The easiest way to get out of a financial hole is to stop digging! I’ll cut to the chase and challenge each of you to go “cold turkey” and cut up your credit cards today. Yes, TODAY. (Say whhhhaaaattttt?!?!?) And when I say cut up the cards, I don’t mean take them out of your wallet and pinky-promise that you won’t use them unless you have a really important emergency. I mean literally CUT THEM UP. With scissors. All of them. If you want to get out of debt, you must stop borrowing money, especially on credit cards.
Once you’ve cut them up, call each creditor and request to close the account. Believe it or not, it IS possible (and quite easy) to function in life in 2016 without a credit card, despite what our culture teaches. Aaron and I have never had a credit card during our marriage, and we’ve survived for the past 8+ years just fine. “But what about renting a car and booking a hotel?”, you ask. Those things can be done just as easily with a debit card. That means that you must have enough money in your bank account to cover those costs at the time you travel. If you don’t have enough money to pay for the trip, then don’t go. Simple as that.
I know it’s a radical shift in thinking for many people, since debt/credit is so highly promoted in our culture and is considered normal. As Dave Ramsey says, “Normal is broke. Be weird!” I can’t recommend Dave Ramsey’s Financial Peace University highly enough. If you can get to a class in your area, please do it ASAP! They also offer the home-study edition online or by DVD. I promise it will be the best investment that you ever make!
I can anticipate some of the backlash I may receive from this post. Here are my responses:
- But I earn points/miles from my credit cards. That’s fine. But I challenge you to complete a cost/benefit analysis. Are you paying the cards off in full each month? If not, the cost of paying interest and/or fees will generally negate any “rewards” you may earn through the cards. Try saving up the money and paying cash for your big purchases. The feeling of that accomplishment is the best reward you can give yourself.
- Credit cards are safer than debit cards. If your debit card has a Visa or MasterCard logo, it will carry the same protections as a credit card that’s issued through Visa or MasterCard. Don’t believe me? Check it out straight from the source: Visa and MasterCard
- You need a credit card to have a good credit score. Your credit score is simply a record of your interaction with debt. A good credit score doesn’t mean that you’re successful with money, it just means that you’ve borrowed money and paid it back. Aaron and I have never had a credit card during our marriage, and we were able to qualify for a mortgage with a very low interest rate with no issues. Don’t let a credit score be your measure of financial success. I prefer to use our savings account balance as the number to gauge our financial success.
- But my credit card is at 0% APR. I’m going to quote Ramsey again, “When you play with a multi-billion dollar industry and you think you’re going to win at their game, you are naive. You cannot beat the credit card companies.”
Note: I have a BSBA with an emphasis in Personal Financial Planning and worked as a HUD-certified financial counselor for several years. So some of these tips are from my professional experience, but many of them are just common sense. I would encourage each of you to seek professional guidance if you have specific financial questions.