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Three Easy Steps to Credit Card Debt Freedom

By Karen Collett

Finding ourselves in credit card debt is so prevalent today. Our children need to learn, before they become involved in the world of debt, how to manage credit cards.  Through God’s power and grace, I have learned to make my money work for me.

After spending most of my life in financial despair, I followed these techniques to stay in control of any new credit card debt.  I became determined to manage my credit card debt and teach my son not to be a slave to his money.  We are commanded to be good stewards of all God gives us.

Your first goal must be to eliminate that debt, and give yourself a new credit outlook.  Paying off credit card debt may take some time, but it will start to work for you if you take these simple steps: 

Step 1   Stop the madness

Stop using your credit cards at once.

If you have multiple credit cards with balances, pick the credit card with the lowest balance.  Pay the minimum due on each of the remaining credit cards and apply what you would have paid, above the minimum due, to the lowest balance until that card is completely paid. 

Time for Intervention

     Write down every single cent you spend for the next week or two.  The object is to curb unnecessary spending and to apply, at very least, double the minimum payment due, toward your lowest credit card balance. 

Step 2   The Goal

Pay off the lowest balance credit card first, and then apply what you were paying to the next lowest balance, along with the minimum payment you have already been making.  Starting with the lowest balance you will see results sooner. 

Example:  Make the minimum acceptable payment due on all credit cards, for now.  On the lowest card, minimum payment may be $20, you should pay $40 payments until the balance is paid off.  When that card is paid off, go to next card with say… a $25 minimum payment due, add the $40 payment from previous paid off card.  When that balance is paid, the next card may have a $40 minimum, plus $65 from previous two cards paid off, makes a payment total of $105 going toward one credit card balance.  You will be making a bigger monthly payment without paying more in interest or using more of your budget.

Go through this process until each credit card is completely paid.  It may be necessary to cancel your paid off credit cards to stop any annual fees or to keep from using them.

Step 3   Choices

When your credit cards are completely paid, choose one or two with the lowest interest rate and low or no annual fee.  Make small occasional monthly purchases.  For example, go out to eat or purchase gas or a birthday gift once a month.  This should be a purchase you were going to make anyway and have the money in the bank set aside to pay off the balance when the bill comes in.  Keep track of your purchases so you don’t go over a preset monthly spending amount.

Three keys to managing your credit cards:

1) Don’t use your credit card unless you have the money set aside in your budget to pay for your purchases.

2) Charge only minimal amounts once or twice a month determined by your budget.

3) Pay the balance online or when the bill arrives.

You may ask; what is the point in using a credit card if you have the money to pay for your purchases?  Your credit cards build your credit when you use them and pay them on time and can improve your credit score on your credit reports.  In addition, you won’t be paying high and compounded interest rates and your credit grows.  Be diligent in paying the complete balance every month.  Smaller amounts are easier to manage.  If you put a larger amount on your credit card, such as an airline tickets or a rental car, simply don’t use your card again until the balance is paid.

© 2007 Karen Collett

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