5 Steps to get out of Credit Card Debt

I know this may surprise you, but I have a credit card. Actually, I have three.

For many years, I treated my credit cards like cash, paid off the balance in full every month, and paid no interest.

Don’t hate me, the story gets better.

Then I had two kids, Christmas, a hurricane, got really into organic food and cooking, blah, blah, blah – now I have a bunch of credit card debt and need to pay it off.

For months, I tried to pretend that the credit card debt wasn’t a problem and that sometime in the future I would have enough money (maybe when I won the lottery?) to pay if off all at once.

But, I don’t play the lottery.

Months went by. I’d make a big payment and feel like I was making progress. Then, the balances would creep back up. My credit score started falling. I went through the stages of spending grief.

Denial: It’s really not that bad, I’ll have enough money to pay it ALL off in a few months.
Anger: This isn’t fair! I deserve nice things!
Bargaining: I’ll pay off my credit cards when I get my life in order.
Depression: I’m never going to have enough money to do anything nice for my family again!
Acceptance: This problem isn’t going away, and I have to be willing to make some tough choices to fix it.

Ignoring my growing mountain of debt wasn’t making my money problems going away.

And then, one day, I reached my actual and proverbial limit. All of my credit cards were declined at the grocery store because they were maxed out. I didn’t have my debit card or cash with me, and I had to call my husband to get the number for our debit card so the customer service person could key in the number and I could pay for my groceries.

I expect that I’m not the only one who not-so-secretly hopes that if I close my eyes and pretend that I don’t have a credit card problem that the problem will go away. Or that maybe, one day, I’ll come into a lot of money and it won’t be a problem anymore. But the truth is, I’m may not have more money in the future, especially if I keep spending more than I have.

For the past few months, I’ve been slowly chipping away at my balances. Unfortunately, there’s not a quick fix here, but at least I see that there is a light at the end of the tunnel.

Here are a few tips I’ve used to work on my credit card spending habits.

1. Look at your credit card statement

And when you look at your credit card statement, look at the information that’s important to you, not the what’s important to your credit card company. You may notice that on my statement, the “Minimum Payment Due” is featured in bold letters that are easy to see.

Your statement will also let you know that if you pay only the minimum payment, it will take you 15-20 years to pay off your credit card, and you’ll eventually pay three times more than you actually put on the credit card. They also suggest a number that is slightly higher than the minimum that you can pay that will allow you to pay off the card in 3-5 years.

Pro Tip: THE MINIMUM PAYMENT IS NOT IMPORTANT.

IN ORDER TO PAY OFF YOUR CREDIT CARD YOU MUST LOOK AT DIFFERENT NUMBERS.

2. The first step to getting out of a hole is to stop digging.

You must Pay Off the amount you have purchased and the new interest charged to make any headway on your total balance

When I am making my payment every month, I look at the Purchases I’ve added to the card and the fees and interest charged (if you’re paying on time, hopefully there are no fees!) and no matter what happens, I MUST PAY THAT OFF EVERY MONTH!

HOLD THE PHONE: Wait, Maggie, I thought you said you took your credit cards out of your wallet.

Yes. I did. And, I have a few things that I automatically pay on my card – like my cell phone, and a monthly donation I make to World Vision every month. It’s more convenient to me to continue to pay these things on my credit card, and now that I’m paying off the balance every month, I feel like it doesn’t make a big difference if this money is coming out of my credit card or checking account.

3. Get out of the hole

Back to your credit card statement: Look at your Previous balance.

You want your New Balance to be LESS than your previous balance. If it’s not – YOU ARE NEVER GOING TO PAY OFF YOUR CREDIT CARD.

Pro Tip: Try using cash instead

For me, for now, credit cards offer too much temptation. It’s just too easy to add something to my cart at the grocery store, and Target is basically credit card kryptonite for me. So, I took the cards out of my wallet and am using cash instead.

To stick to my budget, I have started using cash (yes, actual paper money) for my discretionary purchases (groceries, toiletries, gas, etc.). For me, it’s much easier to avoiding excess spending when I’m using cash.

4. Figure out what payment you have to make to pay off the card

You can put your balance and interest rate into a free online calculator. Here’s a link to one or you can do a google search for credit card payoff calculator.

To find the interest rate for my credit card, I have to flip WAY back of the last page of the statement to find the interest rate (mine is probably too high…)

The calculators are fun (yes, I said fun, because getting out of debt is SUPER FUN!) because you can see how increasing the payment can change the amount of time it will take to get it all paid off.

For my cards, I’m on track to pay off my cards in about 8 months.

Would I like to pay them off faster? Yes. But, I would also like to eat. And I feel like I can live my life on my current budget. And when I don’t feel like I’m depriving myself, it’s easier to stick to good spending habits. So, I’m willing to take a little longer and know that by the end of next year, the only debt I’ll have left to pay off is my house.

5. What are you spending money on anyway?

A few months into my quest to pay off my credit cards, I realized something that kept getting me off my budget. Every month, some random thing would come up that cost about $500.

• One month our car needed four new tires.
• One month we had to get supplies, make repairs and had less income due to Hurricane Irma.
• Another month we had dentist visits and my daughter had to get a cavity filled.
• One month, my dog developed a mass on her leg, and we needed to got it biopsied to see if it was cancerous

When I noticed this was a pattern, I realized that in order to actually stick to my budget and stop increasing the balance on my credit cards, I had to have $500 in my budget for to the “unknown unknown” to quote Donald Rumsfeld. And maybe, this month, if there turns out not to be an unknown unknown event, I can put that money in savings or pay extra on a card to get out of debt faster.

The point is, having that awareness of where my money was going helped me budget more effectively and has made my spending plan more sustainable.