I would like to put “Easy” in the title of this post, but then I think we would be fooling ourselves. The steps themselves are easy, but they are difficult to follow through on. It will take determination, and a lot of sacrafice, to see all those credit card balances go to zero. There is something I would like you to do before you begin to follow the steps below, and that is what I call Step Zero. Identify why you want to be debt free. Saying you want to be debt free is not enough, you need to know why. For me, it is because debt is forcing me to stay in a job longer than I would like. It is limiting my opportunities. Once you have identified the “why” move on to the steps below.
Ten Steps to Paying Off Credit Card Debt
- Save three months of expenses in an emergency fund. You may be saying, “why is this on the list of steps to take to pay off my debt?” You need this fund for when unexpected expenses come up, like when your air conditioner breaks, or your car breaks down. This will keep you from using your credit cards to pay for this stuff.
- Take an inventory of your debt. In this step you list all of your credit card accounts. Include the account number, current balance, interest rate, minimum payment, credit limit and contact number. This may shock you when you see how much you really owe.
- Contact each credit card’s customer service number. What you are going to do here is explain that you are in the process of consolidating cards and would like them to review your account for a lower interest rate. If they decline, ask to speak to a supervisor and repeat your pitch. If that fails, thank them ad hang up. Whatever you do, DO NOT close the account at this point.
- Consolidate balances to credit cards with the lowest interest rate. Move as much and as many of your high interest debt to cards with the lowest rates.
- Get real angry. I mean get really really angry and the debt staring back at you. Take a look at it and remember all the nights it has kept you up, or all your dreams that have been put on hold.
- Cut up all but the card with the highest available credit. You are in a hole and you need to stop digging it deeper. Get your scissors out and start cutting. Take that card you kept with the highest available credit, put it in a plastic cup of water and freeze it. You will only need it in case of an emergency.
- Reorder your list of debts, putting the smallest debt at the top. Put a big #1 next to that sucker.
- Put every single dime you can find at debt #1. You want every single extra penny you can scrape up to go to paying this debt off.
- Snowball to the next smallest amount. When the balance reaches zero and you have paid off the entire balance, you will then take the monthly minimum you were paying on that card along will every extra penny and begin to pay off the next credit card balance. You will rinse and repeat this step until all your credit card balances are paid off.
- Celebrate. I think it is time to celebrate a great victory in your life. Do something good for yourself.
If you are like me, you have probably been accumulating debt for years. It is time to get it paid off and start living a life debt free!Credit Card Debt