Hello, I'm your host, Mr. Chuck, a retired accountant turn truck driver, I reduce my debt in a relatively short period of time, debt reduction to achieve financial freedom takes commitment, confidence, determination. How to stop using credit cards? Are you using your credit cards to pay for everything in your life, that means your utility bills, your groceries, your gasolines, maybe even your mortgage with the font, you're gonna get those rewards, and you're gonna pay it off every month. But somewhere in that cycle you got behind, he was unable to pay off your credit cards and you start carrying a balance. And every month that balance keeps getting bigger and bigger. Are you starting to feel overwhelmed with your debt is your credit cards out of control? If so, you need to listen this episode. If you're unable to pay off credit card balance every month a problem is developing. To solve this problems stop using credit cards to make purchases out to stop using credit cards. The rewards are not worth the interest and fines that may be paid. This, I have two articles in my show notes I link to that I'm going to be referring to the first one is forbes.com. How to get off the cycle of using your credit cards for everything. And it's fairly simple. Number one, well, let's talk about the risk of using credit cards for everything. Using a credit card for everything can create a vicious cycle, you keep swiping the cars and can't manage to pay it off in full each month, and then carry debt over to the next you start racking up interest on the unpaid balance and have added stress of not knowing when we'll be fully paid off. Does that sound familiar? If so, you got a big problem. So number one, what I have always said, Stop using your credit cards completely. If you're all overwhelmed with credit card debt, or if you just trying to get what whose credit card debt you have under back under control. The first thing you got to do is stop creating new debt. You need to have a debt reduction plan. The first thing in your debt reduction plan is quit creating new debt to make the minimum balance on all your debt no matter what quit paying extra towards that debt. I know that doesn't sound like it makes much sense. How are you going to get those credit cards paid off? If you quit paying extra towards them? Well, we're going to explain that three, set up an emergency fund, an emergency fund is nothing else but a savings account. If you have a lot of credit card debt, and you have zero savings, you've not been planning wisely. Set up that savings account and start putting money in it. Well how much money do you put into it. If you want to be super lazy, whatever that extra payment you've been making on your credit cards, put that in to the savings account. If you want to be really good, you need to develop a budget. And a budget is nothing more than what you are spending does look at write it down and have it on a piece of paper or use a spreadsheet. I offer anybody who requests a spreadsheet budget I will email it to you go to my Facebook page. I have a video on how to use it. Just request on there from Instant Messenger and give me your email address. And I will email you my file for this budget and it's a yearly one one for every month of the year. And once you develop the budget and know what you're spending money on and when the money is due when the expenses are due, such as your rent or your mortgage payment, your car payments, all your credit card payments. And when you go to the grocery store in your when you buy gas for your automobiles, everything you must track down to the penny. I know it sounds like a lot of work. It is not just look back through your checking account. If you have an online bank account, look back for no previous month after month you're currently in is September, look at August. And what did you pay in the month of August? And when is it due? So you need to know a can put it on account or is another way to do it, that what it is how much the due date. And if it's a credit card, the rate of interest, why do you want the rate of interest for a credit card, because when you start paying them, you want to start paying them off by the highest interest rate. First, if you want to minimize the amount of interest that you're going to pay, you need to pay off the highest interest rate card first, than the second highest and so on. That will, in the long run, reduced what you pay in interest. And you got to make all your payments timely, because there's no use in paying late fees, that's just a waste of money, pay everything on or before the due date, set up automatic payments, know what's due. And when it's due. That's what a budget will do for you. And also you have your money when you get paid and how much. So if you take your money in, subtract money out, you have money left over money left over, you leave a minimum balance of$500 in your checking account, just so you don't bounce any checks or write bad checks. The excess then goes into the same account, and you need an emergency fund built up to at least $500. To get started. Once you have $500, then you continue putting money into your emergency fund savings account until you have $2,000 or $3,000. Why? Because the time that you have the money in your savings account, it's also doubling as a emergency fund. If you need tires on the car, and it's going to cost you $900 And you got$1,500 in the savings account, he don't have to use credit to pay for it. Or if you use don't use credit to pay for transfer the money into your checking account and use your debit card. A debit card is the same as cash because when you use a debit card, the money automatically comes out of your checking account. It's just like writing a check in the olden days, 20 years ago. Debit Card is just another word for a check. And it's the same as paying in cash. Sounds pretty simple. But how you get if you're used to using your credit card to pay for everything. He just got to stop using them. And how do you gonna do that? Well, it's gonna take some effort, he gonna have to be willing and knowing do that. And once you get a credit card paid off to zero, do not cancel it, do not close it. Now your credit card company might do that for you, then that's going to hurt your credit ratings, that if you don't close it and keep it open and don't use it, you're gonna be better off. And then number two is build a budget, which what we already talked about. And number three, why you don't close the checking account or the credit card is because down the road when it's paid off for a little bit. You may get an offer from that credit card company saying do a balance transfer. Most of them charge at 3% transfer rate, but they may give you 12 months to 18 months of no interest. So he can use that to help pay off another credit card, transfer over what you can afford to pay off and at the time, that's no interest transferred it over. Because the transfer fee of three even as high as 5% will be read. You save that and not paying interest on the other credit card and it used to take two or three months and you will recoup your transfer fee no big deal. Figure out the math before you do it. But that's what you do with the credit cards that remain open. Hopefully they'll offer that if not if you have good enough credit or if your credit is improving. See if you can find a credit card get a new credit card that offers a zero balance transfer or an order offer a limited time, usually 12 months to 18 months of zero interest on any balance transfers from another card. Because the credit card companies are thinking that you're not going to be able to pay it off in that time, and they were just waiting to start charging you interest. The other article is the 10 steps to break credit card habit. So if any of these apply, you got a credit card problem. Do you pay interest fees when you send in your credit card payment? Have you ever paid your credit card late because you didn't have the money for the payment? Do you use your credit card when you don't have enough cash? When the issue riser raises your credit limit? Do you spend more because you can. Credit card companies love credit card users like this. Then they pay interest and late fees and they spend more on their credit cards also. So what you need to do on this article, which is from consumer cometary comm 10 steps to break the credit card habit, which I have a link in my show notes, look at your spending carefully. Now, other words, just don't spend this because you can only buy the things that you need. Create a budget, which we already talked about, go back through maybe multiple months. And to figure out where your money is being spent, you know where your money is coming from is from work. So you know how much you're going to get is can be on a monthly basis is what I'm talking about. He can break it down to a weekly basis if you have to. But a monthly basis seems to work best. You can do it on a counter and just write it the what it is and the dollar amounts on the calendar. So you know the due dates. And when you look back, you got to remember when was the due date did you pay that late, if you pay that late, don't pay it the next month late again, you got to make timely payments, you're not going to improve your credit score by making late payments, and you're going to be risk racking up more fees. And they take their interest and fees first, before they apply it to what you owe. That's important to know build an emergency fund and have money available. So you can stop using your credit cards, which is their number four. District destroy your credit cards except for one or two, he can I don't recommend that. Pay him off, keep them keep them but put them in a place that makes it difficult to get to. Don't carry them with you. If you have them available where you can use them, you're going to be tempted to use them more often. But if you place them somewhere where you have to go and think about oh, I'm going to go buy something, I need my credit card, I'm going to use x credit card, and I don't have it with me, and I gotta go get it that then you can think about do you really want that purchase? Do you really need that purchase? Before you just racked up another charge on that credit card. I say keep your credit cards because once you get them paid off and paid down, you're gonna improve your credit score. Consumers consolidate your balance onto one or new card, one or two cards. Okay, well, that's a balance transfer. He may be able to do it, but I would recommend paying one to zero maybe fine of one of your cards that you have a balance on that do that offers the balance transfer and offers a zero interest rate for 12 to 18 months, and then pay that one off, and then transfer your balance, this is not going to happen overnight. It's going to take you time is going to be slow to get started. And it's gonna it all depend on your spending habits. If you don't change your spending habits and slow down using credit cards, you're not ever gonna get under control, you're never going to get ahead of getting them paid off and use a cash only policy which is start paying cash for everything. When you go to the grocery store. Instead of using your credit card use a debit card or cash out the bank and pay cash for everything which is harder and harder to do nowadays. So the debit card is probably the better way to go. Go cash only with a debit card, pay down your balances. Okay, I'd say don't make extra payments on on your credit cards, you want to make timely minimum balances, until you have your emergency fund built up. There's two methods on how to pay off which credit card first, the snowball method means you pay off the credit card with the lowest balance first. And then the next lowest balance, the Debt Avalanche Method method is you pay off your credit cards with the highest interest rate first, and then work your way down from there, I recommend if you have three or four credit cards or maybe more, the first one you should try to pay off when you're first getting started would be the one with the lowest balance and get that paid down to zero and quit using it. Once you got that down to zero, then after that credit card, you need to start paying off the ones with the highest interest rate, second, third, and so on. Why do I do that? One, so you have a credit card was a zero balance, and you fit the zero mounds for two or three months, they may send you a in the mail, a balance transfer offer where you can have 12 or 18 months of zero interest. And you can transfer a balance from another credit card onto that credit card and maybe pay a 3% fee to do so that 3% is going to be a lot less than the interest you're paying on the other credit card. So it can save you money. And I'll make another chunk, he can reduce a credit another credit card down. So you can pay it off faster, and then just make the minimum payment or make the payment that will pay that down to zero in that time frame that you have zero interest. So if you have a 12 months zero interest, and you can pay $100 a month on that, then you should transfer $1,200 You're gonna pay a little bit more the first month than $100. Because you gotta pay that transfer fee, then after that, it's $100 a month, for the next 11 months. And then the end of the year, you got a zero bounce. And guess what that credit cards gonna do. You make timely payments, and you got to pay down, you're getting you're improving your credit score, and they're gonna make that offer back to you. Again, I still get these offers on it don't have any balances on any credit cards, but they'll keep sending you these offers. And you can do it multiple times to three years, until you get your debt under control. Check your process or progress every month, keep track of what's going on keep track of how much progress you're being making. And you know it. Because if you build up your emergency fund, and you have $3,000 in your emergency fund, and you want to maintain $1,000 in there, you're going to pay$2,000 on the credit card, and you only owe $3,000, it's going to drop way down, and then the amount of interest you're paying on that is gonna reduce groobie greatly reduced, and you got to over time you get that second credit card paid off, that's freeing up more money, your minimum monthly payment to build your savings account back faster to build that up again. And as you get to set first one paid off, it's going to be a little bit faster, and you get your second credit card paid off, it's going to be a little bit faster, the third and fourth, then maybe you get all that paid off. And then you start working on your auto loans you got maybe have a couple auto loans, you get first auto loan it keep doing the same thing over and over and over. He keeps track of your budget, you know how much money is coming in, and how much money is going out. And you just stop using those credit cards. And you just put all any and all money extra into your savings account. So anything bad would pop up. You have the money available to pay for it instead of using credit. Now says Say you got so much bad credit so much credit that you want to consolidate and because you haven't trouble keeping track of all these different payments. Remember, you one quit using quit creating that and now make the minimum payment on your credit cards, do a budget, review your budget, knock anything out of your budget or things that you no longer use, cancel them, or if you no longer need it, or if you can change services and save $10 a month,$5 a month, you got to do that. Also, it's a never ending cycle. It's your money. It's not how much money you make is how much money you can keep. And the more that you have, the better off you're gonna be. It's simple math, he just work on it. So you got your budget, you know what's coming in, you know what's going out, eliminate anything that you no longer use or no longer need. You change your cable TV to streaming and you saving money there you constantly look at your cell phone plans you've done away with your home line, because nobody's ever home to answer it. Nobody ever calls you on it. All these things are little things that may save you $5 One month here and $2 a month there and$20 a month, you know it but it all adds up and over time, it will make a big difference. Don't think it's a waste of your time because it's not, you got to stay focus. Quit creating new debt, make the minimum payment on all your credit cards and all your debt, get an emergency fund a savings account set up, know your budget, know how much money can be transferred from your checking account to your savings account. So you're not tempted to spend it, use your debit card the same as cash, know how much money you always have, know what you can spend. If you have a$200 budget for the grocery store, and you're at $210, you need to look for ways to reduce your spending. It sounds simple. It's not you got to stay focused. I'll be back in one moment was my final thoughts. If you listen to this podcast reduced that increase well, on an Apple device, scroll through all the episodes towards the bottom. And you can select write a review and leave your comments. And you can rate this podcast, I appreciate all feedback. And I thank you for your time in doing so maybe you're thinking I use my line of credit my home to pay off my credit cards, and now pay a lot less interest. Well, that may be true that you'll be transferring unsecured debt that that you have no collateral put up for and giving your home as collateral. That is not advisable. I would not do that. No matter how low of an interest rate you hit. No matter how much interest you're going to say, Do not use your home to pay off credit card debt or auto loans, your auto loans the automobile is the collateral. So why do you want to make it your home that Clotet if things go bad, super bad, and you got a big mortgage payment, and you made a bigger because you paid off all your credit cards and your your automobile loan and you're paying an extra eight or $900 a month because of it. And you lose your job and your spouse loses your job. How are you going to pay your mortgage, you're going to lose your home, they can foreclose and take the home away from you. So do not use your line of credit from your home to pay off any unsecured debt or any automobile. The automobile loan is the collateral for that one. Even if you're upside down, don't do it. And maybe over time, if you've done a debt reduction plan, when you quit creating new debt, you're making the minimum payments. You have an emergency fund build up a significant amount. Let's say at least three to six months at least three months of your expenses that you got unemployed you can use your savings account to pay your your mortgage and your living expenses for up to three months. Then may consider getting a loan consolidation, a personal loan that you can use to pay off your credit card debt that may have a lower rate of interest. But you already need to have your debt reduction placed in place for at least six months or a year, you need to have a budget, you need to know how much you can afford, you need to know what how many credit cards and what the bounces are on them and how much you're paying, and how fast your start paying off, do not get in a hurry by getting another loan, because that's one creating new debt. And it's gonna be worse if you borrow more money on that loan than what you owe on your credit cards. Because you're creating new debt, how's that gonna help you, at the very least only borrow the exact amount of money, you need to pay off the credit cards, so you have the same dollar amount of debt that you did before, maybe you have a lower rate of interest than your before. But if you have multiple credit cards with large balances that bank or whoever's loaning them money is gone, too. Maybe they're gonna take the money, and pay off your credit cards and close the accounts. And that could hurt your credit score. And if you spent the last 18 months, 12 months, 18 months, two years, since you started this and you build up your credit score, the last thing you need is to have them close up these credit card accounts and hurt your credit score. So think twice, know what you're getting into, before you do it. Be careful, stay the course, quit creating new debt, make the minimum payment on all your debt, build up your emergency fund. And then once you have two or $3,000 more than what you need in your emergency fund, then apply that extra money to that debt that you're trying to pay off. And do that month in and month out how much you transfer to your savings account is going to be determined by your budget. So the more you can control your spending, the more you know about your spend, the better off you're gonna be, the more money you'll be able to satisfy. Put in that savings account. I know the savings account, don't pay zip for interest. So if you got anything more than a $4,000 balance in that savings account, let's say that your emergency fund is$4,000 or higher, you need to find a place to put that money to get more interest return. And that would be a high yield interest savings account. Because it stores liquid, we can get to it easy and quickly. But you're gonna be making more interest on a high yield savings account than you will at your local bank or you have your checking account. So stay the course. It's gonna be a slow, long process. It's gonna be slow at the beginning. And as you get a credit card paid off, and the second one, the third one, it's gonna speed up. And before you know it, you got to be out of debt. I paid off $133,000 in debt and three years, eight months. So I can do it. You can do it. And I never in my life ever made more than $75,000 a year and never ever if that most of the time less than that. So get your credit cards under control. Get them paid off. Keep them paid off. And you'll be happy you did so