How to Pay off Credit Card Debt and Live without Them!

Susan Brannon
26 July 2011
The economy is bad and is not getting better.  The total credit card dept in America is: $799,326,936 and rising every second.  The average debt per family is $688,639 and the average savings per family is $6,916.

How can you lower your debt and take that yearly vacation?  It has been over 2 years since the last raise, and the prices for everything is going up.  What can you do to cut back on expenses and save a bit of money and lower your debt?

First I want to explain what is important for you to focus on as your goals, then I will follow up with an article on how you can find that extra money to meet your goals.

I am not just a person that is saying this to say it, I have lived without a credit card for over 10 years!  I have traveled overseas at least twice a year, take care of my dental and medical problems, buy food, and a few luxuries. In other words, I have "been there" and "done that"

1)  Make a list of all your credit cards. Include, the outstanding balance, interest rate, and minimum payment.  (look on your last month statement)
2)  Re-arrange that list from the highest interest rate at the top to the lowest at the bottom.
3) Now, add up your total minimum balance.  This is the minimum amount to be paid.  However, you will want to pay more!

Now, I am not going extreme here:  Go get your cards and cut up all but the one with the lowest interest rate! No one likes to hear this and no one wants to do this, but not having the interest alone will help you to save money for that vacation and in time you will find it easier to buy what you need in cash.

Go do it Now!  Why wait?  Really?  Get up...get the scissors...Now.
Feel better?  That was not hard was it?


4) Make a commitment to not use your last card, ever, ever, ever. In case you are dying, in case your home burns down, in case you lost your leg and you need to rent a driver.  Never use that card again! 
a)  Do not take that card with you out of your home when you go shopping, buying food, walking around.  Leave that card at home!  Promise? 

• Remember:  You are only cheating yourself, if you get out that card!  you deserve better than that!  Don't you?

Make that commitment now.

5)     Now you need to make goals:
a)     Never to use your one card again, of course unless you are dying. (pun intended)
b)     Pay extra on the credit cards as you go along, explained below
c)     Save cash for emergencies
d)     Finally save for that vacation!

• Goal number 1:  Is ongoing and re-commitment if you have to.  Leave that credit card at home.  Do not keep it in your wallet.  Put it in a drawer and forget about it.

• Goal number 2:  To pay extra on that card each month, you need to find extra money from your budget.  In other words, sacrifice some discretionary spending and get some extra cash to pay off your credit card debt.  (Tips in the next article)

6)  You will take that extra money that you suddenly discover that you really have, write it down on your paper, and put that cash towards the credit card that has the highest interest rate each and every month. 
a)  Once you pay off that card, use that "extra cash" to pay each month to the next highest interest rate credit card! If you have two with the same interest rates, pay towards the highest amount first!

• For example: you paid off card number 1 and your payments were $200 per month.  You will take that extra $200 per month towards credit card number 2, in addition to your normal card number 2 payment of $150 per month, you total payments for card number 2 will be: $350 per month.

b)  Do the same thing for the next credit card. 

• For example: Card 2 is paid off and go on to card 3;  your card 3 payment is $150 per month, add $350 to the $150 for your card 3 payment which will be $500 per month!  And so on.

c)   Do not touch the extra $$ for anything else, not one bit, not at all.  Pretend in your mind that you do not have that money.  Agreed?

Just be happy for yourself doing this, you cannot hurt anything by doing this and at the same time, you can help your credit score!

• Goal 3:  Start saving for "emergency cash"

7)      Once you pay off all your cards, and you only had the 3 cards to pay off that totaled $500 per month
a)      Figure out how much you should have in your emergencies only savings account.  If you want, you can use this formula:
add up your "real" monthly expenses; your mortgage/rent; food; gas for car/or public transportation, utilities and doctors (take the yearly amount and divide x 12) Do the same for dentists, clothes, and entertainment.
b)     Write down that number and multiply by 4.
c)     Write down that number as your emergency savings goal.

8)     Once you have your emergency money saved, cut up your last card!
       Woopie!
9)     Now take that extra monthly cash and save up for a much deserved holiday!

Tips!  Call your credit card companies and ask them if they can lower your interest rate.  All they can do is to say no...or maybe yes!

• Think about balance transfers.  It may not always be the best, but if you have a card with 25% interest rate, and another with 18%, it helps!  Always check for "hidden fees" as well in considering this.

 Be Patient!  This process takes time.  It may take months or a few years, depending on the amount of debt that you have.  Remember, you are starting something that will help you to get out of this debt, and move on.  If you do not do anything, everything will remain the same, and maybe get worse for you.

• If you run into extra money during this process like a bonus or tax return, take that money as a lump sum for the credit card you are currently adding the extra money to!