Do You Have a Plan for Getting or Staying Out of Credit Card Debt?

Through a series of circumstances I carried a healthy amount of credit card debt for the better part of a decade. Fortunately, I had good credit and had 0% interest almost the entire time. March 31 I will finally be complete paying off all my credit card debt (I just finished my college loan as well).

Now that I will be out of debt I plan on not carrying a balance ever again.

Do You Have a Plan for Getting or Staying Out of Credit Card Debt?

Nagel
http://finance.webaplex.comhttp://finance.webaplex.com

Basically, I don't allow myself to carry a balance.

Once in awhile, maybe one month, max. Three times in five years, for example.

I charge almost everything for the mileage, but I always pay it off. I keep a running tally more or less in my head, or call to check the balance.

Compounding interest is just a huge snowball.

(congratulations)

I'm paying as much as I can, and cutting expenses drastically, so I can pay off my credit cards this year (which is a real feat, since I don't get paid during the three months of summer!). I will have one paid off by end of May, and the bigger one by Christmas. Then I haven't decided -- either the car loan or the student loan will be chipped away with all the money I used for paying off credit cards. I should be debt free in three years.

My fiance and I both accumlated credit card debt while in college, ~$4000. Now that we are out of school, have jobs and just bought a house, we have been working on knocking it down. The only problem I have encountered is once I get one card paid off, we incure another debt.

For example, I paid off 1 credit card that was ~$2000, then purchased an engagement ring with some down and the rest (~$1800) financed for a year @ 0%. Another example is that I piad off another credit card of $1000, then we bought a new washer/dryer ($800) since we did not have one in our new house. But once again, it is 0% for 1 year.

The good thing though is that all of my debt is now @ 0% compared to ~20% that it was on the credit cards. Also, I have split up the payments for these over 11 months so that they will be paid off before the 0% is up.

I have also setup 2 savings accounts @ ING for my fiance and I. We contribute $25/week to each account. This way, once we get these credit cards paid off, we can use our savings for our future purchases, rather than using credit cards. I figure I would rather make the $25 despoit each week in our savings accounts and gain interest, rather than making that payment to a credit card and paying interest.

cut them up. never use them again. pay them off. works every time.

I keep track on my personal finance software. This way, I can look at where I'm at, and compare it with my budget. I try to use credit cards for nearly everything in my budget and then pay them off each month. It's about being disciplined and making them a part of your budget, treating the money as if it's coming right out of your bank account (because it should be).

I just don't use my credit card. I find it to be a hassle to use the credit card and then pay it off at the end of each month. I just use cash (checking account) for all my purchases.

-EJP-
www.rmicsi.com

Hey Nagel,
First, CONGRATULATIONS on getting out of debt, that is one of the best feelings in the world! Sadly it also seems to be a pretty rare accomplishment nowadays.

I'm not currently in debt, but as a planner I do talk to a lot of people that are and my favorite approach to recommend is always the debt snowball. This approach provides rewards along the way, and these rewards encourage you to continue paying off your debt. Even though you're already out of debt, you'd still benefit from learning about this method. The other major benefit of this approach is that it instills good money management and saving habits without you even realizing it. By the time people's debts are gone, they are disciplined wealth-building machines.

I'm new to these forums so I have no idea what the rules are about posting links, but I can still point you to an article explaining this method. The site is "The Odd Lot Blog" in the sig below and I think the article is called "Get rid of debt once and for all... with a snowball!". And yes, that's a cheesy title but it's great info. (:

I'd say it's time to start learning about investing now that you're out of debt. Best of luck to you! Post back here often, it's fun to watch people on their wealth-building journey.

Consider the following tips for getting out of debt, and staying out:
Stop charging: The first step out of any hole is to stop digging. Only then can you begin to devise a plan to crawl out. Whatever you have to do, stop making new charges.

Pay debts off smallest to largest, regardless of interest rate: Make minimum payments on all but the smallest one, and throw everything you can at the smallest one. The psychological advantage of scoring one or two quick wins bringing balances down to zero is worth the difference in interest charges.

Divide credit card minimum payments in half and pay that amount twice a month: Interest is calculated based on the average daily balance of your account for the entire month. By making a payment every couple weeks you are reducing that average balance and therefore reducing the finance charges assessed, as opposed to waiting until the end of the month to make a single payment.

Make micro payments (commonly referred to as snowflakes) any time you receive extra money: Send proceeds from eBay sales, garage sales, and any earnings from overtime or part time work directly to your credit card as soon as they are received. It may not seem like much, but it adds up.

Don’t waste time with balance transfers, unless you owe more than $10k: With anything less than $10k the interest saved just isn’t worth the hassle factor. If you are within $10k of becoming debt free you can get there through finding additional sources of income and cutting household expenses to make significant monthly payments. If you owe more than $10k in credit card debt, consider consolidating as much of it as you can on cards with a low interest loan.

Find part-time work: Sometimes this is the only option to generate cash flow over and above your normal monthly earnings. I offer this as a last resort, especially for families, because it often requires a parent being away from their family for long periods of time each day.

Close out your newest accounts: As balances are paid off, close out all but your oldest one or two credit cards. One of the components of FICO score calculations is length of credit history, which is negatively affected each time you open a new account. By closing these newer cards you are effectively making the average age of your credit history older.

Regards

I have recently started trying to pay off my credit card debt. I moved most of it to a 0% interest for 15 months card. At least that will save me from the interest until I can pay it down. I think the key to not running up credit card debt is to have at least a thousand dollars in emergency money to cover the odd expenses that occur.

Need money advice
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I have recently started trying to pay off my credit card debt. I moved most of it to a 0% interest for 15 months card. At least that will save me from the interest until I can pay it down. I think the key to not running up credit card debt is to have at least a thousand dollars in emergency money to cover the odd expenses that occur.


That's a nice thing to pay out debts as the first option. But unfortunately not everyone have a 0% interest credit card. Its available to only those who have a Good Credit Score. Though we can get one by building up credit scores. Even paying of debts with savings is beneficial most of the times.

Regards

I don't agree with paying off the debt smallest to largest regardless of interest rates.

The psychological advantage would be minimal if you are already determined to pay off the debt and if you are not determined you will most likely fail if you have multiple credit lines that are maxed out.

Here are the some simple rules to get out of debt.
-Try balance transfer to consolidating debts to 1 or 2 cards
-Restrict the number of credit cards
-Try breaking your savings account to repay
-Confront your creditor with your problem
-File for bankruptcy

Hope this helps to pay off your debt.

I just don't spend money that I don't have. I'd rather use a debit card, but it doesn't build your credit and you don't get fancy rewards.

Just cut them all out, if you have them you will use them.
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