In light of last night’s post on Dave Ramsey’s Snowball Method vs. Suze Orman’s Method for Getting Out of Debt, I thought I would share our experience in paying off our credit cards.
We paid off our last two credit cards nearly a year ago (Card #1 and Card #2). It was an amazing feeling to write those two final checks. Our only remaining debt outside of our home is our car and a furniture purchase and both of those will be paid off in June.
We were lucky (or blessed) because we were able to have 0% on our credit card debt for several years (I don’t remember how many). When each and every dollar you pay goes directly to reducing your debt, you can do a lot of damage quickly. That was what made our journey so much easier. When one card’s 0%-period would end, we would transfer to another card. We just kept doing this until we finally paid everything off. It’s important to note that we wouldn’t have been in that situation had we not paid our bills on time and kept an excellent credit record. That’s the key right there:
And, if you have a problem, call the company and explain the situation to them. A lot of times they will help you out IF you are proactive as long as you are not trying to work the system.
We also made sure to always pay more than the minimum payment due. If you’re familiar with credit cards, each month your minimum payment declines as long as your balance declines. The minimum payment is usually 2% – 4% of the remaining balance. As your balance declines, your minimum payment declines too. Towards the end of our credit card days, I paid WAY over the minimum payment and just kept my payment the same constant amount. That coupled with the fact that we weren’t paying finance charges, really knocked our debt out fast. Even if you have finance charges, you can still do damage by paying more than the minimum payment.
Last but not least, we didn’t use our credit cards. I think that’s another real key to paying off credit cards. Nothing will make you feel more helpless than to get your credit card bill and notice that you charged more than you paid over the last month. So, as difficult as it may be, you have to quit using the credit cards. Get yourself a pair of scissors and cut them up. That’s what we did.
We kept on paying pretty sizeable payments for two years and then finally paid them both off with a bonus check. The feeling was incredible! Once you pay off a credit card, you don’t EVER want to be enslaved again!
Our situation wasn’t nearly as desperate as it could have been. That just means that those in a worse situation will have to take more drastic measures to getting out of debt (selling their cars and buying cheap cars, delivering pizzas,…).