Pay off That Debt

Eliminating Use of Credit Cards Can Do Wonders for Your Finances

One of the best ways to stop yourself from making new debt is to eliminate those little debt-makers you carry around. That’s right. You should consider cutting up your credit cards.

“But wait a second,” you declare, “I don’t need to cut them up! I just won’t use them anymore.”

That may sound reasonable at the moment, but would you:

• Start a diet but keep cookies on the counter?
• Quit drinking but hold a martini at a party?
• Stop smoking but carry a pack of cigarettes in your pocket?

Of course you wouldn’t! Not if you were serious about change. Well, if you are serious about limiting your debt, consider cutting up your cards.

The Solution: Pay Cash!

It’s true that credit cards can be convenient, but it’s this convenience that often gets people into trouble. So here’s the best solution: Pay cash!

Let’s make sure you understand the two reasons that paying cash is an important strategy. Credit cards, by their very nature, enable us to simply spend money we do not have. This is not news to you. Most of us have credit limits that exceed weekly, monthly, or even yearly income. This gives us access to ridiculous amounts of cash, but it also helps create a ridiculous amount of debt. And with the interest piling up every month, that debt can become even harder to eliminate. The interest penalties are the first reason you should use cash whenever possible.

The second reason to use cash is that you will find yourself spending less. You will find that if it requires taking time to go to the bank to get cash, and then returning to the store to pay for the “got-to-have” item, you will likely lose interest in it. What you are doing here is removing the impulse from the impulse-item buy! It’s easy to get all worked up and buy something on the spot, but when you remove yourself from the situation, physically access the cash, and then hand over cold card cash to a salesperson, you’ll find yourself buying fewer impulse items.

The second you take out a credit card you’re paying with what seems to be play money. It’s like Monopoly cash. But if you take out $100 or $500 or more in real cash you may find your “need” for that item has changed. Or just as beneficial to you, you may find that you can live with a less expensive model.

There are only two instances where it is worth spending money that you don’t have. The first is health related. If you or any member of your family find yourself facing an illness or trauma that is outside your insurance coverage (or part of your deductible), you undoubtedly spend the money. You shouldn’t even hesitate. Not even financial freedom is more important than the health of you and your loved ones.

The second instance can be answered by asking yourself one question: “Will this help me be more financially secure in the long run?” In other words, is it an item, business, seminar, book, or course that will increase your income at a later date? If it is, then you must decide if its potential value is worth the cost. This is the same premise as taking out a college loan in order to build a better career path. If it’s something you feel you must do, then do it. Afterward, pay it off as quickly as possible.

Credit Card Alternatives

Even if you are someone who uses credit cards for all your purchases, don’t worry. There’s an alternative that’s just as convenient. And you won’t have to walk around with a wad of cash on you. A debit card is a great way to help you build the discipline of spending only what you can afford today. Debit cards are essentially the same as accessing ATMs, and can be used anywhere most credit cards can. Best of all, since you know you are dealing with real money, you will be less likely to abuse a debit card. (Just be sure to save the receipts to enter into your checkbook!)

Start right now by focusing on reducing your debt. And whether you ultimately decide to cut up your credit cards or not, cutting down on your use of them is a great way to start.