Is it time to take a break from your credit cards?

My credit cards have been with me for years – my oldest was opened in 1987. They were there for me when I had unexpected car repairs, unfinished holiday shopping lists, uncovered medical expenses, a slow month in business, and the times when our money ran out before the end of the month. They have gotten me through good and bad financial times, just like old friends.

But, about ten years ago, I came to the conclusion that my cards were helping themselves more than they were helping me. When I relied on them for emergencies, it meant paying interest on the entire balance for an unforeseeable amount of time.

Here’s a common example of credit card debt:

Balance Owed	Interest Rate	Minimum Payment	Months to Payoff	Additional Interest Paid	Total Paid
$5,000	12%	$100	70 Months (almost 6 years)	$1,966	$6,966
$20,000	18%	$350	131 Months (almost 11 years)	$25,745	$45,745

I want you to look closely at the last 3 columns. Look at how much you’ll end up paying and how long it will take! That should scare you into taking a break from using your credit cards. I know it did me!

Once you get behind in your bills, it becomes a never-ending cycle of taking out debt to pay debt. You worry yourself into sleepless nights and your whole paycheck goes towards past expenses instead of current wants and needs.

Today is the day to make a resolution to stop your credit card debt and take back your financial independence.

This step is the scariest, make a list of all your credit card debt (you can include other debts as well).

The list should look something like this:

Name	Interest Rate	Minimum Payment	Balance Owed	Payment Due Date	Paid On
Creditor #1	18%	$350	$20,000	5/1/14	4/27/14
Creditor #2	12%	$100	$5,000	4/15/14	4/10/14

You can tackle paying off your credit card debt in one of two ways. 

Save money by paying the highest interest rate card first.

The first way is to pay the credit card with the highest interest rate off first.  Pay every penny you can above the minimum to get it paid off as soon as possible.  There is a box on your credit card bill that tells you how much you have to pay each month to pay the balance off in 3 years – aim for that or sooner.

Once that card is off your list, pay off the next highest interest rate credit card until all cards are paid off in full.

Get satisfaction quickly by paying off the lowest balance first.

Sometimes we need to see physical evidence that our efforts are working to stay motivated. If you need encouragement, then pay off the lowest balance first, then work your way to the highest balance.  You’ll get satisfaction as the low balance cards drop off your list.

Either way, you need to stop using your credit cards for emergencies and monthly expenses, and make a plan to pay off your debt once and for all.