Money Infant

Baby Steps to Financial Freedom

Take Charge of Your Credit Cards

When you are drowning in credit card debt it’s easy to panic and make a wrong move. Too many of us frantically open new cards, transfer balances, and (hopefully) close our older cards, and yet seem to make no headway. It’s a vicious cycle, but it doesn’t have to be that way. There are ways to manage credit card debt so that you can ease the burden, see the light at the end of the tunnel, and eventually remove your debt shackles.

I know all about the credit card merry go round personally because I’ve spent a good portion of my adult life riding it. I used to transfer balances regularly in search of better deals, promising myself that now I would have the breathing space to finally get ahead, only to find myself in the same situation 6 or 12 months later. That is until I changed my mind set about credit card usage.

I still have a small amount of credit card debt, but it is manageable and is part of an overall budget and money management strategy. I do admit to carrying a balance on occasion, but never for longer than a few months. When I make a new charge I already have the money to cover the charge, or it is a part of my anticipated cash flow over the next 3-6 months. I use my cards as tools now, rather than crutches.

If you are looking for a way to eliminate credit card debt and/or manage your existing and future card debts better, look no further. Here are the steps you need to finally take charge of the charge card.

A pair of scissors cutting a credit card.

Step 1: Gather all of your outstanding credit card bills. Make a spreadsheet or write down the current balances, interest rates, and minimum monthly payments for all the cards.

Step 2: Determine which card(s) you truly need. I keep two cards – a Visa that is used in emergencies, and an AMEX that is used for monthly recurring payments (mostly business related) and for large purchases such as airline tickets. The rest were paid off and closed long ago. You shouldn’t need more than 2 cards.

Step 3: Take the remaining cards and order them by the interest rate you are paying, highest to lowest. If you have several cards, consider doing a balance transfer to pay them off. If you are considering a balance transfer, have a look through the credit card comparison sites to see where you can get the best deal. You should be able to lock in a 0% introductory rate for at least 6 months, maybe longer. Some people scoff at these introductory rates, but I used them quite well to my advantage when I was paying off my credit cards. You see, if you are paying hundreds of dollars a month in interest charges, once you get that rate to 0% you can aggressively apply all of the interest payments to the principle. DO NOT drop your payments just because you now have a 0% rate. This is the time to pay the cards down even faster than before.

Step 4: Look to your budget to see how much you can afford to apply to the credit cards each month. Now, look for areas of your budget where you can cut back and apply that money to the credit card payments as well. If you can somehow work out a plan that allows you to pay off the cards in 12 months great! If you simply don’t have that much free cash each month try to plan for 24 months or 36 months. The important part is to set a goal date for paying off the cards in full. And then, push your limits to extinguish your debt even earlier than your goal.

Step 5: Consider selling your stuff to generate extra cash that can be applied to the credit card payments. If you are like most people, you probably have several thousand dollars worth of stuff you no longer use or need that can be sold for cold hard cash.

Step 6: Also consider starting a side hustle if you haven’t already. Even a part time job if you have little or no interest in a small business of your own. This doesn’t have to be permanent; it just needs to be for as long as necessary to pay off all your credit cards. If you want you can stop once that goal has been completed.

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