Financial Advice Needed on CC debt

[yessir235]

Bit of a long one. So I’m a young guy (26) and I find myself in a bit of a sticky financial situation.

Long story short, back in 2022 I applied for two Amex cards that I got with a 10k credit limit each.
Fast forward two years and I racked up around 13k in credit card debt because of reckless financial decisions (some mental health related) but thankfully I am totally fine now. I used to make payments regularly but for the past couple of months I’ve missed minimum payments. Then 2 weeks ago I get my final statement from Amex saying my debt has been sold to a debt collection agency. So I called Amex and they told me to contact them.

In total I had two cards with Amex, one with around 6k and the other 7k for around 13k total debt. At the time they were canceled they were both over limit due to my credit limit being reduced several times over the past 2 years.

So I called the agency today, (they had been trying to reach me for the past week). I was very nervous, but the lady on the phone was super nice and explained everything to me, including terms and conditions, all the details surrounding when Amex transferred the debt, and asked about my current financial situation. Once I explained everything to her, she was very understanding and we agreed to a monthly payment plan of a couple hundred dollars at 0% interest to pay of the debt. I was very surprised with this because paying the debt of with Amex would have been at 28.99% (ridiculous, which of course isn’t even an option anymore.) She also said that I can change the monthly amount at any time, raise it once I have more income, or pay off any amount of the lump sum anytime I want if I have the means, with no penalty. We set up a direct deposit and that was that. I will also receive a confirmation of our agreement through the mail.


I guess my question is, should I be worried about anything? It just seems to good to be true. Does anyone have any advice?

I know the downside all lot of people will mention is the impact on my credit score. The thing is , my debt is already in collections, which means it already negatively impacted my credit score (580 as of today) so there’s not much to do now. I did some research and filing a consumer proposal doesn’t make sense at this point because while it would get rid of the debt faster, it would just further hurt my credit score another 100-150 points.

I have no doubt that I will be able to pay off the 13k debt within a year or sooner as I start my new job in September and plan to save around 3k per month. (I will also have to start paying my student loans as I just graduated, but that shouldn’t be a problem as my expenses for this coming year are quite low and I will be making around 60-65k.)

Any help, advice or tips are very much appreciated!

 

[SchlongConery]

They probably bought the debt from Amex for 50% on the dollar. You might have benn able to negotiate a lower amount if you had a lump sum. But just consider yourself fortunate that you can pay it off over a reasonably short time frame instead of just paying the interest.

Good lesson to learn.

You'll be able to rebuild your credit over the next few years. And really, the most important credit is to get a mortgage. I think anyone who isn't alreadfy in the real estate economy or doesn't have rich parents to help, or gets an inheritance is shit outta luck for home ownership in our lifetimes

 

[funhobby]

Bit of a long one. So I’m a young guy (26) and I find myself in a bit of a sticky financial situation.

Long story short, back in 2022 I applied for two Amex cards that I got with a 10k credit limit each.
Fast forward two years and I racked up around 13k in credit card debt because of reckless financial decisions (some mental health related) but thankfully I am totally fine now. I used to make payments regularly but for the past couple of months I’ve missed minimum payments. Then 2 weeks ago I get my final statement from Amex saying my debt has been sold to a debt collection agency. So I called Amex and they told me to contact them.

In total I had two cards with Amex, one with around 6k and the other 7k for around 13k total debt. At the time they were canceled they were both over limit due to my credit limit being reduced several times over the past 2 years.

So I called the agency today, (they had been trying to reach me for the past week). I was very nervous, but the lady on the phone was super nice and explained everything to me, including terms and conditions, all the details surrounding when Amex transferred the debt, and asked about my current financial situation. Once I explained everything to her, she was very understanding and we agreed to a monthly payment plan of a couple hundred dollars at 0% interest to pay of the debt. I was very surprised with this because paying the debt of with Amex would have been at 28.99% (ridiculous, which of course isn’t even an option anymore.) She also said that I can change the monthly amount at any time, raise it once I have more income, or pay off any amount of the lump sum anytime I want if I have the means, with no penalty. We set up a direct deposit and that was that. I will also receive a confirmation of our agreement through the mail.


I guess my question is, should I be worried about anything? It just seems to good to be true. Does anyone have any advice?

I know the downside all lot of people will mention is the impact on my credit score. The thing is , my debt is already in collections, which means it already negatively impacted my credit score (580 as of today) so there’s not much to do now. I did some research and filing a consumer proposal doesn’t make sense at this point because while it would get rid of the debt faster, it would just further hurt my credit score another 100-150 points.

I have no doubt that I will be able to pay off the 13k debt within a year or sooner as I start my new job in September and plan to save around 3k per month. (I will also have to start paying my student loans as I just graduated, but that shouldn’t be a problem as my expenses for this coming year are quite low and I will be making around 60-65k.)

Any help, advice or tips are very much appreciated!

I had similar issues in my 20's and have learned from the mistakes I made. The fact that you are here asking, is a great sign. Advise ... don't be in default on your agreement. Stick to it. Don't get another credit card until this is all cleared up. Once you do get another CC, and you should, commit to paying off the entire balance each month. If you can't one month, no problem...put the credit card aside and wait until you pay off the previous balance before using it again. Pay what you can that month. Credit card interest kills any opportunity for you to be financially independent. But you need it to establish a good credit rating. Keep your limits low. Start paying yourself each month (10% of your salary), once your credit cards are paid off....you will feel so much better and will be on the road to financial stability. Just my 2 cents... been there.
Cheers

 

[DesRicardo]

Bit of a long one. So I’m a young guy (26) and I find myself in a bit of a sticky financial situation.

Long story short, back in 2022 I applied for two Amex cards that I got with a 10k credit limit each.
Fast forward two years and I racked up around 13k in credit card debt because of reckless financial decisions (some mental health related) but thankfully I am totally fine now. I used to make payments regularly but for the past couple of months I’ve missed minimum payments. Then 2 weeks ago I get my final statement from Amex saying my debt has been sold to a debt collection agency. So I called Amex and they told me to contact them.

In total I had two cards with Amex, one with around 6k and the other 7k for around 13k total debt. At the time they were canceled they were both over limit due to my credit limit being reduced several times over the past 2 years.

So I called the agency today, (they had been trying to reach me for the past week). I was very nervous, but the lady on the phone was super nice and explained everything to me, including terms and conditions, all the details surrounding when Amex transferred the debt, and asked about my current financial situation. Once I explained everything to her, she was very understanding and we agreed to a monthly payment plan of a couple hundred dollars at 0% interest to pay of the debt. I was very surprised with this because paying the debt of with Amex would have been at 28.99% (ridiculous, which of course isn’t even an option anymore.) She also said that I can change the monthly amount at any time, raise it once I have more income, or pay off any amount of the lump sum anytime I want if I have the means, with no penalty. We set up a direct deposit and that was that. I will also receive a confirmation of our agreement through the mail.


I guess my question is, should I be worried about anything? It just seems to good to be true. Does anyone have any advice?

I know the downside all lot of people will mention is the impact on my credit score. The thing is , my debt is already in collections, which means it already negatively impacted my credit score (580 as of today) so there’s not much to do now. I did some research and filing a consumer proposal doesn’t make sense at this point because while it would get rid of the debt faster, it would just further hurt my credit score another 100-150 points.

I have no doubt that I will be able to pay off the 13k debt within a year or sooner as I start my new job in September and plan to save around 3k per month. (I will also have to start paying my student loans as I just graduated, but that shouldn’t be a problem as my expenses for this coming year are quite low and I will be making around 60-65k.)

Any help, advice or tips are very much appreciated!

Just a couple questions. You said you racked up 13k in debt, paid come off but still had 13K in debt?
Second, you plan to save 3k a month on 60K salary?

My advise to you is take your time paying this off. The damage is done so no need to rush.

 

[yessir235]

Just a couple questions. You said you racked up 13k in debt, paid come off but still had 13K in debt?
Second, you plan to save 3k a month on 60K salary?

My advise to you is take your time paying this off. The damage is done so no need to rush.

To clarify, I had more debt originally, about 18k but it was down to 13 when Amex cancelled.
And about the saving yes- my monthly income is around 5-6k. My expenses are my rent which will be quite low because splitting with partner, around $1300, and I plan to keep all other bills and spending (groceries etc.) around 800-900$.

Thankfully I have no car payments, no variable rate mortgages , no loans or anything else that would drastically eat up my finances.

 

[DesRicardo]

To clarify, I had more debt originally, about 18k but it was down to 13 when Amex cancelled.
And about the saving yes- my monthly income is around 5-6k. My expenses are my rent which will be quite low because splitting with partner, around $1300, and I plan to keep all other bills and spending (groceries etc.) around 800-900$.

Thankfully I have no car payments, no variable rate mortgages , no loans or anything else that would drastically eat up my finances.

You have to pay income taxes.

 

[yessir235]

You have to pay income taxes.

You have to pay income taxes.

Yes of course I know that, I paid around 4K in income taxes this April 30 and I expect it to be similar for this year.Which is also one of the reasons I didn’t have enough cash left for minimum payments. I’ll have that set aside by the new year so it doesn’t catch me by surprise

 

[KalEl1970]

I paid around 4K in income taxes this April 30 and I expect it to be similar for this year.

Maybe for 2024, since you said you start your job in Sept. For 2025, making $60k, you will pay a lot more than $4k for the year. Probably 20% average tax rate. And then there are deductions like EI, CPP and possibly other things, depending on your employer. You should wait and see what your take-home pay looks like.

Either way, the best advice is to spend less than you make. NEVER pay credit card interest again. If you can't afford to pay off the balance in full by the due date, don't make the purchase. Exceptions for essentials only, like a car or furniture. For vacations, save up in advance and don't go until you have the cash. Otherwise your debt could crush you.

As for this hobby, cut back if you need to. Set limits, like once every three months. Masturbate more. (This last part about pleasuring yourself is standard advice you'll hear from any financial planner.)

 

[Ceiling Cat]

There is only one way to credit recovery. Pay off the money you owe as quickly as is comfortable for you. If they still allow you credit, buy all your necessities on the card and pay it off each month.