credit score is low from mistakes I made in the past, and I’m just trying to get things on track.
You’re young. I’d say try to pay it down as fast as you can, as long as you won’t run it up again.
No, don’t dip into your 401k. At your age, you’d be giving up a lot more for retirement than you might think.
Instead of looking for a quick fix, try working on the root cause, which is likely spending beyond what you earn. There’s a simple plan that works:
- Cut all unnecessary expenses. Anything that’s not essential goes.
- Boost your income by picking up extra shifts or a second job.
- No more debt for any reason.
- Make the minimum payment on each debt, but put extra cash toward the highest interest debt. Once that’s paid off, move to the next one. This is called the ‘avalanche’ method.
- Try not to make the same mistakes that got you here in the first place.
- Keep only one or two credit cards to avoid temptation, and never carry a balance again. Pay off any charges completely each month.
@Ashton
I like this, thank you!
You should be able to contact a local non-profit that helps with credit card debt. They’ll work with the credit card companies to get the interest down to almost zero. Then you make one monthly payment to them, and they handle the rest. I did this myself and paid it off in two years. They won’t let you use credit while in the program, though, and they close that account, but it won’t hurt your credit score. There’s no fee to use this service because it’s a non-profit.
Definitely don’t touch your 401k. A non-profit might be the best option here.
@Kai
I tried that with Discover but they barely lowered the interest rate, and the payment was still high.
Flynn said:
@Kai
I tried that with Discover but they barely lowered the interest rate, and the payment was still high.
They got mine down to 1-3% depending on the card. My monthly payment was about $280. Some companies won’t work with them, though. Maybe try another non-profit in your area?
@Kai
This is interesting. I hadn’t heard of reaching out to a non-profit. How do I know if it’s not a scam?
Nico said:
@Kai
This is interesting. I hadn’t heard of reaching out to a non-profit. How do I know if it’s not a scam?
The Consumer Financial Protection Bureau (CFPB) has a page on spotting scams. You can also check with your state’s attorney general or consumer protection office.
The NFCC (National Foundation for Credit Counseling) and FCAA (Financial Counseling Association of America) are good options for non-profits. They negotiate with credit card companies and charge low fees or sometimes no fees. Just make sure to check if they’re reputable.
Be cautious because some non-profits also have debt settlement services, which can have more risks. If they’re NFCC or FCAA members, they’re generally safe but double-check.
Good luck!
Nico said:
@Kai
This is interesting. I hadn’t heard of reaching out to a non-profit. How do I know if it’s not a scam?
Good question. I found mine by searching local help services. They had physical locations and lots of good reviews. Totally saved me back then.
Not worth it unless you’re paying off the whole thing. If you can’t keep up with payments, that balance will go back up, and you’ll have less in your 401k. Try to see if they’ll offer a hardship payment plan, or consider loan consolidation.
@Arlo
The minimum payment on that card is pretty steep. Balance transfers are out because my credit is low. Would the hardship plan come from my 401k?
Nico said:
@Arlo
The minimum payment on that card is pretty steep. Balance transfers are out because my credit is low. Would the hardship plan come from my 401k?
No, you’d ask the lender directly for the hardship plan. They might lower the interest for a few months. What are your income and expenses like?
@Arlo
I called them, and they said they could only stop interest for one month. I’ll check my income and expenses and update here.
Nico said:
@Arlo
I called them, and they said they could only stop interest for one month. I’ll check my income and expenses and update here.
Which credit card company said no hardship program?
@Arlo
It was Goldman Sachs with the Apple Card.
@Arlo
Thanks for the advice!
Don’t pull from the 401k. See if you can do a balance transfer to a 0% interest card like Capital One Quicksilver. They had a 0% offer for 15 months with no transfer fee. Stop using your cards for a while if you can.
@Bay
My chances of getting approved for that are slim. It would help a lot, though.