1. Don’t apply for new credit cards: when those ads come in the mail for “0% interest x 1 year” don’t rush to open a new account and transfer all your balances to that card unless you have a realistic (in this universe, not evil Kirk’s) chance of paying off that balance within a year. Giving yourself new opportunities to spend is never, I repeat, NEVER a good idea when you’re trying to whittle down your debt. Plus, every new credit card may adversely affect your credit score if you have a less than perfect payment record.
2. Don’t use your credit card if there’s no money in the bank: If after you’ve paid your monthly bills (rent, utilities, car, groceries and yes credit cards) there is little or no money left over, don’t turn to credit cards as the answer. That money isn’t magic, it isn’t free. It just adds to next month’s bills – with interest. No more than 20% of your net (i.e. take-home) income should be spent on loan repayment – and that includes your car. And that also includes paying more than the minimum on your cards, which leads me to….
3. Always pay more than the minimum on your credit cards: just paying the minimum every month is a red flag to credit score companies and will make it hard to get loans in the future (you know like for a house, new car debt consolidation, school). It also means the balance you owe will multiply like flies at a barbecue, especially if you’re adding charges to the account each month. You should always pay off at least twice the minimum each month so that you can whittle down balances stuck at high interest rates.
4. Call your creditors: if you’re having problems making twice the minimum payment each month, call your credit card company. Yes, call them. Explain that you are an honest person and would like to pay back what you owe. What can they offer you to help you give them their money back and a small profit, too (which is only fair, admit it). Lower your interest rate? Allow you a longer term of payback at a fixed amount each month? Get creative and bargain.
5. Never hide your debt from loved ones: spending in secret is no different than drinking alone – you’re hiding a problem from loved ones and potentially putting them at risk as well when the creditors start calling. Hiding purchases, taking out secret credit cards, will only lead to feelings of betrayal and potential financial ruin on everybody’s part.
6. Put the cards in the freezer: really. I read once that a woman who was in profound debt literally dunked her cards in water and froze them. That way, every purchase she made had to be done with cold hard cash and trust me, that hurts a lot more. It’s hard to hand over a $100 bill, but somehow just sliding a card is no prob at’all. When she needed her cards for an emergency – a REAL emergency – she had to go through the hassle of thawing them out before she could just plunk them down. This gave her additional time to consider just how “necessary” the expenditure was. All of this is to say: reduce your spending. If you save just $10 per day by bringing a sack lunch, not getting your nails done, coloring your hair yourself, getting regular instead of premium gas, you’ll save $3,650 dollars. And that’s enough to pay off a big chunk of debt. Or go to Florida. I’m just sayin’.
