A few days ago, I got yet another call from my old friends at Global Credit & Collections. Oh, how I’ve missed you. You hardly ever call me, but when you do, you only want something from me, and I’ve always been happy to oblige. So, what is it this time? They wanted to make my current, $200/mo plan permanent until the debt is completely paid off. Again, I was happy to oblige. It’s been a full year now, almost to the day, since I first started making payments to the good folks at Global to satisfy my Capital One debt. So far, it’s been good. I went from a high balance of just over $8,000 at a high interest rate to a balance of just under $6,500 while accruing no interest, just in the span of 12 months.
It sounds odd, but kind of like walking away from an upside-down mortgage, I can pretty much say that defaulting on my Capital One card was one of the best financial decisions I’ve ever made, even if there was no intention of doing so. I’ve saved a ton of money in interest, and am making solid progress at paying down the balance. With this payment plan continuing, I will be rid of that ugly debt in 33 months. That’s less than three years. Just for kicks, I ran the numbers and found that:
- With this payment plan, I will be rid of that ugly debt in 33 months. That’s less than three years.
- If I were making the same payments at Capital One’s current interest rate of 23%, it would take me 52 months (over four years) to pay it off, while paying about $3,750 in interest on that debt. It would take 16 months just for the amount applied to principal to surpass the amount applied to interest charges.
- If I were making minimum payments of 3% at the current interest rate, it would take me 289 months (that’s 24 years!) to pay it off, while paying $10,894 in interest charges – more than the current principal itself!
I also made this kickin’ graph to show the balance progression with the three different scenarios outlined above:
Of course, I’m not going to just let it ride at that payment level until the end. At least, I don’t plan on it anyway – I might feel differently about it a year or two from now. Right now, I can just ride those payments. It truly is set it and forget it, as they come out of my account automatically. I merely have to budget for them. In the meantime, there are much more pressing personal as well as interest bearing debts to take care of.
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You know, this is going to sound weird but sometimes I feel a bit jealous of my friends that have defaulted on their credit because they can no longer get credit to be tempted to get themselves in debt. On the other hand, I’ve always kept up on my credit but also had way too much access to opening credit. I’ve had enough self control to pay my cards but not enough to not use the damn cards!
Looks like you’ll be saving a ton by paying off your cc through a collection agency. As long as you don’t have to open any new lines of credit/loans it seems almost better!
As long as you don’t need a loan soon after, defaulting on a credit card doesn’t have to be a disaster. Especially if you stay within the company’s own collection agency and don’t get outsourced, in which case you might not even take a ding on your credit report.
Yeah, defaulting was a good definitely a good move. Keep working on that debt. Hopefully in 3 years, it will all be over!