How to Free Yourself from Credit Card Debt - The 10 Step Program

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Monday August 2, 2010

Credit cards are a problem for most people, but if you aren’t the best money manager then it’s a total disaster!

Thinking you cannot live without a credit card is simply a learnt attitude, and one that you will quickly shed once you have proven to yourself that you can manage without one. And of course once you get off the credit card merry go round and never have to worry about it again, you are going to wonder why you didn’t do it sooner!

But knowing how to do it or where to begin is the problem, so we have made up a pretty simple to follow 10 step program:

1. Make the decision to get rid of your credit card and stick to it. Set yourself a goal to pay it off and get rid of the credit card once and for all.
2. Apply for a Debit Visa or Mastercard. This will give you all the benefits of Visa and Mastercard, but instead of using the banks credit you are using your own funds. 
3. Transfer your existing credit card to a credit card that has a low or 0% interest on balances bought over to give you a financial reprieve and help you pay it off much faster. To find credit cards with low or 0% balance transfers check out the credit card section in our Money Saving Business Directory, or follow the links provided at the end of the blog. 
4. Once you have successfully applied for the new credit card and your balance has been transferred, you will receive your new card in the mail – CUT IT UP! 
5. Things are probably going to be tight for a while, because chances are you will have expenses coming in that you are used to charging to your credit card - but you can make it work! Go through your budget and find area’s where you can extract money to redirect towards paying off your credit card balance and also keep on top of bills. The simplest of things will go a long way, like taking lunches to work; getting a better deal on your utilities; have pot luck dinners with friends instead of going out for a few weekends; put a lock on your home phone for a while so you cannot make outgoing calls etc, the list is endless! (For more ideas on ways to save money, consider getting yourself a copy of ‘Save It – easy ways to save money’). If you are struggling and have a bill due that can’t work in with your immediate cash balance, call the service provider and ask for an extension or payment plan to help you out until you can get on top of things. And of course, use the money you would have otherwise spent on credit card interest towards paying out your credit card.
6. Find some ways to bring in some extra cash to help you stay on top of things while you are still in a transitional period. You could possibly do overtime at work, get a weekend job, mow lawns, walk dogs, have a garage sale or sell unwanted items on ebay, get a roomie, make use of a talent or hobby such as teaching piano etc, or even sell your famous home made fudge at markets.  
7. Once all your bills are paid and you have taken out your living expenses each pay day, divide your surplus income 60/40%. 60% you pay directly onto your credit card and put the other 40% in a high interest savings account. This is because if something did come up and you needed money quickly, you could access the money in the savings account - as remember your credit card is chopped up and gone! But you only access it if you really need to. This will help you change your habit from using credit cards to pay for what you need, to using your own savings. You will feel much more in control of your money, and of course have a much greater appreciation for the money you save yourself. 
8. At some point you will get to the stage where you have enough money in your savings account to pay out your credit card if you wanted to. It’s your call, but just make sure to leave yourself with a little bit of a buffer.  Then pay it out!    
9. Once you have paid off your credit card, call the issuer and cancel the credit card. This will usually require a letter in writing sent to them. Make sure to follow it up and ensure it has definitely been cancelled and your letter didn’t get lost in the mail (it happens). 
10. Congratulations! You now have no credit card, and money in the bank! Now you have all the money you would have put onto your credit card each month in surplus - make sure you continue to put the money you would have spent into your high interest savings account – no excuses! You managed this long - you can keep it up, and you will always have money in the bank for when you need it.

Click here to visit Credit Cards Australia

Click here to visit Mozo

Click here to visit Info Choice

Click here to visit RateCity

 

Please note:  Blogs are not paid for, or sponsored by the businesses mentioned in them. The blogs are purely to bring you information that might help you to save money.

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