How I Slashed My Credit Card Debt From $7000 to $0 With One Simple Trick
I hate debt. Especially those little things called Credit Cards.
What is written next is my opinion and it’s your right to disagree with me, trust me, I’ve had this debate before.
First up, I have a credit card. I’m embarrassed to admit I got one so I could spend 6 weeks on an international trip to the USA and Fiji. It had a limit of $7000.
Originally I was only going to use maybe $2000 of it – but it was there and it was so easy to upgrade from the bus to a plane and the backpackers to a hotel so I spent the whole $7000.
That was about 7 years ago and I only finished paying for it yesterday.
Currently I have a balance of $0. I was so excited by this that I announced on Facebook that I was cutting it up and living debt free from now on. I thought everyone would be happy for me. I did not expect the sheer amount of comments from people on why I need to stay in debt.
Let me break it down for you.
“You have to keep the credit card because it builds a good credit rating”.
Yea maybe, but if your credit card is always maxed out, you impulse buy jeans just because you can and it feels like a huge weight around your neck, excuses like this are keeping you broke. A credit card is not the only way to build a rating and if your card is constantly maxed out or you miss payments, it’s doing more harm than good.
“You need a credit card for emergencies”.
Again, I like this in theory but since it’s been proven that my idea of an emergency is an impulse trip overseas and my husband’s idea of an emergency is a new Xbox, I don’t think we are leading examples of what an emergency actually consist of. While I’m on it, why can’t we just have an emergency savings account instead? It’s the same thing – fast access to cash when we need it but at least if we spend it we don’t have to spend the next 7 years paying it off.
“You should use it to accumulate frequent flyer points or rewards”.
This is the most difficult excuse to let go of for me. The thing is these loyalty programs can be an awesome deal BUT only if you manage your money and only use the credit card as per your system. I know some awesome money managers that use their credit cards for everything, get the points and pay off the balance straight away so they don’t pay interest. It’s a great idea if you can manage it.
I can’t and if you are reading this, you probably can’t either.
I tried to pay off my debt for ages but it didn’t matter how much I paid off, it would always creep back up to the maximum limit. In the end the thing that saved me was so simple, I wish I’d thought of it 6 years earlier.
I decided that every time I paid off a chunk I would make a 5 minute call to the bank and reduce my credit card limit by whatever I paid. So if I paid $200 off the card, I’d ring and get them to adjust my limit to $6800. The next time I might pay $400 off it so I’d call and ask that it gets reduced to $6400.
This made sure I could never actually use it because the limit was always whatever I had just paid off it. Super easy and it worked. The only issue (with my bank, check with yours) is that you can’t have a limit of less than $500 so once you get to this point, you can’t reduce your limit any further.
It was this simple trick alone that finally enabled me to break the credit card cycle. So next time you make a payment on your credit card, take five minutes to reduce your limit. You’ll be glad you did.