Financial Freedom

Pay Off Credit Card Debt:

I’m sure we can agree that paying off credit card debt is a worthy goal.  After creating an emergency fund, paying down debt smallest to largest is the next step to become debt free.  In this post, I will review the steps I took to get out of credit card debt as well as discuss my decision to shift away from credit cards in favor of debit cards.  Let’s begin.

Getting Results by paying off credit card debt

The 7 steps you need to take to become debt free are pretty straight forward:

1.  Get organized:   Its nearly impossible to stay in debt if you’re organized.  For most people this means opening the credit card statements that are unopened in a box or drawer somewhere.  You can no longer hide in denial about the credit card debt or student debt that has accumulated.  By getting organized, you will be able to Take Charge of your personal finances.  You wont need a personal loan or any debt relief.

Right now, I’m reviewing my year end credit card statements from and I see so many charges that I’ve cut out.  And I feel great about all the money I am not wasting.

But part of me is calculating how many thousands of dollars of money that just spilled out of my life simply because I was not paying attention.  Read more about the dumb stuff I bought last year.

2.  Create a Budget:

It doesn’t have to be fancy.  On one side is all the income you have coming in.  And on the other side is ALL the expenses you have going out.  Every dime!  Which means you must open the credit card statements and really understand where your money has been going.  One of the advantages of this exercise is that it allows you to find your areas of wasteful spending.

3. Eliminate wasteful spending.

For me, the most obvious wasteful spending was a $100 storage locker.   It made me so angry that I eventually began this journey and started writing this personal finance blog.  (If you’re ready to start your own blog, begin here.)

Don’t dwell on the money that you’ve wasted in the past.  Focus on your debt free future.  I was paying for auto renew memberships that I didn’t even remember.  Never again.

I began to explore our current consumer culture and why we buy what we buy.  This helped me understand why I was spending so much money shopping.  More on Consumer Culture and why we buy what we buy.

Make sure you’re using discount codes and getting cash back. I use Ebates and they give me cash back for nearly all of my purchases.  Ebates gets a commission from stores you shop at and they share the commission with you.  Average cash back is about 7%, which is great.  Right now, they are offering a Free $10 Gift Card when you join and spend $25.  More about Ebates Here.

4. Negotiate Discounts:

For those services and memberships that you like but would like to pay less for, you need to contact the merchants and ask for a discount.  Yes, you can do it.  And yes they will give you discounts on your memberships:  Cell phone carrier, cable company, Satellite radio etc…  I have written a whole post about How to negotiate Discounts.

5.  Create an Emergency Fund: 

It’s easy to fall into debt when unplanned emergencies happen.  Unfortunately, life is full of unplanned emergencies.  That is why you need to set aside an emergency fund of at least $1,000 to start.  I have written an article on why and emergency fund is so important,  An Emergency fund is an umbrella for your life.

6. Increase your Income:  Everyone is looking for a way to increase their income.   When I got really motivated to pay down my debt, I wrote financial articles for a financial blog and created this blog.  You may want to find a side hustle or side income.  I’ve written a number of posts about the best ways to increase income.  45 Ways to Boost your Income is one example.

7. Stay Motivated:  I found reading the book, The Total Money Makeover by Dave Ramsey to be incredibly helpful.  Yes, it lays out the framework he used to be become debt free.  But, the big benefit of the book is it gets you fired up to get out of debt.  It is very motivational.  And that is really helpful on the debt free journey.   More on Dave Ramsey’s book here.

Credit Cards vs. Debit Cards

I’ve recently changed my mind on credit cards.

I always pay off my credit card balances each month.  And I never pay credit card fees or interest.  So, when I got my MasterCard bill this weekend, I knew something was very wrong.

They charged me a $25 fee.   Ugh

Which means I have to waste 10 minutes talking to them to reverse a fee that could never have even happened if I listened to Dave Ramsey and cut my credit cards up. Maybe he was right. Anyway.

Well, It was my fault.

I sent the wrong amount.  I was off by $3.43.  (Just Another sign I need glasses!)  I paid on time, but I sent them the wrong amount. I was off by $3.43  And they pounced  to add late fees and interest charges.

Read my related post on Banks that still offer free checking with interest here.

This is their business.  This is what we agree to when we use credit cards.

Of course, I called the credit card company and had it reversed.

And it happens every now and again, I’ll send them money and because of a holiday or something, they receive it a day later than the “due date” and they do the same thing:  late fees and penalties.  And that’s my fault, of course.

Relevant Articles:

44 Ways to Create Extra Income

Getting Results: How I Paid Off $17K

The Best Personal Finance Books

But, I am struck by this feeling that they are ready to profit from anyone who:

• falls behind on their payments,
• gets sick,
• loses a job,
• has a crisis etc
• …  the credit card companies are not messing around.

This is another great reminder of why you really need to  have an emergency fund, read my post because they’re waiting and so are other companies that will take advantage of your situation: credit card companies, payday loans, auto leasing companies, etc …  emergencies happen and it is essential to be able to handle them without taking a loan from these companies.

And I’m not saying credit card companies are not a perfectly legal business.  I’m saying it’s a perfectly legal business where they make more money from fees and interest when you are most vulnerable.  When you lose a job or have a crisis or someone gets sick.

What am I trying to say? Life happens.  Be prepared.

• I’ve lost a job,
• had a family crisis,
• and gotten sick in the last 5 years.

And I wish I had an emergency fund in place.

My view on credit cards is essentially that over the next couple years I want to have a couple of debit cards and only two credit cards. Simple. Easy.  And focus on living debt free, invest, and retire early. If they offer a big cash reward to open a credit card like $500, then I may take advantage of a credit card offer now and again.  Other than that, I will mostly be using debit cards.

Why not close all my credit cards?

Well, I get benefits from one of my credit cards when I travel like access to airport lounges etc… that I think is really worth it.  It makes traveling easier.  And I get value.  But I’m not saying no, either.  It’s possible.  At some point, I may decide to use debit cards exclusively.  We’ll see. 

I’m canceling the majority of my other credit cards.  Just not worth it. The more of them I have open, the higher the possibility of something going wrong.  What about you?

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