Eleven Credit Cards – Soon to be Zero
I have eleven credit cards. There, I said it. It made me feel a little bit better, but not much. Let me try again. I have eleven credit cards. Good grief, that’s a lot of cards to have.
The good news (for me, not the banks who issued them) is that I’m getting rid of them one by one. Here’s how I’m doing it:
I’m using the classic method of listing my credit cards, smallest balance to largest, and paying off the smallest first. There’s another (classic) method that says to pay off the highest interest rate first. I’m not doing that because my interest rates are already pretty low and I’m incredibly impatient. I also have enough income to knock out cards quickly enough that the extra interest (if any) will be negligible when compared to the debt.
Here’s the card rundown as of today:
- Bank Card 1 (big balance)
- Bank Card 2 (medium balance)
- Store Card 1 (medium balance)
- Bank Card 3 (medium balance)
- Bank Card 4 (medium balance)
- Store Card 2 (zero balance)
- Bank Card 5 (zero balance)
- Store Card 3 (zero balance) CLOSED
- Store Card 4 (zero balance)
- Store Card 5 (zero balance)
- Store Card 6 (zero balance)
The bottom ones were small balances and I took them out quickly. One of the medium balances will be gone as soon as my tax return is back. From then on, I’ll have that much more to get rid of the higher balances.
The key (that I’m not doing) is to CLOSE the cards once the balance is zero. That’s one of the beauties of the list. It shows exactly where I’m failing in my plan.
As I mentioned in my financial goals for 2006 post, eliminating credit card debt is one of my key goals this year. Every dollar I pay towards credit card debt is another dollar my net worth increases. In my opnion, credit card debt is the biggest problem most people (Americans, anyway) have when it comes to building their net worth and experiencing some degree of financial independence. I’ll keep you posted on my progress.
Technically, paying toward a credit card does not increase your net worth. Net Worth = Assets – Liabilities. When you pay a credit card, you are reducing an asset (cash) and a liability (debt). The Net Worth does not change.
Leave it to a CPA to get “all technical” on the topic of finances.
Excellent point.
Sure, a brilliant accountant might think that, but in the world I came from “cash” was another term for “money I’m about to blow on worthless junk.” If I put it on the cards instead, I consider it one less liability.
Moving forward, I’ll start considering cash as something I could actually *save* or *invest*. That’s a new concept. Thanks.
[...] Paying off debt provides you with a sense of immediate freedom – Every credit card I unload is sheer bliss. There has been a bigger load lifted from my mind than just the monthly payment. I’ll always have utility payments. I’m on a path to eliminate my credit card debt forever. That means no more payments ever. [...]
[...] “Avoid credit cards like the plague” That’s my opinion anyway. It goes right along with the $1000 lesson and the chicken devouring lesson. It is very easy to drop a grand on a credit card (new TV, Computer, furniture) and feel like nothings happened – at least that’s my experience. What’s worse is that you end up paying interest and loose the opportunity to earn with that money. Currently, I’m getting rid of my credit card debt. [...]