Do you know what they call credit cards in Japan? Loan cards. Because that’s exactly what these deceptive little pieces of plastic are. We don’t actually realize that each time we swipe our credit cards, we are essentially borrowing money at a hefty interest rate. Paying off credit card debt wasn’t a real concern to me when I got my first credit card during junior year of college at the oh-so-smart age of nineteen.
By the time I graduated, I was in deep trouble. I didn’t have to take out a student loan for my undergraduate degree, so I thought I would be debt-free for the rest of my life. I was lucky enough to get a good on campus job that was sufficient at first to pay off several hundred dollars each month in bills. Looking back, I know my problem was that I was financially overconfident. And, like most people, I thought credit cards were a fact of life. My parents and some of my older friends had several credit cards so I thought getting one was simply a part of transitioning into adult life. Oh, how naïve I was.
So in 2011, there I was, a twenty two-year-old fresh out of college with a $10, 000 credit card debt looking for a job in a market shaken by a global recession. I was completely depressed, furious at myself and scared out of my wits. I was struggling to pay rent, utility bills, Internet bills and other essentials on top of the debt. I sincerely didn’t think I was going to survive all that. Then, I received a golden piece of advice that might have very well saved my life.
The Golden Rule to Paying Off Credit Card Debt
Pay more than the minimum requirement. That’s right. It came from my landlady, of all people. I’ve been paying the minimum amount each month on my debt which barely covered the accrued interest. Basically, I was going nowhere near reducing my overall balance with the minimum payment. It turns out no one does. The only way to make any real progress in paying off a debt is to at least double the minimum payment. Otherwise, you will only ever pay off the monthly interest, for years to come.
Once I got that down, it was time for the nitty-gritty aspects of being debt-free. I had to do everything I could to raise my income level to pay double the minimum amount on my debt. I had a full daytime entry-level job that paid only a pittance. So after getting off from my “proper job” at 5 p.m. every weekday, I did part-time shifts at the local Taco Bell. Trust me, it was a real nightmare in there to get extra shifts, especially for the weekends. So I went from store to store looking for part-time weekend shifts until a local bar took me in to serve drinks on Saturdays. Both these jobs paid only the minimum wage, but it was enough to earn me several hundred dollars each month, all of which went towards paying off credit card debt.
Perhaps, the hardest part was controlling compulsive buying. I fully stopped eating out. I made my entertainment budget zero and stopped shopping for clothes from anywhere other than the Salvation Army. Ramen was largely my food of choice. It may sound extreme to some but I only had to tolerate two years of this and then I was completely, truly debt free. I felt like a bird in the summer. Oh, and now I only use a single debit card.
What strategies have you used to pay off debt?