Did you wake up one day and realize how much you were in debt to credit card companies? Unfortunately, there is no “get out of debt free card,” but there is a process you can follow that will can help you get out of debt.
In 2007 I attended a Greater Chicago Great Banquet weekend, and there was discussion about how one spends their money, uses their time, and applies their talents. After that weekend, I returned home to find that one of the credit card companies doubled my interest rate, seemingly without warning. Even though it was not our fault (they took two days to post an electronic payment after confirmed as received on time and subsequently considered it “late”), it was a pain to get resolved, and to me, a hint of what was to come in the personal revolving credit industry. We made the decision to pay off our credit card debt, which was spread over three credit cards.
Many people don’t have any idea what the balances are on their cards, so start by making a list of credit cards that you have. Be sure to include the balance, interest rate, and minimum monthly payment, and the monthly payment you make for each card. It may be surprising to you how much you owe, but remember, tackling a problem requires that you understand the scope of it. Once you have the list made up, stop making purchases with these cards. Select the card that has the highest interest rate and the least amount due. Begin making payments that are double the amount you are currently paying or the minimum payment, whichever is more. Make minimum monthly payments on the rest of the cards. As you read this statement, you probably are asking why I did not have you take the card with the highest balance and interest rate. The fact of the matter is this – by selecting the smaller balance you will achieve that goal quicker, and if you are like me, it will motivate you to continue in the process.
When you have paid off the balance of this card, take the amount that you were paying on that card and apply it to the next card on your list. If you were paying $300 to the first card and the second card has a $100 minimum payment, pay $400 until this card is paid off. Again, this card should now be the one with the smallest balance and highest interest rate.
Repeat this process as you move through the list of cards you have in your list, always adding the amount you previously paid to the minimum payment of the next card. In our example, we would take $400 and apply it to the $150 payment of our next card, making our payments $550 each time until the balance is paid off. As you will see, once you get to the card with the largest balance, you will have amassed quite a payment, and should be able to pay that last card off pretty quickly.
There is no “get out of debt free” card or pas, but with this process you will be able to pay off your credit card debt.