Paying off your credit card

{The second in a weekly series of articles on credit card tips.  These posts cover  many common credit card topics  with action steps you can put to work immediately.}

Remember, you vowed you were going to get out of credit card debt.  You’ve had it up to you know where with making decent money, but having nothing to show for it.

The first few weeks, you went happily along with the plan.  Then reality set in:  You realize your  measly payment will get your credit card debt paid off about the time you move from assisted living to the nursing home…

You decide to ask the right questions in the right way…

“Maybe I need to use a little critical thinking here.  Do a little research, and make better choices?  What is the difference  between success and failure?”

“Yes I know it was my fault, but now I want my Citibank Card and Visa accounts  to  be as empty Muammar Gaddafi’s conscience.  They are history, baby!

Critical Factors in Payoff Success

You have probably figured out (without my brilliant analysis) your payment amount and your interest rate are the critical factors in paying off your cards.

Before starting this journey on your own, however, you need to prevent crisis management. Being in crisis mode makes smart decisions impossible.  Like throwing a drowning man a beer.  He may appreciate the gesture, but he remains a drowning man!

Crisis management

That’s what got you in credit card debt in the first place.  Oops, can’t pay for my books, put it on my card.  Oops, need new clothes for work-swipe away…

Living with credit card debt hanging over your head is not living, it may be an adventure—if you think constant stress and strain are adventurous.

Getting Started On Card Payoff

The American Way?

I know you want to jump in and start killing Citi-but even the Hulk will think before he leaps!

Let’s review  your pre-credit card payoff steps.

• Have a small emergency or mad money fund-for the next crisis. Don’t take one step forward and two back cause you had no cash….
• Cut up, freeze, or otherwise keep the cards in your wallet from adding to your credit card debt
• Decide which card to pay off first.  Smallest balance seems to be recommended by many, but highest rate card has math on its side.  Use your judgment, but read both sides of the argument and pick one.  Don’t wait for hell to freeze over while you choose.

Jump Start the Process

Now that you have the preliminaries down, it’s easy to become frustrated by the lack of progress.  What can you do?

Only one thing to do: Earn more money.

For you nurses, I wrote a post on earning extra money as a nurse.

For you non-nurses-read the post anyway cause it may give you a few ideas for side jobs or check out this other post for 10 tips on earning extra moolah.

Action Steps:

• Get on a spending plan-use Mint, Quicken,  or other systems.
• Throw every extra dollar at your credit cards- bonuses, raises, e-bay, or  yard sale money.
• If your card has a high interest rate, try to find a  lower rate card. It will cost you a fee to switch, but it’s worth it if you can pay off the new card quickly.  If you don’t know what a debt snowball, avalanche,  DOLP, or bucket of hot water are then do your homework.
• When you pay one off, reward yourself with an appropriate level reward.  That might be a night out at McD’s , Olive Garden, or your  favorite gourmet restaurant-if you paid off the BIG ONE!
• Then get started on the next one.

Other things to keep in mind:

• If you transfer a balance to a new card, it may ding your credit temporarily.
• If you use all the available credit on your card by consolidating  two balances-it may hurt your credit.
• If you get a lower rate card using the techniques I described last week for getting your credit card rate lowered, being late for a payment will jack the interest rate back up.
• If you are not making progress or can’t even make minimum payments-you may need to either negotiate a settlement or consider debt consolidation. These are topics for another post.

Success with Credit Card Debt Reduction

Getting out of credit card debt  has two parts that are amazingly difficult:

1.       Getting started: It is so much easier to just not rock the boat.  You can’t admit to your family or yourself  you don’t know how to manage your money.  You feel  like such a failure and you don’t deserve financial success anyway….

2.       Sticking with it: Diets, exercise resolutions, and making headway on debts are all in the same category.  They require lifestyle surgery.  You can’t just say, “Tomorrow will be different.”

To make tomorrow  different than today, you have to start.  And if you don’t have your stuff together before starting, you will be doomed to failure.

Remember, there will be setbacks along the way-just keep after it.  Learn to visualize your life after debt.  Use that vision to get you through the black days.  Get a buddy or friend that understands your situation and call them when you are frustrated.

Questions/comments: Tell us your story.  How did you get out of credit card debt?  What worked for you?  What are your frustrations?

(Photo Credit: Martinez, Carlos c.c.)

Carnivals featuring my articles this week:

Editor’s pick at the Carnival of Personal Finance at Money Beagle! Yes! (and thanks!)

The Yakezie Carnival is at Control Your Cash, with great commentary!

Totally Money Carnival is at Debt Free Divas

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