Tuesday, April 12, 2011

Paying Off Credit Cards

Paying off your credit cards is a Good Thing. Turning around and racking them back up is Not. It's important to budget the money you DO have, to make sure that you have enough to last until next payday.

I think quite a few people learned this a few years ago when the economy was so bad. What happens if you lose your job or you fall ill? How will your family be able to pay their bills, buy gas, groceries and the other necessities of life?

 We try (but do not always succeed) to not use credit cards. We have credit cards, but we try to not use them.
There have been times when we have had to carry over credit card debt. When the next due date comes along, I make sure I:

pay ALL the interest

pay more than the minimum amount.

For example, say our credit card bill has a balance of $4000. The minimum payment they say I have to make is $200.00 I look at the bill and see they charged me $70 interest. This means I HAVE to make a payment of at least $270.00 (minumum payment + interest).

If you always only make the minimum payment, you will never get anywhere. Eighty years from now, you will still be paying off that darn credit card.

And if you don't pay off all the interest every month, you will soon be paying interest on the interest. Why would you do that? You will not get ahead that way. You won't even stay even. You'll keep falling behind.

If you have multiple cards and a balance owing on each one, the experts say to start paying off the highest interest rate card first. I can see their point. However, if I have 3 cards, 2 of them with high balances and 1 with a low balance of say $300.00 I will be paying off the low balance card first.

Why? So I can feel better by knowing that I have now paid off one of the cards. Sometimes, we need to do something that makes US feel good, especially if we are working on something hard like paying off debt.

Once that first card is paid off, take the amount you would have paid on it each month, and ADD it to what you pay on the next card in your pile. That will pay off your second card much quicker. That money you save by not charging on the third card is NOT new spending money. It needs to go to help pay off your next debt faster.

Sure treat yourself to a lunch out at a sit down restaurant on the weekend. Do it once, just as a good reward for how hard you are working. Then, get back to more frugaly, find ways to do without and keep paying down your debt!

Once you pay off a credit card, either cut it up, put it in water and put in the freezer so it's in a block of ice or simply put it away. No, I don't mean put it away in your wallet!

You can do it!

Do you have any tricks or tips that you use to get rid of debt? How many of our readers don't have debt (aside from a mortgage and a car loan)?

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Kathryn said...

1 mortgage
no car loan
no cc debt
we pay them off every month.
..and live within our means.

Sharon said...

We don't have any debt, not even a mortgage (we paid cash for our farm last year). It's so very liberating.

Having said that it was hard work. We lived (and live) frugally.

When we did have a mortgage we doubled our payments every month and used every single extra dollar to pay it down. It's surprising how fast it starts to drop. We don't carry a balance on our credit cards and, quite frankly, the only time we will use our credit card will be to rent a car in a couple of weeks. We have set up a PayPal account for any online purchases.Oh, and we eat beans...a lot!

I'm one of those people who tries to find anyway at all to not purchase something :)I don't have to talk myself out of buying, I have to talk myself into it. Sometimes it drives me nuts!

Now we are still young and have a start to our homesteading lives with way less worries. My Hubby always calls it "delayed gratification".


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