Since some readers indicated they'd be interested in hearing about my story with credit cards, I whipped this post up for you guys. I hope you like! 🙂
Disclaimer: I’m far from a financial expert, so please take my story and advice with a grain of salt. Everyone’s situation is different, and this is just my story. If you can take anything away from it or it inspires you, then that’s awesome!
Brief Back-Story: I’ve spent the last year or so trying to pay off two business-related credit cards. My biggest mistake in running up the balance (creating the debt) was buying things that I didn’t absolutely need to run my business. Lesson Learned: If you have the money (cash) to buy things, that’s one thing, but if you’re buying on credit, you need be extra choosy and careful.
First Attempt: At first, I made half-hearted attempts to pay off my credit card. I’d pay more than the minimum balance, but not a lot more. I wasn’t ready to cut-back on my personal lifestyle (nothing too lavish, trust me) to put forth the effort needed to really work on my debt. I was really enjoying my Starbucks every other day and my occasional shopping trips. I also wasn’t ready to get a better grip on my business expenses. I probably bought more things on credit that I couldn’t afford and didn’t really need.
Second Attempt: My second attempt was a roller coaster of changes:
Getting Serious: I think the biggest change that helped me pay off my credit card was the change I made mentally. I took a different attitude towards the whole process and got more serious. This time, I really, really, really wanted to get rid of these cursed credit cards.
Where’s My Money Going Anyways?: I decided that I needed to put as much of my money towards my credit card as possible. The first thing I did was create an excel file to track where my money was currently going: Bills, Food In, Food Out, Clothes/Beauty, Gas, Misc. I have to say, I was pretty surprised to learn where a lot of my money actually was going.
Cutting Back on Personal Expenses: Once I figured where the money was going, I tried to figure out where I could start cutting back, so I could use the money I saved to pay off my debt. Did I need to spend as much money eating out as I did? Of course not, so I started trying to pack lunches. Did I need a Starbucks every other day? Nope, so I started brewing coffee at home in the morning and established Friday Starbucks Day, so I still got to enjoy a Starbucks latte now and again. Did I need to be buying new clothes when I had this debt hanging over me? Not so much, so I tried to stick to only getting what I absolutely needed. I didn’t stop eating out 100% and I didn’t stop shopping 100%, but I did try to keep these areas of spending as low as possible. I stopped buying little random things like magazines at the grocery store, because the little things really do add up quickly. I tried to create budgets (and realistic ones, too) for each of my spending categories so I could estimate how much money I could put towards my debt. Then I put any money I had leftover from the month (money paid – money spent) towards my debt, hoping the amount was close to what I budgeted.
Cutting Back on Business Expenses: A credit card is extra hard to pay off if you keep upping the balance, so I cut waaaaaaaaay back on my expenses to keep the balance as low as possible. I learned how to buy only the essentials instead of the wants.
Which Has the Highest Interest Rate?: Next, I heard that I was supposed to figure out which credit card had the highest interest rate. One of my cards had a 0% interest rate for a short, “introductory” period of time, and the time coming up quickly. So I decided to pay the temporary-0% interest rate card off first, regardless of the interest-rate rule (since I was nearly certain that the interest would be added to my balance and calculated from the beginning of having the card making it not really 0% any more). I paid the minimum on the other card and put the rest of my budgeted debt money to the one with the temporary-0% interest rate. Once the temporary-0% interest rate card was paid off (which was before the 0% expired, thank goodness!), I attacked the second and last one.
Gather Additional Funds: I couldn’t think of any means to gather additional funds to use to pay of my debt faster (i.e. garage sale, etc), so I just used anything else that I could find. If I did a craft show, I put all the money I made towards the debt (even though I’d want to do a little something to celebrate the show). I put all my bonus towards the debt (instead of using any to celebrate since I usually like to get myself a little something for the year’s hard work).
Balancing Big Expenses: One of the challenging periods of me paying off my credit cards was when I had a big expense. Last May, I had a pretty huge event occur – my wedding. Thankfully, we had family helping pay for most of the expenses, but there were times we had to get creative. For example, when I had my bachelorette party, I still wanted to do something fun, but both me and my girls were low on money. I ended up using some frequent hotel points that I had saved up from some previous work-related traveling (a couple years beforehand) that I was able to use to get us a hotel room in Charleston, which saved us tons of money. We decided to do one fancy dinner and then went pretty low-key for the other nights/meals so our adventure would be as affordable as possible. We kept our expenses as low as possible, but we still had a blast!
Stay Positive: Paying off my credit card was no easy task. The process was discouraging, to say the least, because there were days it felt like it was never going to go away and days when I felt like I was going nowhere fast. I tried to stay as positive as possible and remind myself that I was really doing myself (and hubby) a favor by getting my finances in order. I also realized that there were going to be months when I may not make the full payment that I originally budgeted for (think December) and allowed myself some leniency.
Credit Cards & Finances Going Forward: I think having gone through this experience has really opened my eyes as far as how I approach money and credit cards. I am working on saving up for things I’d like to buy instead of just impulse buying. These days, I primarily use my debit card or cash for every day purchases. The only times I use my credit card are when I’m purchasing something online, and I think the credit card is more secure or at least, better equipped to handle any potential fraudulent charges (not sure if this is true). I’m looking forward to utilizing my money and credit more responsibly so that, hopefully, hubby and I can buy a house in the next year or two!
For more financial tips, check out Fabulously Broke in the City and for tips on ways to save, take a looksie at Saver Queen.
5 thoughts on “My Credit Card Story”
Congratulations on getting your debt settled Diana! I've always been so lucky — I had parents that drilled the bad side of credit into us, so it's only been used for absolute necessities (house, etc.) And doesn't it feel good when all that interest isn't going down the drain?
Thank you so much for the shout-out. You are an inspiration. You must be so happy and proud. And now you will be able to help others using what you have learned!
Yes, congratulations indeed. I am on the road to clearing mine. It's a long road because of the amount but what I did was transfer balances to either very low interest rate ones or no interest rate ones and then, when those expire, I plan to transfer again. Reason being is that the interest rate alone will drag it even longer. I only shop for necessities put any (*if* any) extra $$$ towards the debt. Its a long road but I swear I will never get in this situation again.
Thanks for sharing your story!
Banks are worse than loan sharks with their exorbitant interest rates… there should actually be some laws against charging such high rates…but, nope. And so many people get sucked into the schemes.
I'm like Thimble…. we had no money growing up…and dear ol' Dad always said, "money doesn't grow on trees" … so we learned if we didn't have it ..we didn't spend it. Yes, I have had some debt over the years, but..not on credit cards at those interest rates. In all the years I've had my cards since I was 18…I pay it off at the end of each month. I have only paid the stupid banks interest on two occasions. They probably hate me and I love that. But, if I know I won't have the money to pay at month end..I just don't spend it. I sure don't need anything that badly that I can't wait a month…or two or three for that matter.
I have a credit card that pays me 2% back on my usage at the end of the year…so we put every single purchase on it..then just pay it off each month. The overall total was huge …especially at the hardware store during bathroom reno time.. so, last year I got about $800 back. I have a line of credit that is only at 3% interest.. so it gets used every so often for the larger VISA bills during a reno month….then I pay it off as soon as I can… with every penny of income earned that we don't use for groceries or utilities…
It's so tough to get out from under debt if it takes over…. you have to work hard to make sure you don't get sucked in to the lifestyle. It's kind of like trying to lose weight or keep it under control…. diets don't work; it's a whole lifestyle change….
Good for you getting out from under….
Going forward, may I suggest having a substantial down-payment as well as making some double ups on your mortgage when you buy your home? We used the old trick of figuring out where we spent every penny (including muffins, coffee and pantyhose) in order to help save up our downpayment so we could buy a house in the fist place…but, then,.. it freaked us out to actually see how much the interest was and how nothing went toward the principle… so… it motivates extra payments. Who wants to end up paying 3 times what your house is worth by the time you pay off your mortgage. It was tough, as our first mortgage was at 9% …then at renewal..the lowest we could find was 11%…we bought at the height of ridiculous interest rates and both had 2 jobs to scrape up enough to find those extra payments…but, we did it and paid off the house in a total of 8 years…. being debt free is the best feeling in the world……..
yikes! that was pretty "blabby" and long..!