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Hi, everyone. In today’s installment of the Debt Free Challenge we’re going to take a look at credit card debt. As stated in an article in Yahoo Finance, the average American household is carrying $7,000 in credit card debt, up from $6,081 in 2017. You can read more about this rather alarming statistic here. At one point in time I had over $15,000 in credit card debt, which makes my blood run cold when I think about it now! I’m thankful I had help to sort it all out and get it paid off, and I hope to do the same for you.


Debt Snowball


The strategy you chose to employ earlier in the Challenge will dictate how you prioritize your credit card debt. If you chose to attack it using the Debt Snowball, list your credit card debts in order of balance, from smallest to largest. Make the minimum payments on all but the smallest, and throw as much cash as you can at that smallest balance until you pay it off. One that one is crossed off the list, move on to the next balance, and so on.


Debt Avalanche 


If you’re using the Debt Avalanche, line them up by interest rate, paying minimum payments on all the cards except for the one with the highest rate. All your extra cash should go on the highest rate card. Once that’s paid off, move on to the next card on the list with all your extra cash, and so on until they’re ALL gone.


Negotiating your Rate 


Another idea to consider, especially if your credit card interest rates are higher than normal, is to contact your creditors and try to negotiate a lower interest rate. The call might take you a little out of your comfort zone, and you may not be successful after the first try, but it’s worth a shot to make the call. Some tips for negotiating a lower interest rate on your credit cards can be found here.


Drastic Measure 


The advisor I was working with when I had that $15,000 in credit card debt suggested I cash out a life insurance policy I had at the time, and that’s what I chose to do. It was rather drastic, and before I did it I made sure I had a new, less expensive life insurance policy in place, but it’s an option I wanted to make you aware of. I can’t emphasize enough that this was a drastic measure, but it got the job done rather quickly. It’s something worth looking at but make sure you don’t leave your loved ones unprotected-if you choose to go this route have a new policy in place before you cash out an old policy. Also keep any tax implications in mind and consult a tax professional if you have any questions.


Less Drastic Measures


If you’re not willing (or comfortable!) doing what I did to pay off your credit card debt but you still want to get a jump on getting it done, it’s time to go through your house and start figuring out what you can sell. Employing this strategy will help you two-fold; you’ll have some extra cash to throw at your debt AND you’ll start organizing your house at the same time. SCORE!!

You may also want to consider taking on a second job to earn some extra cash. While the Christmas shopping season may be over, the local malls in my area are still posting “Help Wanted” signs, and I’m constantly receiving email from Uber & Lyft to come drive for them. Keep in mind it’s only temporary. Dave Ramsey is fond of saying, “Live like no one else, so later you can live like no one else.”


Should you continue using Credit Cards 


Now that your credit card debt payoff strategy is in place, it’s time to address whether you should continue using them. It all depends…I never stopped using credit but I cannot remember the last time I carried a balance. That’s the key-if you can use credit responsibly, credit cards are not bad. You can earn cash, travel, or other items through your use of credit cards. The main card I use is for travel, and I’ve used the points I’ve earned for a 4 night stay at a “MouseLand” (y’all know where I’m talking about!)  resort hotel in Florida for free. That said, if you can’t resist temptation to spend when you don’t have the money to pay your cards off, I have to recommend that you stop using your credit cards. I’ve heard you can freeze them in a bag of ice to give you time to think about what you’re about to purchase, but really the best thing to do is to get out your scissors (or better yet, a heavy-duty shredder) and cut them up.


Using a Debit Card instead 


Using a debit card in place of a credit card can be done but make sure you know the vendor’s policy before you swipe your card. Some vendors will place a hold on your funds and this could cause some serious cash flow problems for you if you’re not careful. The consumer protections for debit card use differ from credit card use, so I recommend you be aware of those, as well. Clark Howard has some great recommendations for how to use a debit card safely. You can click here to read more.

I hope some of what I’ve covered here helps you get a handle on your credit card balances and ultimately leads to you paying off those balances. Depending on your starting point it will take some time and a whole lot of hard work but I’m confident you can do it if you set your mind to it! Let me know how your progress goes in the comments. I wish you the best!

Be well and God Bless-until we meet again…


Note-Any and all items contained in the Older Wiser Money Miser Debt Free Challenge are intended as a resource for informational purposes only and should not be construed as professional tax or investing advice.

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