5 Ways to Payoff Credit Cards

0:01 Ralph: Are you drowning in high interest credit card debt? Unsure how to tackle those balances in a strategic way. You're not alone. Folks. We received this call from Hannah the other day. Hannah: I'm really stressed out. I just learned that my husband has a bunch of credit cards that he never told me about. And now he says he can only make the minimum payments. He has been hiding this debt from me, and I need to address that. But I'm really wondering, how in the world will we ever get these credit cards paid off? I looked online, and it said somewhere that if we only pay the minimum each month, it will take us nearly 15 years to pay them off. I have no idea what to do, and I need some advice or a path forward with this. Please help us find a solution. We've worked too hard to lose it all because of these credit cards.

0:43 But if we don't do something soon, we may end up having to file bankruptcy. Thank you for listening to my rambling, Ralph, but please give us some ideas. Ralph: Hannah, I'm going to help you today. So folks listen up today, we'll be sharing five practical steps. To help you slay that credit card debt once. And for all.

1:29 Welcome back to the show. Today is our motivational Monday. Monday, we try to motivate our listeners to improve their financial situation. And I am really excited to dive into today's topic with you. Today, we're talking about a topic that affects millions of Americans. It's affected me. And I'm sure it's affected many of those listening credit card debt. Before we get started, it's a cool morning here on the farm. So I guess spring, even though the calendar might say is here, I don't think it's quite got here yet, but at least we're not shoveling snow. But that kind of bums me out because I bought a new skid steer this year and I've been looking forward to using it with my plow. I guess maybe next season, unless we get one of those late March snow storms.

2:10 So let's get to our show and help Hannah today. Many of us rely on credit cards for convenience and even emergencies. Before, you know it? Those balances have piled up and you're paying hundreds of dollars a month in interest and fees alone. It starts feeling like you have an endless debt treadmill. With no way to get ahead. If this sounds familiar, don't worry. You're not alone. And the good news. Is there a proven strategies to tackle credit card debt in a step by step way? Applying these methods with diligence. And consistency can help you make serious progress. I'm going to talk about that today. But before I get started, don't forget to subscribe to the show. And join our email list. You do that at askralphpodcast.com.

2:52 So you don't miss tomorrow's show when we're going to talk everything crypto, specifically the taxation of cryptocurrency. Something I have to ask every person that comes in to have their taxes done. But tomorrow, we're going to take a look at that and tell you about how that's handled. From a tax perspective. So without further ado, let's dive into the five ways to slay your credit card debt for good. But before we get started, I did a little research. Let's look at some current credit cards, statistics. So here's a breakdown, the latest and most important credit card debt statistics in the United States. And this was really sobering to me. Total credit card balances. That's the Americans. held a record $1.13 trillion.

3:34 That's a lot of zeros folks. in credit card debt in the fourth quarter of 2023. The scary part of that is this is a significant increase from previous periods. And I got that from the federal reserve bank of New York. So that really tells us two things. It's a big number and it's a significant increase from previous periods. So let's talk about the growth of debt credit card balances have been steadily increasing. Especially since 2021 with higher inflation, likely driving some of the increase. Of course that's the case. When you go to the grocery store. We go to the gas pump and everything is costing you more. Of course, that's going to grow that credit card balance. Let's talk about the average debt. This was really a sobering statistic.

4:17 It's estimated that the average debt per cardholder is $6,295. That's as of January, 2024. And that's from TransUnion. One of the credit bureaus. And households with debt. Roughly 49% of credit card holders. Carry debt month to month. That's from Bankrate. So that means they're not paying off those balances on a monthly basis. They're carrying those balances. They're increasing interest or increasing fees. It's one thing to use your credit card to get points, or find ways to float your money. And if, as long as you're paying off the end of the month, Then that doesn't trigger an issue with, that's not what these statistics say.

4:57 It's telling us at 49% of credit card holders. Are carrying that debt month to month. But what's causing this. We talked about this a few minutes ago, obviously inflation and the cost of living. The rising cost of essentials like groceries, gas. And rent force, many Americans to rely on credit cards to cover expenses. That's just the truth. As well as emergency expenses, unexpected costs like medical bills. Car repairs are leading drivers of credit card debt. For many people, you might be one of those people I've been there before. I talked about in the show before that, when we were first married, my wife and I had to rely on a credit card to make some. Payments because we just didn't have the money for it. And the other scary part about that is the interest rates.

5:41 Higher interest rates, make credit card debt, even more expensive to carry. Now, here is a scary statistic. The average credit card interest rate is now well over 20%. That is not good folks. What are the consequences of this Ralph? The big time consequence and having worked in the credit union field, I was executive vice president of credit unit here in Newark, Delaware. I know that as the economy gets worse and as credit card debt goes up. Delinquencies and charge off, become an issue. Credit card delinquencies. Those are late payments. And charge offs. That's when a card company. And it says you're not going to pay us. This debts, unlikely to get paid are rising. And guess what folks they're exceeding pre pandemic levels.

6:24 That's right from Moody's. It's creating a huge financial strain because high credit card debt burdens households create stress and hinders longterm financial goals like saving for retirement or buying that first house. If you're saddled with debt. Your saddled with credit card debt specifically, it is really hard to meet. Your long-term goals, it creates stress. It causes stress in marriage as a cost stress in families. She might ask Ralph, what can I personally do to get this credit card debt under control? I'm very glad to ask. Cause I'm going to give you five steps today that should help you. Get that credit card debt under control and step number one. Is simple.

7:05 Stop the bleeding when you go to the hospital and let's say you have an injury. You have an open wound. What's the first thing they're going to do. They're going to stop the bleeding. Before launching into debt, payoff mode, first things first, you got to stop adding to those balances. You've got to stop using those credit cards. This may mean reducing spending temporarily and relying on cash or your debit card instead of credit. Don't take on any new credit cards and loans during this season, either. Resist the temptation to rely on credit. When money gets tight with this first critical step, you halt the growth of high-interest debt. That's the goal to this. Stop, the bleeding. Stop using that credit stop. Getting more accounts. Maybe you're doing consolidations, you got to stop all of that.

7:48 Let's move on to step number two. And this one is critical. I mentioned this in my book, mastering your finances. You have to know where your money goes. Now you can get that book at my website. That's at askralphpodcast.com/store it's 47 pages chock full of ways to help you improve your finances. So step two, list your debts from smallest to largest. So gather all of your statements and make a list of your credit card debts from smallest balance to largest balance. it's called the debt avalanche method. It focuses on wiping out those smaller debts. First pay the minimum on all your cards. But paying extra funds towards the smallest balance until it's fully paid off.

8:29 So you think about it, you're going to make this list of your credit card balances. You're going to start with the smallest one. Now you're going to continue to pay the minimum payment on all of them. But on that smallest one, you're going to focus on wiping that one out. So that's step two. Now, step number three is rollover payments to the next debt. So once the first card is paid off. Take the amount you were putting towards that first one. Plus the minimum you are paying and apply to the next smallest balance. That's why they call the avalanche. And you got to pick up steam as this thing goes downhill and you start paying off those credit cards. You repeat this process as each card is paid in full, freeing up more money to tackle the next card. Let's talk about step number four, and this is a sidelight, but it's still a step.

9:11 Look into balance transfer consolidation options as the debts get larger. Consider balance transfer cards with a 0% interest APR Or even consolidating multiple cards into a lower interest loan. Now you are going to say, Ralph, wait a minute. You just told me not to get new cards. Yes, but this is once you're in this method. You might get to a point where you get offered a card with a 0% interest. Now this can provide temporary savings on interest that can, you can redirect pay down principal faster. So if you're able to reduce that interest rate or even get that six months, no interest that will help you grow that avalanche of money even more because you're not going to be paying interest. But you gotta be sure you shop for comparisons on the best terms for these.

9:54 And step number five and I can't stress this enough. You've got to celebrate small wins. Celebrate each milestone. Like when you pay off that first card, it's going to feel great folks and continue. That'll help you continue that process. Seeing progress keeps you motivated to stay on the course. And that's why we start with the smallest one. That should be the easiest one to get paid off. And once you get that first one paid off you're going to build momentum. You can even use rewards to get dinner out or item from your wishlist when you hit certain goals. So those are the five things folks. And I think that you can do these. I know that you can do this stop the bleeding. list debts from smallest to largest and tackle those smallest ones.

10:34 First roll over payments to the next debt. And it, repeat that again look at. Balance transfer consolidation options and celebrate your small wins. You can do this. I have confidence in you. Before we wrap up, I want to remind all of our listeners, if I haven't said this enough to visit our podcast page, that's at askralphpodcast.com. There you can leave us a review, share your thoughts like Hannah did, or even send a message with questions for future episodes. As we're always looking for content, we're always looking for things that would be beneficial to our listeners . Now, while you're there, make sure you join our email list. and that will enter you into our $25 Amazon gift card drawing.

11:15 We're doing that each week. And if you find that you need my personal assistance. While you're on the website, you can also schedule a consultation with me and I can help you with your specific circumstance or one of the things I do. Is I offer financial counseling. I sit down with you. One-on-one. We can do it in person. We can do an in zoom. So don't matter where you are. I can help you. Friends there, you have it. Five steps to strategically slay your credit card debt for good. With focus. Discipline. And don't forget God's guidance and prayer. You can overcome this financial burden in steady steps. Don't get discouraged if it takes months or even years based on your specific situation.

11:56 This is a work in process. Stick to the plan. Keep working the steps and you will reach the finish line. And remember you can find all of our episodes at askralphpodcast.com. We got over 300 episodes with all kinds of financial advice out there. Be sure to subscribe. So you don't miss any of our episodes. And I wanted to say this before I sign off, as I always say. Stay financially savvy out there, and God bless you. And please work on paying down your credit card debt.