Monday, December 1, 2008

Surviving holiday sales with no more debt

I know you all saw it: sales everywhere over the weekend! Even in my determination to get rid of my credit card balance as quickly as possible, it took real strength to avoid the $1,000 flat screen TVs and $400 laptops that were calling my name. Thankfully I survived by staying home, watching football and preparing for my upcoming move (more on that later).

Meanwhile, I found some inspiration in a friend from DC who's also trying to get rid of her credit card debt and asked me for advice over the weekend:
I'm trying to decide which of my two cards to pay off. One has a really high interest rate and the other has a lower balance. Which one should I pay off first?

I've been in that situation before and my choice has been get rid of the lower balance first, even though the card with the higher balance has the higher rate. Why? Psychology. You'll pay off the lower balance more quickly than the higher one, and seeing that balance dwindle to nothing gives you confidence in what you're doing. Think of it as a motivational tool.

Don't think the fact that the higher-rate card is costing you more in interest. Once you pay down the lower-balance card, you can make up for that by adding the money you were paying on the other card to the monthly payment you're making on the more expensive one, thus chopping away at the balance more quickly and reducing the amount of interest you'll pay over time. Good luck.

Anyone else have a story to share about how they cut down their credit card debt? Or how about a story about something you bought (or didn't buy) on sale over the Black Friday weekend? Post them in the comments!


Mary said...

I am embarrassed to admit this, but hopefully someone will draw strength from my victory. In an effort to spend less and not charge anything on my credit cards, I have put a freeze on all my cards. Yeah that’s right I put my credit cards in zip lock baggies immerse them into water and put them in the freezer.
When I am tempted to shop I let the credit card defrost in the kitchen sink, for the most part by the time the card has defrosted the urge to buy or the item is no longer there.
And because I lack discipline I do direct pay twice a month for all my credit cards. I don’t write checks I let the money leave my account it’s easier that way, I don’t form a bond or make plans for money that I don’t see.

Gregory said...

Here's another reason I paid off my smaller balance first:

By paying off the smaller-balance card, I can devote that card for routine monthly expenses. And, if I continue to stay current on that card by paying it in full by the monthly due date, I'm effectively paying 0 percent interest on that card.

That might not make sense for everybody, depending on your interest rates and balances. But I think it worked for me.

By the way, I just got completely out of credit card debt within the past week or so.

Tonya said...

Great advice Keith! When you look at the collective debt, it seems so overwhelming, but if you shed the debt a little at a time, before you know it you are in the clear. In the past, I used to pay off a debt and incur MORE once I was finished paying--but those days are over!



Anonymous said...

I recently came across your blog and have been reading along. I thought I would leave my first comment. I don't know what to say except that I have enjoyed reading. Nice blog. I will keep visiting this blog very often.


darkmuse said...

The fact that there is no uniquely correct answer about investing money. Currency under the mattress (or our banks) has some drawbacks

custom essay writing assistance