How have I done it? I listened to quite a few financial advisers on satellite radio and NPR, and this is the method I have chosen:
- Choose the card with the smallest balance and focus on paying that one off. Pay the snot out of it (as much as you can afford) and just pay the minimum on the other cards.
- I call my credit card companies ( had 3, now I only have 2! Yay!) every few months and ask them to lower my interest rate. My method is to tell them I got an offer to transfer my balance to another card at a lower rate, and ask them to match that rate. The have never matched it, but they have given me a temporary lower rate for a few (9) months.
- I changed the rewards program on my Discover card to the new Motiva plan. If you pay on time every 6 months, they give you a months worth of finance charges back as a cash bonus.
- Now that I have one card paid off, my plan is to transfer the balance on my card with the highest rate(Discover) to my now clean card. I just got my 6 month bonus, and ended up getting an additional $10 by redeeming it in gift cards instead of putting it back on my card. I thought long and hard about that one, because I really wanted to just use it to pay down the balance. I decided to reward myself instead. I earned it, after all. If I had not gotten my bonus yet, I would have waited for that before transferring the balance.
- I will use the $$ I was paying on my first card and add it to the minimum payment of my card with the next smallest balance. Then, it is the same formula until that one is paid off. It will get paid off quicker, because I am able to pay more on it.
- I get paid every 2 weeks, so every time I get my pay stub, I go online and pay on my cards. By paying every 2 weeks instead of once a month, I am saving on interest charges (because it is compounded daily) and I never have to worry about running short at the end of the month, because I pay it out as soon as I get it. What I have leftover is my budget for the next 2 weeks for gas and any other personal items I may need or want(our household budget automatically goes into a separate account). Everything leftover at the end of those 2 weeks gets transferred into my savings account. (If I have $5o as my beginning balance on payday before my paycheck posts, I will transfer that into my savings account, where it stays unless there is an extreme emergency. I've been doing this for almost a year now, no emergency yet.)
So, I am feeling pretty awesome right now. I am happy, happy, happy!