Attacking Credit Card Debt

Having credit card debt sucks. It was one of the most stressful times I’ve experienced. In order to pay off my credit card debt, I found I had to attack it every minute of the day through learning, strategizing, and sacrificing. After awhile, the progress I was making paying down my credit cards was almost as much as I had racking up the debt. I’d scrounging for a couple of extra dollars just so I could send it to the credit card companies to see the balance go down. Here’s a strategy I think is pretty successful:

1. Pray
1. Sometimes the toughest times in our lives are there so we focus more on God instead of thinking we can do it ourselves.

2. Quit using credit cards
1. This goes without saying, but you’ll see me speak out of the other side of my mouth below when I suggest getting a cash back rewards card.

3. Create a plan
1. Put together a spreadsheet listing the total amount owed and what the interest rates are. The visibility this provides is invaluable. Plus, you can include formulas in the spreadsheet to calculate how long until the card will be paid off based on a certain monthly payment.
2. Negotiate lower rates where possible with credit card companies or transfer the balance to a lower rate card.
3. Pay the minimums on all credit cards, except for the highest interest rate card. For the highest interest rate card, pay as much as possible each month. Put every dollar you can spare toward the balance. If “extra” money pops up mid month, send it to the credit card immediately to get it out of your hands and reduce the balance you are paying interest on. Use your credit card company’s online payment feature to make payments quick and easy and to save postage. Once that card is paid off, use the same strategy to pay down the next highest interest rate card. And so on…

4. Look for way to bring in more money
1. Get a cash back rewards credit card. This card should be used for as many of your standard monthly expenses as possible and should be PAID OFF EACH MONTH. This will not only give you 1%-5% cash back on everything you charge (things you are already paying cash for anyways), but will also help with monthly cash flow since you get a 30 day float. Use the cash back rewards you earn to pay down other credit cards. Note: Do not get a rewards card if you are unsure that you will pay it off every month. Rewards cards have high interest rates and slipping up one month will eliminate the cash back rewards gained over many months. We average ~$40+ a month in cash back rewards. This is some of the easiest money I’ve ever made.
2. Have kids? Babysit a neighbor’s kids for a couple of hours each week. It will be fun for your kids and help tire them out.
3. Have lots of “stuff”? Sell items on craigslist. One man’s trash is another man’s treasure. It’s free and if you place the ads on Friday, you can have people come by on Saturday and Sunday to purchase. I’ve sold an old can opener for $5, scratched up sunglasses for $15, and even a couple of parts off my car that I did not need (a truck cover and truck mat).
4. Love dogs? Offer to walk neighbor’s dogs for a few bucks.
5. Enjoy needles? Donated plasma. It’s quick (~1 hour), easy, and pays ~$30 a visit. Plus, you’re helping others.

5. Save money wherever possible
1. Eliminated all entertainment that cost more than a nominal amount. Find free things to do like borrowing books for your library
2. Don’t eat out. Food is expensive and easy to over look. Buy food on sale and prepare large meals to have leftovers.
3. Plan driving trips to reduce fuel costs. Gas is expensive. Car pool if possible.
4. Cancel gym membership. Go for a jog, swim, or bike ride to get a workout.
5. Cancel retirement contributions. Every extra dollar needs to go towards paying off the credit card debt. Once it’s paid off, you can save like crazy. UPDATE: Thanks to Kristy at Master Your Card for pointing out that you should always contribute up to your employer's match (free money). I totally overlooked this. Thanks Kristy!

Paying off debt is a war. Fight like crazy to win.