Friday, December 3, 2010

No More Miniumum Payments!

In April of this year I wrote the post below.  I am happy to say that effective 11/19/2010 I made my FINAL payment on my last credit card and am now 100% credit card debt free!  In less than 1 year I managed to rid myself of almost 10K in credit card debt.  Grant it a bit of saccrifice was required but the relief I feel after ridding myself of this huge burden is well worth it.  Here's to living on a CASH basis.  My new motto is: If I can't pay for it with CASH now then I don't NEED it!  To learn how I did it read on....

Original Post: April 2010
You make your minimum credit card payment every month and the balance never seems to go down.  That's because making the minimum payment ensures that you will be paying that credit card for many many years to come.  Check out the scenario below based on one of my credit cards.  Yes, the interest rate is insanely high I know!  Despite my decent credit rating the credit card company decided to jack my interest rate from 9% to 26.24% last year.  Why you ask, I have no idea: I assume it's simply because THEY CAN.  Needless to say that card is CLOSED and no longer usable, yay me!

Balance: $3961
Interest Rate: 26.24%
Minimum Payment: $130

If I continue making just the minimum payment it will take me 17 years to payoff this card.  That's right, not a typo 17 years!  I will have paid $6440 in interest, nearly double the principal amount that I owe.  Is that insane or what???

After reading Life or Debt 2010, the book that saved my life and bank account, I kid you not, I discovered a method for eliminating my debt and avoiding 17 years of minimum payments and over $6000 in interest.  To get full details you're going to have to read the book for yourself, which I highly recommend.  To give you the gist of it the method is a snowball effect.  You attack one item of debt at a time starting with the smallest and working your way up to the largest.  Every time you pay off one item you move onto the next larger item and add whatever you were paying on the previous item to the payment for the next item in line.  I know sounds confusing, read the book the author explains it much better than I do!

So let's say instead of making the minimum payment of $130 per month on the card in the earlier scenario I attack it with a $600 payment each month.  The results are astounding! By making a payment of $600 per month the card will be completely paid off in 8 months and I will have paid only $263.68 in interest.  That's a savings of $6176.32 in interest!  Yes, making a $600 a month payment is a bit tough and requires discipline, planning and cutting back on non-essentials, but with those kind of results how can I not?  Don't take my word for it, see how many years and dollars you can save yourself with this Debt Reduction Calculator from CNN Money.  Then go get Life or Debt 2010, to save money do what I do: use the most important piece of plastic in your wallet, no it's not a credit card!


  1. Easily one of the best entries I have read in the past 30 days. Many upon many congrats to you Jen. Ps: May I suggest you write to the author and share your story. I really value the cold facts. It's the only way anyone will ever be able to kill the debt beast. Amazing to know that you made this happen in a year. Super impressive, thnx for sharing! :)

  2. SO HAPPY FOR YOU JEN!!!! You've set an example for me :)

  3. I agree with Brit, I'm drowning in debt right now along with a mortgage payment and car payment. So to hear your story is amazing, I am going to go and buy the book. I will try to do this. But it's very hard I'm a single mom of 3 but it can be done... Thank you for the story it has helped me with many decisions.

  4. Thank you for your feedback! You CAN do it! The book shows you how step by step so it isn't overwhelming. Being a single mom is tough, I know from experience, but there is no reason it has to be miserable and more stressful than necessary with debt. I warn you, it's going to take some sacrifice on your part, but trust me it will be well worth it! I wish you the best in your debt free endeavors!