Eliminating Credit Card Debt

Due to some bad decisions I made some years ago, I ended up with some pretty hefty credit card debts. My income has been such that I could just about cover the minimum payments on those debts, and I calculated that if I continued doing that, it would take about 17.5 years to clear them.

It was like a millstone around my neck and I was constantly stressed out. My blood pressure went up and I’m still on medication for it. I couldn’t live like that, so I decided to sit down and work out how to clear the debt more quickly. That’s one of the main incentives behind “Digging My Own Ditch” (see previous post).

Now as you reduce the capital of a debt, the amount of interest added every month reduces, and the minimum payment reduces. So what I decided to do was to take the minimum payment I have to pay this month and work out what would happen if I paid that every month, instead of paying the decreasing minimum payment each month.

I couldn’t believe what I was seeing. I had to check my calculations a few times to make sure I hadn’t made a mistake. Instead of taking 17.5 years to clear the debt, it would take about 3.75 years. And that was from just paying the same amount I was paying now, but every month.
I can afford that amount this month, so I should be able to afford to pay it every month.

The millstone is feeling lighter already, and I haven’t even started to adjust my payments.

Now, if you’ve been following this blog, you will have read that we are taking in language students for the summer. I have already calculated how much profit we’ll make from that, so I decided to calculate what effect that would have if I used it to pay off some of the capital of the debt and then keep paying the same amount every month as I am now.

The difference was not so dramatic this time, but it does reduce the time to clear the debt by about another 6 months.

Credit card debt is a terrible thing to have, and the interest rates are crippling. Even though in the UK, bank base rates have been at a record low, the banks are not passing that on to their credit-card customers. If you’re stuck in that seemingly endless cycle of paying the minimum payment every month, why not consider keeping your monthly payments the same, and you will see a much quicker reduction in the debt, and possibly pay it off in under 4 years.

Can you see the light at the end of the tunnel? It may be just a glimmer now, but it will get brighter every month that you pay off more than the minimum payment from your credit-card debt.

July 14, 2011 · Phil Rogers · One Comment
Tags: , ,  · Posted in: Lifestyle

One Response

  1. Rex Ryan - August 6, 2011

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