Digging Out of Debt – Credit Cards First

Digging out of debt means that you have to concentrate your efforts in order to make it happen.  Continuing to pay the monthly minimum is not really getting you realistically any closer to paying them off.  And since your credit card debt is probably spread out among several cards, the effort should be concentrated on one card at a time.

Choose your card.  Consider making your choice of which card to begin with based on the balance amount.  You will see why later.  It will be tempting to choose the one with the highest rate, but resist this urge.  Select the card with the lowest balance amount that you can pay off quickest and first.

Pay as much as you can.  Find as much money as you can to pay off this first card.  You need to have a success under your belt quickly in order to help you see progress.  That is why you should choose the card with the lowest balance first.

Pay the minimum on the rest.  Keep the other cards and card companies at bay by just paying the minimum each month.  You want to minimize the effect of concentrating your efforts on just one card, and if you cannot afford to make the monthly minimums, you will be incurring even more charges so that this effort will become counterproductive.

Discontinue use.  Once you have paid off each card discontinue using it.  You can close the account if you wish, but keep in mind that this will impact your credit score negatively because a closed card is a flag on your credit.  The reason is because there is no accompanying reason given on your credit report.  It shows as closed and that is enough to lower your credit score.  But, do not fear, your credit will go back up eventually.

Increase your payment amounts.  Here is where the leverage increases.  Once you have paid off that first card, take the amount you were using to pay it down, and apply it along with anything else you can pay to work on the next higher balance card and so on, using this method to generate momentum.  With each card that is paid off, you will get a boost in confidence which will help propel you on in your quest.

Do not get discouraged.  With the increases in interest rates and fees being charged, you are probably going to become discouraged or even upset, but refuse to allow anything to move you off course.  Make your payments timely and in as large of amounts as you can.

Handle emergencies.  If you find that you have an expense emergency, then suspend your program and just pay the minimums to keep things in a ‘holding pattern’ until you can begin again.  Even if it takes a month or two, this is worth working on, knowing that you will be picking up the pace on your progress very soon.

Celebrate.  Once you have paid off a card, celebrate a little.  BUT, do not use your cards in order to do that.  Just have a small, inexpensive party that will help mark your progress.  This will build anticipation to the next one.

Once you reach your goal and if you have not already, then begin to close the accounts that are not necessary.  This might be all of them, but you might keep one or two opened.  You be the one to dictate your decision, not other outside forces.

This is your money and your life.  If you are married or have a partner with whom you have these accounts, agree together how you are going to proceed.  Then, once you are finished, have one BIG party to celebrate.  You deserve it.

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This entry was posted on Tuesday, March 17th, 2009 at 1:41 pm and is filed under Debt & Consolidation, Tips & Advice. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.