You feel the weight. It always seems to be there or to show up at inopportune times. Too many choices are made by saying, “do I have enough room on a credit card.” It is time to break free. You need to get rid of the dark cloud of debt that follows you around. Before you start, you need to come to terms with why it is a bad idea to stay in this position. You must be prepared to do the hard work to remove credit card convenience and debt from your life.
Even a low interest rate on a credit card is still too high.
Compared to home loans lurking below 4% and car loans not far above, credit cards at 9% to 29% hardly seem like bargains. In fact if your credit gets even a minor ding, you will be facing rates much nearer to the top than to the bottom of this range. By paying near the minimum amount per month on your cards, you will not only need years to retire this debt if you stop charging right now, you may pay several times the sticker price for the item before the amount is paid off.
High credit card debt means poor spending habits.
Unless you have had a true financial crisis, it is spending beyond your income that creates credit card debt. An unavoidable medical bill or being caught in a natural disaster qualifies as a type of true financial crises. A blown tire does not qualify. Often a lack of initiative regarding earning income or a lack of discipline regarding savings result in using credit cards as emergency money for small financial needs. This will only lead to oppressive debt.
It is all but impossible to build a savings account if you are addicted to debt.
Because of high credit card interest, it is easy to have too much of your income consumed by credit card payments. This can leave little to create a savings account. Often, you will need to negotiate better terms with your credit card issuers before you can have enough cash to save. The key is to stop charging.
Your future is in saving and investing not in spending.
No one builds wealth by spending. Investing works. Using money as a business tool to generate more money like in buying low and selling high works. Begin to see saving as good and spending or charging as bad. Change your habits, and you will change your future.
Breaking free of the spending habit is painful.
People like new things. You can new things. Learn to delay getting them until you can afford them. This may lower your lifestyle for a while, but it will rebound to be better than before if you will concentrate on saving. No one enjoys doing without. If you do not need it to live, do not buy it.
Learn to say no to yourself and others.
Spending can be quite gratifying in the short run. You get pleasure from a new car, house, or outfit. Paying it off can be painful. Learn to say no to buying temptations. Some people are able to master this by only spending cash and then limiting how much cash they have available to spend. It may be uncomfortable when you decline invitations for eating out, entertainment, or other enjoyment. Eventually, you will get used to the idea when you see your cash reserves growing and your debt shrinking.
Never end a month owing more than the month before.
Do whatever it takes to reduce outstanding debt every single month. Keep a log of how much you owe and track it several times per month to see progress. Pay off small debts first and keep pushing to pay off larger debts using the extra payment money yielded from the payments made to the cards that have been paid off.
Use cash and not credit for minor emergencies.
Keep enough cash available to buy that new tire or fix the refrigerator without charging it. For most people $500 to $1,500 is enough to cover all small emergencies. Work tirelessly to build up this amount in a fund that will only be used for this type of need. Resist using it for entertainment, vacation, or just a buying binge. Restore the funds quickly when you have to use them.
Negotiate better terms to payoff and close credit card accounts.
All credit card issuers will negotiate, but you may have to agree to close the account. If you cannot get them to play nice, find a non-profit debt management program to help you. These will slam the door on credit until you retire the troubling debt, but the long-term effect on your credit in usually negligible. Most creditors see this as a positive. Since your debt will be paid-in-full, it is far better than bankruptcy or debt settlements. One reputable agency is Clearpoint Credit Counseling.
Choose the no credit card option.
Once the debt is gone, make a commitment never to return. If you can, open an account that will let you have a debit card. Use this card like a prepaid credit card. Put a set amount in the account like $500 or $1,000. Only use this card when required like for buying airline tickets, renting cars or reserving a hotel room. This way you limit your risk while having a card available for those times that require a card number to do a transaction. Try to use Paypal or some other online currency when spending on the Internet.