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2 ways I've paid off credit card debt

pay off debt, credit card debt, pay off credit card debt, get out of debt, stop spending,

 

 

I’ve found myself in credit card debt twice and it’s the reason I want to help people with their basic finances. Both times I followed a different method to pay them off and I’d like to share these with everyone in the hope that it inspires some of you to also pay off your credit card debt.

 

Apart from a mortgage, most of us have found ourselves with some sort of credit card debt, whether its only a few hundred dollars or a few thousand dollars. No debt is good debt as it holds you back from your income potential.

 

Don’t bury your head in the sand with your debt, face it, plan it and pay that thing off. There’s a number of reasons that may have caused the debt and there’s also a few ways to be free from it.

 

The number one reason is over use of credit followed by unemployment or the loss of income, therefore creating credit card debt; it can happen to any of us. Other reasons may be because of a relationship breakdown, bad health, or even gambling.

 

The first thing you should look at and recognise is why you’re in debt in the first place. If it was your own fault through gambling or over spending, you need to acknowledge this and change your ways before your life becomes a roller-coaster of balances rising and falling, along with interest which is just dead money. This in turn results in every past purchase costing you more than the original price. It kills the reason you justified buying the items because they were at a discount price? Hmm.

 

Other reasons that weren’t brought on from bad habits are unfortunate and can happen to anybody. This is why a budget is necessary, to plan spending, the future and to set yourself up if an emergency was to happen.

 

Without a budget and future planning, you’re only a few months or even weeks away from financial disaster…aka debt.

 

Adopt good money habits to keep yourself from poor financial decisions.

 

FIRST -

Recognise the reason you’ve found yourself in debt.

NEXT –

Work towards a recovery plan to pay off and stop wasting money.

FINALLY –

Follow a budget so there’s no repeat offence.

 

pay off credit card, credit card debt, get out of debt
Convenience or constant debt?

BACK TO MY DEBT & HOW I WAS ABLE TO DO IT

 

I’ve been in credit card debt twice due to my ex partners loss of income because of an injury and a decade later, the relationship breakdown leaving me needing to rely on some credit for day to day living.

 

I have used 2 different methods to pay off these debts, both effective only if you are disciplined and can refrain from over spending while paying off.

 

The first time I ended up in debt from a high balance on a credit card, my ex partner had lost employment due to a workplace injury and we were down to a terrible income from work cover and my part time pay, racking this debt up over 1 year. Lower income because of an injury left us with not enough to cover the budget therefore the credit card had to come out often. We mostly used it for larger household bills like car costs and utilities. Thankfully after another 18 months he was back to work but we were left with a credit card balance of around $4000.

 

Both our incomes weren’t enough to pay this off easily and I had to get savvy in the way we were able to do it.

 

I wrote up a refined budget for the household knowing that we had to stick to it as there was no left overs. We had to be able to use every dollar not in our budget to pay the debt off.

 

As soon as we were both paid, I allocated all of our income (except for our personal cash spending) on to the credit card, instantly reducing the amount of interest charged, for a few days at least until we were to pay all other bills due with the card. Interest is usually charged daily so even if the money was there for only a short time, it would lower the interest charged over all for the month.

 

While this sounds weird or scary, hear me out. In our budget, we estimated all of our expenses to the average cost or slightly higher so we wouldn’t spend more that we’d planned to. Because of this, sometimes when we paid for something, the cost was a little under what we’d allowed for. These small amounts we didn’t spend added up over a month to be a few hundred dollars. The amount that wasn’t needed therefore came off the balance of the card, also reducing the interest charged for the next month. (Allowed $100 for fuel but only used $85 etc)

 

 

1 month example:

 

WEEK 1

Income paid on to credit card    $1200

expenses paid for the week     - $1128

                                                           = $    72

 

WEEK 2

Income paid on to credit card     $1200

expenses paid for the week      - $1156

                                                      = $    44

 

WEEK 3

Income paid on to credit card    $1200

expenses paid for the week     - $1115

                                                     = $    85

 

 

WEEK 4

Income paid on to credit card     $1200

expenses paid for the week      - $1170

                                                      = $    30

 

   $72

   $44

   $85

   $30

= $231 reduced the balance owed on the card.

 

Keep repeating this step each week until you’ve paid the credit card off.

 

 

It only took 18 months to pay off our $4000 credit card. We were so used to this new system of not buying unnecessary things that we kept it up for another 6 months to get our credit card in the positive, or black, by about $1000 to use for Christmas present buying which was approaching.

 

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Why are you using credit?

The second time I found myself in credit card debt was due to my relationship breakdown. As I was down to a single income I had to use a different tactic.

 

The only way I could pay it off was to repay the debt with no interest. I searched for current offers of credit cards with 0% interest rate for a long term. After a few application knock backs, I was accepted for a CitiBank Platinum card at 0% for an 18 month term to transfer my $4750 balance to.

 

I put the actual card in my filing cabinet so I wasn’t able to use it and pretended I was paying off a personal loan. I was forced to use half of my child support payment each month to pay. At $250 per month, it actually took me 19 months to repay, so I only paid interest on the last $250 remaining after the interest free period.

 

After I was free from this debt, I was able to purchase a car that we desperately needed. I got used to only the half payments from child support and decided I could then apply for and pay off a small car loan using the credit card repayment amount, while not affecting my budget.

 

If using this repayment method, I advise to be very careful and self disciplined as often the interest rates on these 0% balance transfers revert back to an even higher interest rate at the end of the term. Make sure you can pay it off in the time frame. Also, do not use the card for any purchases. If you cant afford something, don’t buy it.

 

 

IT’S ALL ABOUT THE MATH

 

Play around with some sums on paper to see what you can achieve. Just by working out different payment amounts you can see how long it will take you to repay going by what you can afford. It becomes much clearer by writing it down in sums, even just $20 extra each month will shorten the time to pay off but if you can afford more it will bring the time back even more. Make it a comfortable amount so you stick to the repayments to be finally free.

 

Example    

                     $4750

Divide by  $   250

            = 19 months

 

 

                   $4750

Divide by  $   320

            = 14.8 months

 

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Keep your credit cards out of reach.

WHEN YOU ARE FREE FROM CREDIT CARD DEBT

 

Once you have repaid your debt in full, you’ll need to cancel and get rid of the cards you have. They’ll more than likely have a huge interest rate and annual fee. Now you have a $0 balance, you’re free to start fresh with a more affordable card if you really need a credit card. They are a great way to earn a good credit score for future loans but cash is always best for personal purchases, not credit.

 

*Read Change your money mindset for more about credit card spending. Instead, use the money you’ve just been using to pay the credit card off in a good way. Save up for items you want, not the buy now pay later mentality

because you’ll always pay more spending that way. 

 

*Save an emergency fund for those desperate times you need to spend money you haven't allocated

 

*When choosing a new card, be picky. Find one with a low interest rate and no annual fee if possible. They’re out there as I have the 28degrees MasterCard who don’t charge an annual fee, saving me a yearly expense and making my credit card free if I use it right.

 

With so many to choose from, only apply for the cheapest card and one you can get the most benefit from.

 

 

CREDIT CARD TRAPS

 

Be responsible. Because they’re made for convenience, it’s easy for the balance to climb to an out of control level. If used right they can be a very handy tool but you need to keep on top of it. Stay away from the bright shiny shops and you won’t be tempted. Get a hobby instead and stop bad money habits.

 

*Repay all purchases within the interest free time allocated (usually 55 days) to avoid any interest. An even better way is to repay in your next pay period so you don’t forget.

 

*Don’t use the card for a cash advance, the interest charged is much higher on this feature so pretend it doesn’t exist and follow a budget to allow yourself enough cash.

 

*You don’t need ‘things’ instantly. If you can’t afford something now, save up for it. It doesn't take long and by paying using money you’ve saved, the purchase is like a reward for saving. You don’t deserve it if you haven’t saved for it.

 

 

 

 

Leave a comment below and tell me how you've become free from credit card debt.

The more ideas readers have the better because we all love options and one way may be easier for someone

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