This post originally appeared on Girlboss.
Maybe you got your first credit card in university, because you were offered a free burrito in exchange for applying. Maybe your car broke down and you had no option aside from charging it to your card. Maybe you lost your job, or quit your job, or had to move. Or maybe you just really love to shop.
However it happened, you have credit card debt. And you (probably) feel shit about it.
You try to pay it off as quickly as you possibly can. You use your entire tax refund or bonus to pay it off every year. You put all your extra money towards it instead of saving, because that’s the “right thing” to do.
So, why do you still have the debt?
It’s a cycle I’ve seen over and over. It thrives off a combination of our own personal guilt, plus the external guilt from pretty much every personal finance blog ever (“I paid off $60K of debt in two weeks, and you can too!”).
And while it’s only natural that people want to get rid of debt as fast as possible, much like looking at your expenses closely, it can actually be a discouraging reminder of all the past mistakes you’ve made.
Because we’ve been trained to think of debt as bad, we end up feeling like we are a bad person for having it. The reality is, debt isn’t good or bad. Debt is debt. The debt you have has no bearing on who you are as a person. Period.
Here’s what’s really happening: With all your extra resources going towards debt, you have nothing left for savings. This means next time an emergency or unexpected expense comes up, it usually ends up right on the credit card. Your credit card has been your emergency fund all these years.
In light of that, here are my radical recommendations for getting out of credit card debt for real this time.
Radical recommendation #1: You should absolutely still contribute to your savings.
There’s a lot of conflicting advice out there on this topic, but here’s my stance: Make sure you’re saving as much as you’re putting towards your debt. If you’re putting $200 towards paying down debt, put $100 towards debt and $100 in a savings account instead.
I know, I know. But the interest! Won’t somebody please think of the interest?!
Here’s my question for you: How long have you been “paying off” this credit card debt? I’ve asked this question to clients and they tell me they’ve been paying off their credit cards for the last five, six, 11 years. It hasn’t gone away, no matter how much money they’ve thrown at it.
None of the debt paydown strategies we go over will mean anything until you stop using your credit cards as your emergency fund.
Radical recommendation #2: Stop. Using. Your. Credit. Cards.
Switch to debit for everything.
I know, I know. But the points! Won’t somebody please think of the points?!
You may have gotten sucked into a new credit card because it had a great rewards system – three-times points on groceries, petrol, and restaurants, plus you can get a round trip flight for free after 30,000 points!
But what does this really translate to? You will have to spend $10,000 to buy a $500 ticket with these so-called “points.” $10,000 at a 15 per cent APR (AKA annual percentage yield, AKA the rate at which the credit card company dings you for borrowing money) is $1,500 of interest per year. Points rarely work out unless you’re paying your credit cards in full.
It’s going to be a hard transition at first. Chances are, you’ve gotten to used to paying for things on the card and spending the cash you have in your checking account, so you may have to spend a month playing catch up.
Once you’re spending only on your debit card, this means all of your credit card payments are going towards paying down your balance, and not just maintaining for the month.
When you have these two guiding principles in place, debt pay down is just a matter of matching the right resources with the right strategies. And once you do that, you move on to seriously strategising how to actually make this debt go away. For good.