Frugal Tips That Can Help You Get Rid of Credit Card Debt
I'm not frugal by nature. But I'm learning to be a cheapskate---thanks to my credit cards. Like most consumers, our family was drowning in credit card debt. It seemed impossible to get rid of credit card debt. We have lived beyond our means for too long, buying new clothes, an iPod, a laptops, but then our money became tied up in credit card debt and interest payments. It became difficult to get a consolidation loan, and we didn't want to declare bankruptcy. And it is even worse for millions of people who have a limited income and a poor credit score. So we tried a lot of different tricks and learned that there is another way to solve this credit card crisis: being frugal. By being frugal, and watching every penny, we can truly make a difference in our daily budget, and we can chip away at the debt that looms above us.
Going Bankrupt is Not the Answer
Bankruptcy is not the solution to this problem. You'll only be left to face 10 years of a bad credit report. Instead, we can find small ways to pay our balances.
Frugal Tip: Use Real Money Instead of Credit
The first step to getting rid of credit card debt is to stop using your Visa card. Put the credit and debit cards away and pay cash. Do not use checks, do not use debit cards, and do not use credit cards. Just use cash.
People who use credit cards spend 25% to 30% more than people who pay with cash. Use this knowledge to help you save money. Lock all of your credit cards up in a lock box, except for one. Keep this one card for real emergencies. (A trip to McDonalds does not count as an emergency.)
Frugal Tip: Avoid Fast Food
McDonalds and Burger King spend millions of dollars on their marketing campaigns. Wendy's knows the tricks, too, and they are counting on your hunger and exhaustion to feed their profits. But every time you pick up fast food, you charge an average of $25 for a family of four to your credit or debt card. If you do this four times a week, you've wasted $100. This is no way to pay off your credit card balances.
Every cheapskate knows that you have to plan ahead for those tired nights. Buy extra frozen pizzas for $7 a pop. Right away, you have saved $18, and you can send that away to pay off your credit cards. Frozen foods have come very far, and you will be surprised at how delicious they taste. Bake some chicken nuggets and place them on a bed of instant rice with a salad on the side. Cheap and delicious. Best of all, you can put that money toward your credit card debt reduction plan.
Frugal Tip: Avoid Temptation
Consider eat-in restaurants, bars, and the mall, which are all very scary places for you and your credit cards. In one trip, we can spend over $150.
Being a tightwad can be fun. Change your habits, and you can save money fast. Instead of eating at a restaurant, pack a lunch and go on a picnic. If that's not your style, go to the city to visit some museums and pick up a hot dog from a vendor. It's a quick inexpensive meal, and you'll have a great time on the town.
Bars and clubs are notorious money wasters. When I was in college, my friends used to drink before they went to the clubs, so they could save money. Now, with drinks costing upwards of $7.50, your wallet will be empty before the night is out. Instead of going to a bar, invite your friends over for a low-key party. Play some pool or darts, and have a great time without spending all your hard earned cash. Put some of the money you saved towards your credit card debt and watch the balance go down!
Dateline: The Credit Card Crisis
Frugal Tip: Stop Charging
The six-month postpone is a brilliant and successful method. However, the impulse purchase is its evil cousin. When we go shopping and don't use our postponement plan, the credit card debt skyrockets.
Consider our scooter. Originally, the idea was that the gas-saving vehicle would help pay down the credit card debt and help us out of the financial mess we made. Gas prices had shot up, and the scooter's cost was fairly cheap compared with a car. So, we went out, looked at a scooter, and popped it on the credit card.
Two years later, we still are paying on the credit cards, thankfully at a low interest. However, we don't use the scooter, and we really could have used the money to make a large debt payment. Luckily, we were able to sell the scooter, and put that money toward our credit card debt. Thus, we've gone back to the six-month postponement plan.
Frugal Tip: Postpone the Purchase
The problem is that it's way too easy to get into too much debt. Credit cards, debit cards, and payment plans make it easy to spend money that we don't have. But there are strategies you can use to reduce the money you owe.
Several years ago, my husband and I accidentally bumped into a wonderful tool: the six-month postponement. At that time, we desperately wanted and needed a mini-van. We knew that we couldn't afford one; we had too much credit card debt, and we still owed a big balance on our other car. But we wanted one so much, that we drove over to the dealership, spent the entire day test driving potential new vehicles, and almost signed the contract. But then my husband stopped us.
He pointed out that our lives would not change substantially if we bought the mini-van that day. He suggested we wait one week and see what happened. We did. And then we decided to wait a month. And then six months. And it worked. Instead of spending our money on a monthly car payment, we were able to put that cash towards our credit card debt.
After our six-month postponement, which turned into our mini debt reduction plan. We managed to save six months worth of interest, and the car price decreased. It cost us nothing, and we still bought the car. However, it could have turned out differently. We could have either bought the impulse purchase, or spent six months paying additional interest. We still bought the mini-van, and by that time, we knew we wanted it.
Frugal Tip: Earn More Money
One of the quickest ways to pay down your credit card is to return your items. Bring them back to the store with a receipt, and it will be just like you never bought them in the first place. The charge will be removed from your card, and you will reduce a little bit of your debt.
Another option is to sell some of your household goods on eBay or Craigs List. There are so many people who are looking for a deal; you might be able to get rid of some of your belongings while earning a little cash. Send all of that money as a credit card payment. For tips on selling on eBay or earning a little extra cash, visit my other hubs:
Frugal Tip: Consider Credit Counseling
When you are paying all of your money towards your credit card, it is time to look at credit counseling and a debt management program. The National Federation for Credit Counseling (http://www.nfcc.org/) is a legitimate company that specializes in helping consumers manage their debt. They also offer free credit counseling services.
The Bottom Line: It's Not Our Money
Perhaps the most important thing to remember about credit cards and credit card debt is this: It's not our money. Credit cards look and feel like our own money, after all, our name is right there on the card and we can use them like cash. But we are just borrowing money from the bank.
Borrowing is never a good thing. In the end, it will catch up with us. Credit card debt is a dangerous toy, and we need to learn to use just plain old cash. Learn to be a tightwad, a cheapskate, or just plain frugal. It may just save your financial future.