How I Paid off $6,000 In Credit Card Debt

credit card debtI didn’t have credit card debt for long. I didn’t suffer for decades. I never had creditors calling me, and I wasn’t in bad enough shape to get turned down for a loan. Yet, I still felt the weight of it every day. That’s the reality of credit card debt. Whether it’s $500 or $50,000, it’s still a nagging feeling, something extra on your to do list, and something that’s quite difficult to improve if you’re not willing to change habits and get in the right mindset.

How It Started

I got my very first credit card at age 22 for one purpose and one purpose only: to buy my husband (then fiance) his wedding ring. I didn’t have the money to buy something so expensive at the time, so I wanted to put it on a zero percent card and pay it over time. Of course, you probably know how it goes. Something that started out innocently enough grew into putting gas on it here or there and then we used it to fund a little bit of our honeymoon, etc. I’m not proud of how it started, but I do like to be honest about it.

When It Got Worse

We were managing our debt well enough and always paid above the minimum. I suppose I always felt that I was trying to get it back to zero, but I never sat down to figure out how much it would take. We both had steady jobs and were never late on a payment. Then, my husband decided to apply to medical school. We spent hundreds in application fees, and then when he got into a Caribbean school, we lost his income.

The Peak

As someone who is a personal finance blogger now, I shake my head knowing exactly what we did wrong. We didn’t track anything we were spending, which is just absolutely amazing to me now, as someone who plugs everything we spend into an excel spread sheet throughout the month. But that’s now, and we’re talking about then. We had good jobs and a comfortable life, but we didn’t have enough in savings, and we certainly didn’t have enough for international plane tickets to send the hubs to school. At the peak, we both maxed out a $3,000 card each.

Chipping Away At It

Before that $6,000 peak, we were actually trying to pay it down. Like I said, I was always aware of our debt, and I often felt the weight of it. I always paid above the minimum, and even managed to knock out a credit card for a TV we owned prior to my husband going back to school. (Yes, I know. Credit card for a tv = bad. My how things have changed.)

18 Months of Work

It wasn’t until 18 months ago that I laser focused my efforts on this challenge. For 18 months straight, I focused heavily on paying it off. I wanted it gone. I wanted it out of my life. We were accruing student debt due to my husband’s medical school tuition, and I didn’t want the credit card debt to get out of hand too. I started working as a freelance writer on the side. It was slow at first, but a year later, I am able to add a considerable amount of extra money to our monthly income. I have used this extra income every month to slowly pay off the debt.

Victory

I was hoping for victory by the end of this year, but it came sooner in the form of a promotion at work. That first paycheck was all I needed to finish off the credit card debt once and for all. I’m actually very proud of myself. While my husband certainly contributed to these efforts by not spending needlessly and not complaining about modest meals, I feel as though this is a personal victory too because it showed me how much can be accomplished with good old fashioned hard work. We now have $500 extra dollars a month (an amount I had been paying on our credit card debt for almost 10 months). It’s time to go to the next goal, which is paying down our student loan interest and maybe saving for a vacation. We’re so excited, relieved, and proud to be here saying we’re credit card debt free. If we can do it, we know anyone else can.

Who else is working on their goal of being debt free?

photo by vectorportal

Credit Card Mistakes To Avoid at All Costs

credit card mistakesIn many people’s lives, credit cards tend to take on one of two roles. One is that of an indispensable ally, one that is always available to bail you out of a tough situation at any hour of the day or night. The other? Well, that is of a cruel enemy, dragging you into a deep pit of debt and then slapping you with extra fees when you are down. Even when things are harmonious in your financial house, credit cards can be fickle friends. Make one mistake â“ a single missed payment, one charge too many that pushes you over your limit or simply apply for too many cards â“ and it can have a negative impact upon your credit score. That, in turn, can result in higher interest rates and other bad news for your budget.

Here are a few of the most common â“ and not to mention expensive â“ credit card blunders that are best avoided.

Late Payments

It may be fashionable to be late to a party, but it’s downright dumb to be late paying your credit cards bills. Not only will missing a payment cause your card issuer to charge you a late fee, but it will lead to them increasing the interest rates on your account. Your payment history accounts for about 35% of your credit score and one single messed-up payment can cause your score to take a serious dive. If you are not set up to make payments online, make sure you drop your check in the mail well in advance of its due date.

Making the Minimum

If you are trying to pay a balance, you must make more than just the minimum payment. Consider this example put forth by the website, omaha.com:

With a $5,000 balance and annual interest of 14 percent, a $100 minimum payment will pay off the bill in 22 years, with $6,110 going for interest. If you pay $150 a month, the bill is gone in four years with $1,369 in interest.

Federal Laws are now in place requiring lenders to display, on every statement, how long it would take you to pay off a balance making only the minimum payment. This as well as the monthly amount you would need to pay, in order to pay off the debt in three years.

Withdrawing Cash On Your Card

DO NOT, as in ever, ever, ever, use a credit card for cash advances, except in the instance of an absolute emergency. Aside from the dizzyingly high interest rates associated with pulling out cash on your cards, there are typically additional fees. Also, interest begins to accrue IMMEDIATELY on the amount of cash withdrawn which means that you will be paying back much more than you borrowed even if you quick about it.

Paying An Annual Fee

Some rewards cards come with an annual fee and sometimes those rewards are tied to the amount you charge. So no matter how nifty the perks on your plastic, they may not be worth what you will be paying for them. Make sure you are not tempted to spend more than you normally would on your card just to get those rewards.

You should always take the time to make sure you understand the exact terms of your credit card. That way you will avoid unnecessary fees and penalties. If you are in the market for a new card, comparison sites such as credit land can be an invaluable tool. If you know how to use your credit cards mindfully, your wallet will house plastic pal instead of foes.

photo by moneyblognewz