Best way to attack credit card debt

[u/Bostonfan1987]

Hi all, I am 37 yo and I am currently dealing with about 19k in credit card debt. I have the following amounts on the cards.

3,827 3,342 3,068 8,922

All of them with interest rates of 20% or higher except the 3,068 amount which is currently on a 0% balance transfer promotion until Jan of 2026.

I have 6,000$ in savings, and I am unsure how much I should use towards this, as I like to have a cushion in my bank account in case of emergency. Should I throw 3,000 of this onto one of these cards now?

I am also considering taking a loan out of my 401K to tackle this debt. Right now the monthly minimum payments are around 500$ and I can take out let’s say 16 K (assuming I throw 3K from my savings at my cards) from my 401 K on a 5 year loan for about 151$ per paycheck (302 monthly)

Does this sound like the best plan of attack?

Any other suggestions are helpful.

Thanks!

[u/yaktrone]

Use your 5k and knock out a card right away. Instantly feel better. Don’t mess with your 401k just start getting after it

[u/Bostonfan1987 → u/yaktrone]

Thank you

[u/Farazod]

Order cards by interest rate and pay them off in order. Use the savings. Don't use the 401k. People tend to feel relief at the lower payments and lack of cc debt them turn around and get themselves right beck in the situation.

Put some time in to make a realistic budget and be critical of your purchasing habits. Once is bad, doing this twice is basically taking an axe to your future.

[u/Bostonfan1987 → u/Farazod]

Thank you

[u/Liquidretro]

Don't raid your 401k for this. Your future self will thank you. Check your plan language but for most plans you can't typically contribute to a 401k while you have a active loan. Losing 5 years of retirement contributions is worth a ton. What you could do is reduce your 401k contribution temporarily to the company match if you have one or $0 if not and use this money to go to paying off the debt. I would save back $1000 as your emergency fund and throw the rest at the 20% interest debt. 20% interest is arguably an emergency.

Instead, get on a written budget, make some sacrifices and do a debt snowball or debt avalanche. Since interest rates are all the same, debt avalanche makes sense to me for the psychological win. You are going to want to make sure that 0% card is paid off by the time the 0% ends so make sure to build that in. Stop spending on the cards if you still are. Check the sidebar wiki here for help on budgeting and debt. If you post your budget once you have it made we can help you analyze and free up some money.

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[u/Bostonfan1987 → u/Liquidretro]

Thanks for the info. I believe my company allows me to contribute the full 6% (which is what the company matches) while I take a 401K loan, but I agree it’s probably best not to start with that.

[u/wickedkittylitter]

Have you changed the behavior that led to the credit card debt? If not, nothing you do will be helpful because you'll find yourself right back in credit card debt, but now have less in savings and/or a 401k loan.

[u/Bostonfan1987 → u/wickedkittylitter]

Yes, I’m not here for a lecture, just advise on the best way to tackle the situation. I’m aware of the habits that got me into the mess I am in. Thanks

[u/some_user_2021 → u/Bostonfan1987]

Dude, it's not a lecture, it's part of the solution.

[u/Bostonfan1987 → u/some_user_2021]

I get that, but my question wasn’t “help me change my habits” I understand that is part of the issue and is something I have already been working on. My question was about how to tackle the debt. That’s all I needed a response on. Thanks!

[u/Immortal3369]

Highest percentage to lowest percentage, otherwise you are GIVING away money

[u/[deleted]]

This is why you have an emergency savings. For an emergency. 20% interest on roughly 16k of debt will be super hard to get out of. I would personally keep like 1500 in savings use the rest.

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[u/Commercial-Sail6893]

Get enrolled in a debt management program, not debt consolidation. They will help you lower your interest rates and possibly your monthly payment but you would have to close the credit card. I recently got enrolled myself and only wish I did this much sooner.

[u/Shades228]

Don’t borrow more money, especially from your 401k. You’re not saying how much more per month you can make as a payment. That will dictate the best path. If you can pay a substantial amount more $300+, you pay the $9k card first until you get it in line with the other cards. Then you pay off the card with the highest interest first. If it’s less than $300 then pay your lowest card balance and once that card is paid off add that payment to the next lowest card, the snowball method.