Credit cards are evil. If you don't believe me rent Maxed Out. I am serious. It's scary.
If you're not in debt, you are my hero and probably only one of ten people in America. If you are in debt, hello, this is for you.
Here's how you get out of debt, FAST, in three easy steps!
1. Get a number. How much debt are you in? Look at all your balances and know where you are. This might help you to stop using credit cards. (maybe not) Also find out the minimum payment due and the current APR.
2. Call credit card companies to get your rate down. They may reject you one week and do it for you the next so stay on them no matter what they say. Ask to speak to a supervisor, tell them you're thinking about closing or switching to another card. be a bully! You can even speak to the supervisors supervisor (called a manager) and see what you can get! Write everyones name down that you speak with so you can keep track.
3. List all credit cards, amounts owed and APRs on piece of paper. Pay off one card at a time, closing ones you don't need, and keeping a few. Systematically paying them off will make you feel great! To know which to pay off first do a little math. Take the total debt and divide it by the minimum payment. This will give you a score. For instance I owe $108.41 to Victorias Secret (gotta make Hubby happy!), and my minimum payment is $10. Gives me a score of 10. In other words it will take me 10 minimum payments to pay it off. The lower the number, the sooner you will pay that card off so it goes on top of the list of cards to pay first. Get it? List all the scores lowest to highest and systematically pay them off! Of course if you lower your rates you'll get more bang for your buck!
Some people say to pay off the highest interest card first but you don't get the same thrill because it won't happen as fast. This method above is from David Bach, author of Smart Couples Finish Rich among others!
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8 comments:
Great info!
I agree, credit cards are evil. I remember getting my first card in college and maxing it out. My parents taught me better but my fabulous college lifestyle caught up with me! How they give kids a card (with up to ten thousand balance) with no job is HORRIBLE. I'm not one for over government regulation but something should be done about this. Thankfully, my parents bailed me out because how awful is it to start your life out swimming in debt! What ever happened to if you can't pay for it in cash, you can't afford it-EMERGENCIES only! That is so retro I guess!
I just was listening to something on the news about paying with cash instead of credit. You "feel" the purchase more with cash. We have really resisted having multiple credit cards, especially store cards. They suck you in with additional discounts, coupons, etc. We find that we keep better track of what we are spending when we pay off the one card each month. If it's big, we feel the big, instead of multiple cards with smaller amounts.
It's all in the HEAD!
Dave Ramsey also recommends this. Our church is big on the Financial Peace University and since we have tons of young families in our congregation, it's a great ministry.
We only have an Amex you have to pay off every month, a Visa check card for our bank account and a Charles Schwab Visa that is tied to a savings account with real money in it. No 6 months same as cash or no payments until 2012 at our house. If we don't have the money, we don't buy it.
Actually, you shouldn't close your unused accounts, at least not all at once or right away. Closing too many accounts at once can negatively effect your credit score, because your available credit is suddenly smaller. If your credit is in decent shape and you're worried about identity theft, then close an account or two. Otherwise you are better off leaving the accounts open and not using the cards.
We charge everything because we have rewards cards and pay our balances in full every month. My H just got a huge rewards check in the mail, just because we charge our utilities. If you pay your balances in full, it really is free money!
You knew I'd love all the financial info!! Mr. HH is a big Dave Ramsey fan.
So, I hate to ask you this (especially in your financial post) but I'm dying to know if I should order a pair of the skinny jeans?? Did you like??
I have gone through the Financial Peace Seminar twice now - and I am 63 and wish I had had it available when I was in my 20"s - I am not good at this but I am determined to get control and know what I am doing - you are really encouraging me to get back on the wagon because I have been slacking lately!! Thanks for the help!!
Evil is right. Believe me, we have other debt, but thank goodness we're out of the credit card craziness. :)
What a great subject. Debt can ruin marriages and lives...it's hard to control it when there are so many opportunites to get credit...it takes alot of self control, but it's so worth it!
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