5 Tips for Paying Off Credit Card Debt
This week, I’m sharing the tips and strategies I’ve used to get to this point. While it seems like there are a thousand opinions on the best ways to pay down your debts, I will simply be sharing what has worked best for me (and hopefully for you, too).
Below you’ll find 5 strategies I have employed to help aid me in getting out of debt. To start, if you are currently in debt and have never heard of or listened to Dave Ramsey, you’re doing something wrong! He pretty much specializes in helping people pay off their debt and then go forward to make the changes they need to, to save and be prepared for the future.
I have used the resources on Dave Ramsey’s website and I try to squeeze in as many of his podcast episodes as I can — I’ll provide a link to a relevant episode for this below!
Before we get into the five tips, the first thing you HAVE to do, is to prioritize getting out of debt. Let me explain. The key to getting anything done in your life is to make it a priority. If you want to save money for a home, or lead a healthier lifestyle, or travel more, or become an astronaut, you need to make that thing your priority.
When you decide to make getting out of debt your priority, that means you are throwing any and all extra money at that debt and it means your energy and focus is on accomplishing this one, huge goal. In the wise words of Ron Swanson, ‘never half-ass two things, whole-ass one thing.’
Write it down (you can read my guide on cultivating discipline + goal setting HERE) and focus your energy and motivation on getting out of debt.
Why should being debt-free be your priority?
If you have $200 sitting on a credit card or $85,000 of student loan debt, your first financial goal should be paying off that debt. It is absolutely insane to be paying astronomical amounts of interest for something that you don’t own anymore, or for something which is currently depreciating in value (like your car, or that $5 burrito you bought on your credit card that is now costing you $8 because of interest).
Imagine your monthly payments you are making to your credit card, car payment, and student loans are about $600 a month. Now, imagine instead of making those payments to someone else, you paid your future self that $600 by contributing it to a money market account that incurs 2% interest every month.
That means, instead of paying $7,200 ($600 x 12 months) to your debts, you could be SAVING $7,891 ($600/month + 2% interest for 12 months). Sounds wayyy better doesn’t it?!
So, imagine what you could accomplish in 3 years, 5 years, and 20+ years?! Your debt is literally THE thing which is holding you back from being financially independent. Make it a fucking priority and throw everything you have at getting that cleared so you can move on with your life and start taking control of your money and future!
Here are my top 5 tips to pay down your debt.
Utilize Dave Ramsay’s Debt Snowball Method
This is essentially a way to methodically pay off multiple sources of credit card debt. The basic idea is you begin with the smallest amount you owe and aggressively pay that one off first, while paying the minimum payments on the rest of your cards.
Once you’ve paid that first, smallest amount off, you move to the next, bigger amount and repeat the same process — aggressively paying off that one while making minimum payments on the remainder.
Why this works: Many people try to pay off the debt that has the MOST interest incurring on it — which makes sense logically. However, being able to focus on the smallest debt amount you owe and getting that one out of the way gives you a sense of accomplishment and motivation to keep going. If you start with the biggest, most intimidating amount, it’s hard to see progress and stay motivated for the long amount of time it takes to keep going.
Making this process as easy and manageable as possible will allow you to get on through that debt in a methodical way.
Pay more than your minimum payment, when you can
Making just your minimum payment is the perfect way for the bank to keep you in debt for pretty much as long as possible. This way, you’re essentially just paying the interest charged on your card and never actually making much progress (or any) towards paying off what you owe.
Listen, I KNOW sometimes you can only afford to make the minimum payment — I’ve definitely been there. I’ve taken change out of the dirty change compartment in my car to get enough gas to get to work and back. But do your best to pay even slightly above the minimum payment and throw whatever extra money you have at your credit card, even if’s only five bucks at a time.
Paying just the bare minimum will keep you in that paralyzing debt for as long as possible. That’s exactly why they have minimum payments — to keep you in debt for longer while the bank collects more interest from you every month.
Call your bank and ask for a lower interest rate
I just heard this tip from Hello HENRYs (they have a TON of other great resources, too) and did some research on it. Some people have had great success by simply calling and asking their bank for a lower APR on their credit card.
When you call, make sure you can demonstrate you make your payments on time and tell them you are aggressively trying to pay off your credit card. Make sure you know what your current APR is, you can check it online on your credit card statement. Then, check what the average is, I did just that by reading this: Average Credit Card Rates
There are also several good scripts you can use when calling your bank, I used one and made my own version by tweaking it a little, but sticking with the main components.
Here’s the script I used: How to Ask For a Lower APR Script
I tried this this week and was told a firm, “no,” but I will be trying again next month — sometimes persistence pays off in these cases.
After talking to a few other people about using this strategy, I have been told that it works “every time” for them! So, just because it didn’t work for me (this time), doesn’t mean you shouldn’t try it this week!
DON’T consolidate your debt
Debt consolidation means you are combining ALL of your debts into one, bigger debt. The reason this appeals to people is because then they only have one payment to worry about, and the debt consolidation companies often promise too good to be true results.
This is always SO tempting and those bastards make it sound like it’s the perfect solution to all your debt problems. BUT, here’s the problem with most debt consolidations — you are not always guaranteed a lower interest rate and sometimes they push that introductory offer of a low interest rate that eventually turns into a bitch of an interest rate.
The other trick they like to pull after consolidating your debt is to make your payment lower. BUT, we all understand how basic math works here, right? You now have one, BIGGER amount of debt, and you’ve been told you can make SMALLER payments? Everything about that is dumb and you’ll be in debt even longer this way!
5. commit to being debt free + act like you mean it
This goes back to what I spoke about in the beginning of this blog post. The first step to accomplishing anything is to decide you want that lifestyle. Setting yourself up for success is the most crucial thing you can do.
Sit down and write down every debt you owe in order of the least amount to the highest amount and tackle the smallest amount first.
Write it down and commit to it. Put your goal on paper somewhere you see it EVERY SINGLE DAY. I have mine written on a piece of paper in my bathroom so I can stare at it while I brush my teeth and think about how I’m going to make it happen and if I have done what I need to do that day that gets me one step closer to that goal.
If you’re married or in a relationship, talk to your partner about money and get them on board — it makes it that much easier to go after these goals when the person you spend the most time with is working toward the same goal.
Have patience. Especially if you owe a large amount, you have to go into it knowing this is going to be an extended process. It’s a hell of a lot easier to get into debt than it is to get out of it. Be prepared for the long-haul and stay motivated toward your goals as you chip away at that amount. If you need to remind yourself daily why you’re doing this, again, keep your written down goals where you can see them every day.
Cultivate a resilient mindset. Because you have committed to becoming debt-free and made it your priority, your actions and words need to reflect that priority. That means you are cutting back (or eliminating completely) on eating out at restaurants, you are budgeting for your groceries every.single.time you go to the grocery store, you are logging every.single.dollar you earn and spend, and you are picking up a side job to get that shit paid off.
This week’s resource:
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