Power Of Women | Sisterhood Sharing Sessions | Life Lessons Learned: Finances-Eliminating Credit Card Debt
What I’ve Learned
Credit Card Debt
We all have, or have had debt at some point in our lives. It’s a culture of a capitalistic society. Eliminating credit card debt proves more difficult than acquiring it.
We usually acquire our first credit card as soon as we hit the legal age to be considered contractually responsible. In the U.S. that age is 18. Well, therein lies the problem. Responsibly managing finances at 18, is a challenge because more than likely, no one has prepared you for the dilemma of debt. Whipping out a credit card is so easy, and before you know it you have accumulated a small fortune of debt. Sound familiar. You are not alone.
What I’ve Learned About Eliminating Credit Card Debt-Practical Application | What Worked
5 Simple Steps
- Write down and organize each credit card based on highest interest rate, then by highest balance. Visuals are important. Focus on paying off the highest interest rate first, rather than the highest balance. Consider consolidating all balances to lowest rate credit card. Note: Confirm balances directly with creditor.
- Close all but one or two major credit cards (WARNING: This action may have a negative impact to your credit score initially). Put away those you will keep. Avoid use during this payoff period.
- Set a date or timeline to payoff your first card, second, etc. This is crucial to staying focused, and ensuring follow-through on debt elimination.
- Make extra payments towards ‘Principal Only’ balance to draw down the debt quicker. Use a financial or credit card payoff calculator/amortization schedule (Google ‘Financial or Credit Card Calculator’) to understand how much in addition to the minimum payment each month you would need to pay toward ‘Principal Only’ balance, to meet your ‘Set Payoff Date’. Adjust timeline/payment as needed based on residual income, or affordability. CONSIDER: If you have a savings account with no withdrawal penalty, and nominal interest rate earned, consider paying off debt from savings. The money you’re losing each month in finance charges, is dwindling your savings efforts resulting in a catch-22 situation.
- Stick to payment schedule no matter what. You have already identified you can afford the extra payments you’ve set for yourself.
SIDE NOTE: Always check or ask about the ‘Go To’ interest rate for your credit card. The ‘Introductory Rate’ is usually for the first six (6) months only. At the end of six (6) months, your ‘Go To’ rate or your actual credit card interest rate begins. Avoid Department Store credit cards if you can, interest rate is usually much higher. Keep two (2) major cards with low fixed rate for emergency purposes only, and to leverage a better Fico/Credit Score (More about best practices for best ‘Credit Scores’ in upcoming ‘Life Lessons Learned’). If using credit card for rewards purposes, payoff prior to billing cycle date to avoid finance charge. This date may be different based on the card. Confirm with your creditor to make sure you are clear about the time period.
Disclaimer: This material is Educational only based on personal experiences. Not intended for legal or financial advise.