How To Pay Off Credit Cards For Good

If you are ready to pay off credit cards for good, it’s possible with a plan, the right mindset, and some hard work.

If you are struggling with credit card debt, you are not alone. Acoording to Experian, overall credit card debt in America sits at 909.9 billion dollars! The average credit card balance for individuals is $5,910.

Just because credit card debt is considered normal in America, doesn’t mean that you have to accept it as a normal part of your life. Credit card debt, and any debt for that matter, is stressful and not fun to have hanging around. But, no matter how much credit card debt you may have, it is possible to pay it off for good and stay away from credit card debt!

I know this because my husband and I paid off our credit cards. Then we continued to pay off the rest of our debt too. We spent a total of three and a half years paying off $107,000! If my husband and I can do it, then I know that you can too!

So if you find yourself with credit card debt that you no longer want to have hanging around month after month, I hope these tips can help you and your family on your journey to pay off your credit cards and get out of credit card debt for good!

Stop Using Credit Cards And Accumulating Debt

Struggling with credit card debt can be very frustrating when you feel like you are making progress and paying down those balances, just to find them right back up the next time you look at them. That’s why in order to make true progress and finally pay off credit cards for good, it’s a must to stop using credit cards altogether.

Even with consistent extra payments, with continued use those credit card balances will likely never be completely eliminated. However by finally kicking those credit cards to the curb and ending reliance on them as a backup for not having enough cash, that is when the real progress toward credit card debt begins to happen.

Later down the road when the debt is completely paid off and the card can be paid in full every month, it is best to evaluate if using credit cards is a good idea or not moving forward. That will be a personal choice for everyone.

Evaluate Purchases

Buying things that we don’t need, even just a few times a month, can really add up quickly. When we get into the habit of making purchases impulsively or convincing ourselves that we need things that we could likely do without, it can become common to fall into the cycle of using debt.

That’s why it’s helpful to evaluate items before making a purchase. Using simple tricks like asking yourself if you really need an item before purchasing it, waiting 24 hours before making a purchase, or even discussing a purchase with a friend or partner can help determine if you really need it.

Another way to look at it is to think about every dollar that you spend. Look at each dollar as money that you no longer have to put directly on your credit card debt. For those that are serious about getting out of debt, this is a powerful way to help curve spending.

By taking the time to evaluate an item before making a purchase, it can help identify unnecessary purchases. As a result of spending less, it’s possible to eliminate debt much faster. This happens with intentional spending and intentional, focused debt pay off.

Create An Emergency Fund

Setting money aside every month to build an emergency fund eliminates the need to rely on credit cards. It is recommended to save three to six months of basic living expenses in an emergency fund. For those with a family or a job that may lack stability, saving a little more is even better. However, you don’t need to save a full emergency fund to get started paying off your credit cards.

Dave Ramsey, who has taught millions of people how to get out of debt and build wealth, recommends having only $1000 in a starter emergency fund. Some people may be more comfortable with more than that, but that is based on each individual family. Whether you start with $1000 or a few months of living expenses, the important thing is to have an emergency fund in place.

By creating an emergency fund that is truly only used for emergencies, not for last minute travel or a new pair of shoes, it’s possible to avoid using credit cards when unexpected expenses occur. An emergency fund is meant to be used for things like a job loss, an unexpected medical bill, an unexpected home repair, or car repair. When an emergency fund is treated as a resource for true emergencies only, then it will be available for those unexpected expenses and your family won’t have the need to turn to credit cards.

Develop The Right Mindset

After relying on credit cards for years, it’s common to develop the belief that it’s impossible to survive without them. However, when you begin to build an emergency fund and decide to no longer rely on credit cards as a backup, it can make a huge difference!

That’s why developing the right mindset around credit cards is so important to avoiding credit card debt. In fact, it is probably the most important thing that you can do to be successful. Rather than telling yourself it’s ok to use credit cards for an emergency, make using credit cards as a backup a nonnegotiable.

By creating the right mindset towards debt and being fiercely determined to avoid it, you will find that it is much easier to say no to things that you don’t really need.

Get On A Budget

Understanding exactly how much income is coming in every month and having a good understanding of all monthly expenses, is very empowering. In most cases you will find money you already have coming in to help pay off credit cards much faster! That’s why a budget is so powerful.

By getting on a budget, it’s possible to create a plan for each dollar that comes in every month rather than wondering what happened to all of those dollars at the end of the month. A zero-based budget can help your family figure out how much you are spending, and it can help you figure out where your family can afford to cut back. Those savings can then be used to pay towards those credit card bills.

My family has been using a zero-based budget for years. We used it when we were getting out of debt and have continued to use it for years. Using a zero-based budget allows us to plan how all of our money will be spent, saved, and invested. It is a very powerful tool!

Choose A Method For Paying Off Credit Cards

There are various methods for paying down your debt. Two common methods are the debt snowball and the debt avalanche methods.

Debt Snowball

For the debt snowball, list all credit cards in order from smallest to largest balance. Pay the minimum on all cards. Pay all extra cash on the credit card with the smallest balance. Once that credit card is paid off, continue to pay the minimum on the rest of the cards and use all extra cash to pay on the next credit card with the smallest balance. Continue to do that until all of the credit cards are paid off.

This method works well because it allows you to see progress quickly. With each balance that gets paid off, there is more money to pay on the next card which helps you progress faster and creates a lot of motivation to not only stay focused but continue to look for ways to make more extra cash to go even faster.

Debt Avalanche

The debt avalanche method works in a similar way in that you pay the minimum on each card every month. However, all extra cash is put on the card with the highest interest rate regardless of what the balance is. Once the card with the highest interest rate is paid off, all of the money that was being used on that card will be used to pay down the next card with the highest interest rate. Again, this continues until all credit cards are paid off.

If you are trying to pay off a lot of credit card debt, this method may make more sense. This is because it will likely save extra money on interest. However, you may end up starting with a card with a large balance. This could take much longer to pay off compared to starting with the credit card with the lowest balance. This could result in loss of motivation.

Decrease Expenses

Setting up a budget, helps you to know exactly how much income is needed every month. To take it one step further, knowing that information and trying various ways to decrease those expenses can have a big impact on the time it will take to pay off those cards. By looking at each individual expense, questioning its need, and searching for ways to reduce each expense, it can result in a lot of extra money each month that can be put directly on that debt.

Let’s say for example you find a cheaper phone provider which saves your family $50 a month, and your family stops eating out until the credit cards are paid off which saves another $200 a month. Then you reduce your food budget by $50 a month. Next, you decide to cancel a gym membership and opt to workout at home instead to save another $30. Finally, you cancel two streaming services and save another $30 a month. That adds up to an extra $360 a month to use towards paying off those credit cards.

Increase Income

In addition to decreasing expenses, finding ways to bring in more income will accelerate your debt payoff even faster. Try starting a side hustle at night or on the weekends. Another option is to get a part time job to make some extra cash.

Even for those with busy schedules, it’s possible to find some kind of extra work in your spare time. Although you may not want to take on extra work, it’s important to remember that the extra work is only for a period of time and not forever.

Let’s say you start a small side hustle and are able to bring in another $800 a month. When combined with the decreased expenses, that comes out to $1160. That is all extra money that can be used towards paying off credit cards every month.

By combining decreasing expenses and increasing income it can knock out a lot of credit card debt and make faster progress. Both of these combined are also a great way to stay motivated.

Use All Extra Cash

The key to staying motivated is to keep making progress. That’s why using all extra cash towards paying off credit cards is so beneficial. If you decrease expenses and increase income but only spend a portion of that money on paying down the debt, then progress will be much slower and you may begin to question the trade off of the extra work and spending less.

To keep focused and realize that all of the hard work is worth it, then being intentional about using all of that extra cash to pay down that debt is very beneficial.

Create A Plan

Figure out exactly how much you owe and create your plan to pay it off.

1. Start by writing down all of your debts.
2. Determine which method you plan to use to pay off your debt. (Debt Snowball or Debt Avalanche)
3. Create a budget. Include a specified amount that you can put towards your credit card debt every month.
4. Determine the amount needed to pay the minimum payments each month.
5. Determine how much is left over to pay extra on the credit card you will be focusing on first.
6. Look for ways to decrease your expenses and increase your income. Do some calculations to see how long it will take to pay off your credit cards if you can add another $400, $800, or even $1000 more per month. This is a great motivation for making your debt pay off go faster!

Things To Avoid

There are lots of articles recommending personal loans, debt consolidation, and home equity loans to pay off credit cards. People may argue that you can get a cheaper interest rate which may be helpful under some circumstances.

However, by taking out a loan to pay off credit cards, it is not fixing the problem. Rather it is just moving the location of the problem. That’s why having the right mindset when it comes to debt is so important.

By making the decision to no longer accumulate more debt, creating a safety net for your family with an emergency fund, and intentionally working to pay off that debt fast, you’ll find that you can pay off your credit cards much faster than you think without the use of debt consolidation or loans.

Tips

• Keep your emergency fund at a different bank than your everyday account. This makes it less convenient to access that money which can help ensure that it is only used for emergencies.
• If you or a spouse starts a side hustle or a second job, act as though you never did. Instead, put all of that money directly on the credit card debt. It may be hard to do, but the payoff is worth it!
• Set financial goals you want to work towards after your credit cards are paid off. It’s a great way to stay motivated when paying off credit cards.
• Plan a special reward for you and your family, that can be paid for in cash, to celebrate when those credit cards are finally kicked to the curb!
• Listen to the Dave Ramsey Show debt free screams. They are a great tool to use for motivation.
• Stay positive! No matter how much credit card debt you may have, you CAN pay it off! With the right mindset and some hard work, anything is possible!