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how to pay off credit card debt

How To Pay Off Credit Card Debt

Credit card debt can be crippling. A loan shark is the only place to get such high-interest charges. We’ll show you how to pay off credit card debt.

I have been in credit card debt since I was 18 years old. As of 2013, I have paid them all off. I read so many books and blogs about how to do it, but the most important tip was JUST GET STARTED. Here’s how I did it, and how you will too.

1. Make A List of All Your Credit Cards

I had a white board hung up in my office where I created this list. If you don’t have an office or a whiteboard, you can use a sheet of paper and stick it on your fridge. You want to keep this list in front of you at all times. You’ll want to constantly be reminded that, yes, you do in fact have a problem that needs to be taken care of.

The list should include every credit card, the balance, the payment due dates, and the annual interest rate. The list should be in order with the highest interest credit card first.

credit-card-list

There are two schools of thought on how best to pay off debt, but I will only recommend one of them. The first way to list out your debt is in order from lowest balance to highest, meaning you could pay off the card with the lowest balance first. This is a mental thing. The idea here is that by paying off the easiest card, you’ll feel like a winner and continue to pay off the rest. This is not the route I recommend.

The other school of thought, and the one I used to beat my debt is to pay off the card with the highest interest rate first. Here’s why:

Let’s say you have a credit card with a 22% interest rate like I did. If you racked up $10,000 of debt on that card, you are paying an extra $2,200 a year to have that balance, which when broken down monthly, would be about $183 a month added to your debt.  You want to pay this debt down as quick as possible so that you’re not giving the credit card companies money that isn’t helping you pay off your card any faster.

2. Create a Mint.com Account

Now that you have your written list, I also recommend you set up a Mint account so you can see your progress every day.

mint-screenshot-ipad

Mint is free online software that tracks your entire financial profile. You can enter in all your credit cards and it automatically pulls data from those credit card companies and shows you an overview of your debit in a big fat negative number. Your goal is to get this number to $0.00.

And don’t worry about giving your information to Mint. It’s just data. There is no way a hacker can gain access to your credit card information. You can also add in your car loan, mortgage, and bank accounts, which I recommend you do as well.

If you have a smartphone, download the app so you can check it every single morning to see what shape you’re in financially. This was a huge help for me and kept me on track. It’s sort of like a game, where your goal is to get that number to 0.

3. Ask For Lower Interest Rates

This is pretty fun and very motivational. You are going to call each credit card company and ask them to lower your interest rate.

When you call, you need to be confident. Do not show weakness here, it’s important. Your goal is to get your interest rate lowered by any amount they will offer. If they ask you why you want it lowered, say it’s too high — that’s it!

If they ask what you want it to be lowered to, say, “As low as you can.”

You can also threaten them. If you’ve been a good customer of theirs for a long time, and you have the ability to transfer the balance to another credit card, throw that in their face. You can threaten to leave. Trust me, if you’re in debt, they want to keep you as a customer since they are making money off you every single month.

You might not be successful with all of them, but keep trying. This will not hurt your credit either. The biggest thing hurting your credit score right now is your debt ratio: the balance vs. the credit limit. Yes, by paying off your credit cards, you will improve your credit score.

NOTE: Just because I told you to threaten the credit card companies with a balance transfer does not mean you should do a transfer. A lot of credit card companies want your business because you have debt. Debt is valuable to them because if you don’t pay it off, they make money off you from the interest you pay. You probably get a lot of offers in the mail stating that you can do a balance transfer to a new card with no interest for six months or a year. Avoid this!

The goal is to get rid of debt and minimize how many cards you have. Opening up another account is a bad idea. For one, you’ll be tempted to rack up debt with the new card. Two, you’re credit score could get hit for opening another card when you already have debt on your hands.

Remember, credit card companies are the enemy right now. Once you get rid of your debt, you are going to play them like a fiddle and take advantage of them.

Here’s a bit of info that might put things into perspective…

In the credit card industry, do you know what they call customers who pay off their credit card debt in full every month? Deadbeats! That’s right, people who use credit cards correctly are the worst customers for them because they make NO money off those people. Instead, we just take and use all the points they give us. Yea, bitch!

4. Start Paying Off Your Credit Cards

Now you have your written list and your up-to-date Mint profile, so now it’s time to start paying.

You’ll start by paying the minimum balance on all your credit cards except the one with the highest interest. What you’re doing is keeping the other credit cards waiting until you pay off the big one first. By paying the minimum on time every month, they’ll be waiting for you. I highly recommend you make these payments automatic, so you don’t have to think about them.

To make your minimum payments automatic, you can either set up automatic bill pay with your checking account or use the online credit card accounts themselves. I find it easier to do automatic bill pay through your bank so that you can set them all up in one place.

Once you have them all set up and automatically taken care of, you are going to throw everything you can afford at the highest interest credit card until it’s completely paid off, and I mean that. Connect your highest APR CC to Debitize, set it up on Debt Destroyer, and set up automatic min payments on your other cards. Then, when debitize pays it off, move next higher APR card to Debitize.

NOTE: If you’re worried about canceling your card because you heard it could affect your credit, you need to STOP worrying. Again, this is small potatoes compared to your debt ratio. Do not worry about your credit score. When you have no debt, you will never worry about this number again.

5. Finding Extra Money To Pay Off Your Credit Card Debt

The way I quickly paid off my debt was by working on the side and reevaluating my expenses. For one, I was spending $150 a month on cable TV. So, I tried only watching Netflix for a month, and I was fine. I used the extra $100 a month I was saving to pay off my credit cards.

I got rid of my very expensive BMW, which costs a lot of money in gas too. I traded it in for a Honda Civic. I was able to cut my gas expenses in half. I went from spending $60 a week to $30 a week. That’s another $120 that went to my high-interest credit card every month.

I also sold a bunch of shit on eBay and Craigslist. I used eBay for stuff I could easily ship, and Craigslist for big items. I took inventory of all my stuff. If I hadn’t used an item in a year, I sold it. All that extra cash went towards my big credit card.

I started doing side-work too. I have website design skills, so I got in my Honda Civic and drove around to a bunch of small businesses looking for work. I was able to sign two clients in one week.

All of these things combined allowed me to pay off my big credit card in less than three months. I’m asking you to get creative here.

The good news is, once you have a credit card paid off, it makes it a whole lot easier to pay off the other ones because now you have once less card to pay off, but that doesn’t mean you slack. Move on to the next credit card and do EVERYTHING you can to pay it off as quickly as possible. Look for ways to make quick money by selling your shit, or working a side job.

In fact, it’s a good idea to make a list of ways you can make extra money, even if it’s only temporary.

Get Started!

The biggest hurdle you need to get over is YOU. Every day you don’t start, is another day the credit card companies are taking your money.

I will tell you this, paying off credit card debt was a very emotional day for me — yes, that means I teared up a little. The relief was so overwhelming and gratifying that I cried tears of joy. The biggest weight in the world was lifted from my shoulders, and I felt like a new man. I felt rich because all of the sudden I had so much more money to spend on stuff I enjoy, however, I never got cable TV back. I’m officially a Netflix and Hulu guy.

This project also helped me to launch my business of blogging and making websites. I got rid of a lot of stuff I didn’t need anymore, and my house had never been cleaner. So much good came out of it, and I hope that it encourages you to do the same.

In fact, I’d love to know how you’re doing and if there’s any way I can help you achieve your goal of getting out of debt. You can ask me questions or share your successes in the comments below. I’m always replying.

Good luck!

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