I Crushed My Burdensome Debt for Good

Updated 29 March 2024.

Content Links

Introduction
Hello, Credit and Debt
A Boulder on my Shoulders
The better choice: ease me from carrying heavy debt
Why credit card debt is costly
Important credit card usage tips
Create a worksheet
Pay down all the credit card debts
Conclusion
Helpful Links

Introduction

Once you get into debt, it’s hell to get out.
Don’t let credit card debt carry over.
You can’t get ahead paying eighteen percent.

— Charlie Munger

This article discusses my actions in eliminating my burdensome credit card debt.

My personal debt journey began with my first Visa credit card.

Soon, my personal debt bag included three more credit cards and a new automobile loan.

Personal debt is like a stack of unfinished Triple-A video games constantly nagging at me.

It wasn’t easy, but I paid off my heavy debt in less than eight years with patience, a plan, and self-discipline.

Since January 2010, I have had zero personal debt—no credit card debt, mortgage, student loan, vehicle, or personal loan. I intend to keep my zero debt situation until I die. 💀

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Hello, Credit and Debt

The concepts of credit and debt became clear to me for the first time during the first year I was residing with my then-husband in the house we had purchased.

In one of our home’s rooms, I had become aware of two fateful piles of unopened mail, each of which appeared to be about one to two inches high, addressed to him.

The first pile of long white window envelopes was the Sallie Mae student loans, and the other pile of short white window envelopes was from a credit card issuer.

When I became aware of the fateful piles, I had zero personal debt as I had never used credit cards and had no student or other loans.

Growing up, my dad and his mother would remind my siblings and me that cash is king and that if one had enough cash to buy a thing, one could buy it and own it outright. Some wise family members occasionally shared cautionary retellings of people they knew who had creditors hounding after them for overdue nonpayment of debt.

Though they were not my concern, seeing those unopened window envelopes unsettled me.

I’m not the kind who ignores important money-related mail. However, the fact that my then-husband, who professionally advised legal rights and obligations to his clients, could leave money-related mail unopened bothered me.

What if he died? The thought of me opening and reviewing his unopened money-related mail and then paying off his debts terrified me. Would I be responsible for paying off his debts? That wouldn’t make sense because why would I have to settle a personal debt that isn’t mine and with my money.

Later, he confirmed my suspicion. He had said he hadn’t opened the envelopes because he would have to pay down what he owed them. Was he joking with me? He was convincingly adamant that he didn’t owe any dollar amount to those creditors.

I needed clarification. I knew he had the money; he showed me his bank account balance before we purchased our house.

And I argued, “But they lent you money for your professional degree and provided you available credit; why wouldn’t you pay them back?”

I’m trying to remember what his excuses were. Whatever they were caused my doubts toward him to grow, and I added them to my increasing collection of red flags.

A few years later, my married status converted to divorced. The credit and debt lessons presented to me during the marriage converted to forgotten shredded paper in the trash.

I received my first Visa credit card with an ample credit limit, and I spent the available credit as if on a forever shopping spree while paying minimally the monthly bill.

Then, I received my second Visa credit card with a higher credit limit than the first one and spent money with that card as if it had infinite available credit. With that, too, I paid the monthly bill minimally.

Looking back, I paid the monthly credit card bills minimally because the minimum payments were more manageable. I underestimated and didn’t expect the effect of interest accruing on my remaining balances.

Additionally, I treated myself to two credit cards from an apparel retail company and specialty retailer, as well as a new automobile loan.

I was experiencing the I-want-trending-clothes-and-accessories-expensive-makeup-the-latest-Apple-devices-and-ridiculous-acrylic-nails phase. 🙄

With my new automobile loan, I was carrying my growing credit card debt monthly, and I had amassed close to over $26,000 in credit card debt in my name.

My debt had its reins on me. 😓

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Thank you to Towfiqu barbhuiya on Unsplash whose photo inspired my above illustration. 🙏🏼🤩

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A Boulder on my Shoulders

Every month and before due dates, I paid the minimal balances on my credit cards, the principal and interest of my new automobile loan, and my rent and other bills, and like a horticulturist, I tended my investments and savings garden.

But I cringed every time I reviewed my credit card bills; I was aware that I was paying more for the original prices of my purchases.

The card issuers multiplied my remaining balances by their daily interest rates and added the results to my owed amounts. The increasing credit card remaining balances annoyed the hell out of me. 😡

I was aware that it would take me months, and possibly years, to pay down and pay off, among my many purchases, a pair of $129 Steve Madden boots, and the credit card issuers appreciated this since they continued to charge interest, and they would keep charging interest until my balance owed was paid in full.

I was wearing myself down, paying minimally my increasing monthly credit card debt. My relationship with it felt like I was in a hopeless, strained relationship that I wanted to run away from. 😣

Every day, my neck and shoulders ached, and aspirin wasn’t easing my pain. Carrying my debt felt like carrying a boulder. 🤮

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The better choice: ease me from carrying heavy debt

I had to act quickly. I had to release myself from my boulder’s weight.

My minimal payments to my credit cards were affecting my physical body and costing me money.

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Why credit card debt is costly

Who usually issues the credit cards?

Credit cards are typically issued by banks like Chase and Wells Fargo, credit unions like Navy Federal, and major credit cards like American Express and Discover.

The major credit card networks are Visa, Mastercard, American Express, and Discover. They facilitate the transaction between you, the merchant, and the issuer.

Credit card interest clarified

Credit card interest is the cost (the card issuer’s fee) you pay for using the available credit.

Interest rates vary between issuers, but the average interest rate for credit cards ranges from 18% to 29%.

Your actual interest rate will depend on your credit score, income and employment, Debt-to-income ratio (DTI), credit history, credit inquiries, banking history, the type of credit card you’re applying for, and your reason for wanting the card.

Assume that your credit card has a credit limit of $10,000. This available credit is not free money. The credit card issuer records your usage once you use some or all of this amount.

The issuers record the following on your credit card account:

1. Interest rate: This is expressed as an Annual Percentage Rate (APR). It represents the yearly interest you’ll be charged on your outstanding balance. Credit card APRs can be fixed or variable.

   A fixed APR is an interest rate that stays the same for the entire length of your loan or credit card agreement.

   A variable APR is an interest rate that can go up or down depending on market conditions throughout the length of your loan or credit card agreement.

   APRs can be:

   • Introductory Purchase APR - a promotional interest rate, a discount on the interest you typically pay to use the credit card, offered by credit card issuers to new cardholders.
   • Regular APR - the credit card issuer’s standard APR.
   • Introductory Balance APR - a promotional interest rate offered by credit card issuers that applies to the balance transferred from another credit card to new cardholders.

2. Balance: This is the money you owe on your credit card after accounting for any payments made.

3. Daily accrual: Accrual means something that builds up over time. Interest is typically charged daily on any remaining balance. So, the longer you carry a balance, the more interest you’ll accrue.

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Important credit card usage tips

Avoid paying interest by paying your statement balance in full by each month’s due date. Since credit card interest rates are notoriously high, carrying a balance can quickly lead to significant debt.

Never pay the credit card bill after the due date. Your late payment might trigger the following negative results:

• Late fees - This is an immediate penalty. You’ll pay a fixed amount, typically around $40, which varies between credit card issuers, for missing the due date.
• Interest rate increase - If your payment is very late (often around 60 days), your credit card issuer may increase your interest rate to a penalty APR. This penalty APR can be much higher than your standard interest rate, making it even more expensive to carry a balance.
• Credit score damage - Late payments, especially those more than 30 days late, the issuer reports to credit bureaus and can stay on your credit report for up to seven years. This can bring down your credit score, making it more difficult and more expensive to borrow money in the future.

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Create a worksheet

I created a worksheet to see all my debts clearly and to track my paydown progress.

Use Google Sheets or Microsoft Excel to create yours.

I listed all my debts on my worksheet: my automobile loan and credit cards.

Other debts you can include on your worksheet are mortgages, student loans, and personal loans.

On my worksheet, I created columns for:

• Debt Name
• Amount Owed
• Interest Rate
• Current Payment
• Remaining Balance (Amount Owed minus (-) Current Payment)
• Month’s DTI (Total Current Debt divided by (/) Take-home Pay; a good ratio is below 35%)

An important note about using take-home pay instead of gross pay to calculate DTI:

Take-home pay is the net pay amount (your salary amount remaining after all withholdings (taxes, benefits, payroll deductions) are accounted for) that’s deposited into your bank account.

Take-home pay is the money you have available to cover your living expenses, debts, and savings.

Using take-home pay to calculate DTI can provide a more realistic picture of your DTI for personal budgeting purposes.

Your take-home pay amount gives you a clearer picture of how much you can realistically dedicate towards monthly debt payments.

Please calculate your DTI ratio using your take-home pay to better understand your debt situation.

In creating a worksheet, below is my sample table:

You can use my sample table as a reference to create yours.

Now that you can see and track the details of all your debts, step forward with patience and self-discipline and pay down each remaining balance to zero as quickly as possible.

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Pay down all the credit card debts

I have six important tips in this section, so please pay attention. 🤑🧐

(1) Decide now how you want to pay down the remaining balances.

(2) It’s imperative that you create a clear-cut paydown plan that’s comfortable for you.

On the worksheet, I sorted the Remaining Balance column in descending order, from highest down to lowest balance, and sorted the Interest Rate column in descending order, from highest down to lowest interest rate, to give me a better view to figure out my paydown plan.

I prioritized handling all my credit card debt with the following strategy: I paid off and closed two of my credit cards with low remaining balances and then paid down to zero two of my credit cards with high remaining balances while continuing to pay down and eventually pay off my automobile loan.

I mentioned above that I tend to my investments and savings. (3) For your best benefit, you must have extra money saved for events like paying down or paying off debt.

When you have extra money stashed away for yourself, you can have the following:

• Peace of mind—This is an ultimate must-have and self-explanatory. ✌🏼
• Financial independence—You don’t have to rely on anyone when you need the money. You can have more than enough to cover your living expenses without relying on a job. 💰
• Emergency fund—You can effortlessly pay related costs of unexpected events like when your vehicle gets a flat tire, when you cut off the tip of your forefinger while slicing a watermelon, or when you’re laid off from your dreadful job. 🦺
• Your financial goals—You can have a down payment on a cute house overlooking the Pacific Ocean, purchase a 1964½ Mustang that you’ve wanted to rebuild, or return to school to enroll in a piano course you’ve set your mind on. 🎁
• Possible opportunities—What if you wanted to explore all of Europe or Asia for a month? What if you wanted to start your own business? 💸

(4) If you don’t have personal excess funds available, open your savings and or investment account as soon as possible.

(5) It would not be prudent to borrow money to pay your debts. 🤨

(6) I don’t believe in transferring the remaining balance from one credit card to another.

Introductory balance transfer APRs don’t make credit card debt better. They’re bullshit. 💩

The introductory promotion is like chocolate candy that the card issuer dangles in your view to get your attention and make you believe that you’re paying down your debt with a lower APR. But that lower APR is still credit card interest on a new credit card that eventually turns into regular APR that will apply to your remaining balance after the promotion ends, and you’re still carrying debt.

You’re just moving the contents of your debt bucket to a new one, and it’s still debt that doesn’t have a zero balance.

A balance transfer fee usually ranges from 3% to 5% of the transferred amount.

You might only be approved for a balance transfer card with a high credit score.

Your goal must be to have little or no debt, but no debt is ideal.

After prioritizing handling all my credit card debt, I immediately paid off the two credit cards from an apparel retail company and specialty retailer since they had small remaining balances, $300 and $120, respectively; then, I closed my accounts with both cards. These actions made me feel accomplished because I had two more credit card debts to pay down and owned only two credit cards.

Then, I took out enough from my 401(k) account to pay down my first credit card, which had the highest remaining balance (about $22,000), to zero and to pay the Internal Revenue Service (IRS). If your age is below 59 and a half, the IRS imposes a 10% early withdrawal penalty on the amount withdrawn in addition to regular income tax.

I have no regrets about taking money out of my 401(k), which was an intuitive decision; I wanted to quickly eliminate that high remaining balance for good.

Finally, I paid down the remaining balance on my second credit card with higher payments than minimal payments until its balance was down to $2,000. Then, I withdrew enough from my savings account to pay down the balance to zero.

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Conclusion

So, below are the steps I took to crush my burdensome credit card debt:

1. While I paid my credit cards, new automobile loan, rent, and other bills, I unwaveringly invested and saved the rest of my earnings.
2. I knew I was wearing myself down, paying my monthly credit card debt minimally, and I had to release myself from this dreadful, ineffective activity.
3. I made it my rule to avoid paying interest by paying my statement balance in full by the due date each month.
4. I steadfastly and steadily paid my credit card bills before their due dates.
5. I created a worksheet to see all my debts and track my paydown progress.
6. I maintained patience and self-discipline and focused on paying each balance to zero quickly.
7. I created a clear-cut paydown plan that was comfortable for me and decided to pay down all my credit card debts to zero.
8. I made it my rule not to borrow money to pay down my debts.
9. I made it my rule not to transfer my remaining credit card balances to another credit card.
10. I made it my goal to have zero debt.
11. I prioritized paying down all my credit card debts to zero. I immediately paid off the two credit cards from an apparel retail company and specialty retailer since they had small remaining balances.
12. After I paid off the two credit cards with small remaining balances, I closed my accounts with both cards, resulting in my owning only two credit cards.
13. Taking money out of my 401(k) was an intuitive decision, and I have no regrets. I took out enough from my 401(k) account to pay down my first credit card, which had the highest remaining balance, to zero and to pay the Internal Revenue Service (IRS).
14. Finally, I paid down the remaining balance on my second credit card with higher payments than minimal payments until its remaining balance was down to $2,000. Then, I withdrew enough from my savings account to pay the balance to zero.

Having zero personal debt is like driving alone on a wide-open highway bathed in the golden light of sunrise.

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Helpful Links

Personal Finance
What Are the Main Types of Debt?
Welcome to America! Now learn to be in debt
What Is Personal Finance, and Why Is It Important?
8 AMAZING THINGS THAT HAPPEN WHEN YOU FINALLY PAY DOWN DEBT
10 Characteristics of Debt-Free Living
What Is It Like To Be Debt Free?
7 Key Traits of People Who Are Debt-Free

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