Credit Card Debt - Why It's so Important to Break Free, and How to Do It

In 2000, my wife and I were over $30,000 in credit card debt, with no hope of debt relief in sight. We owned about five credit cards, and each had several thousand dollars on them. Individually, the bills didn't look so overwhelming, but once we added them up for the month, our credit card bills totaled several hundred dollars that we couldn't afford.

When Debt Becomes All You Work For

The problem with being in so much debt was that the budget itself can be balanced, but with the credit card payments every month, it places the overall household budget off balance. Even if you cut corners, such as turn off cable or save on groceries, your budget is still riding on the very edge of complete financial collapse. The slightest financial crisis, such as a car accident or an unexpected home repair, can force a family to pull out the credit card, yet again, and drive themselves even more deeply into the hole of credit card debt they are in.

I'm Trapped By Debt - What Can I Do?

Debt can destroy families. While that may sound dramatic, it's actually true. According to Federal surveys, 57 percent of marriages end in divorce due to financial problems. Debt creates tremendous levels of stress and anxiety, and that stress can lead to serious health issues down the road. Debt is not only a financial matter. It affects family relationships and their health. This is why it's so important to break free from debt, and remain debt free.

While it might feel like an insurmountable task when it's faced head-on and in its entirety, it really isn't. When we were burdened by such a tremendous debt load, and after taking the time to calculate the total value of our debt, we simply sat in shock. At that moment, it seemed inconceivable that it might be possible to pay it all back in one lifetime. In the end, we did pay off the $30,000 in debt which we owed, but in doing so, we had captured a very important piece of wisdom about debt and finances.

10 Steps to Debt Relief

I am going to share 10 important steps with you that the credit card companies would prefer that you don't know. The reason they don't want you to know these secrets is because once you learn them and put them into practice, you'll have broken free from the clutches of credit card debt.

#1 Never pay the minimum - Being the engineer that I am, I decided to determine how long it would take to pay off all of the debt if we only paid the minimum versus if we paid just $50 more each month. Without the extra payment, it would have literally taken us about 30 years to pay off the debt. Just adding $50 to the overall payment decreased that amount of time by 10 years.

#2 Put an end to the high rates right now - Whenever you sign up for department store credit, or if you've had a card for a long time and might have missed a payment or two, your interest rates can potentially rise up to 24% or more. This sort of interest makes it impossible to pay off the bill. If your credit is good, find a low-rate offer and open up one more credit card, transferring all high interest rate cards onto the fixed low-interest rate card.

#3 Cut up the cards - Once you are finished transferring all of the loans and confirming that all of your interest rates are reasonable, put the cards away, never to be used again. If you don't trust yourself, then simply cut up the cards and throw them away. The only way you will experience true debt relief is by completely avoiding the use of credit.

#4 Reorganize your budget to live within your means - Closely examine your household budget, as well as your actual spending patterns from your bank statements. Once you have a good picture of where your money is going and what parts of the budget are unreasonably high, it's time to start cutting as many things out of the budget as you can.

#5 Watch the credit card statements very closely - Credit card companies play nasty tricks. It's a proven fact. In fact, in 2007 and 2008, Chase customers reported that Chase bank had modified the due dates of consumers' bills so that those customers who typically paid the bill the same time every month would end up being late. Why would Chase do such a thing? They did it for two reasons. If a person pays off their bill every month, then this would force them to at least incur a late fee. If a person has a large revolving debt with a very low, fixed interest rate, it would allow Chase to back out of the "fixed rate" agreement.

#6 Use the Snowball Technique - The single most effective technique, which worked very well for us, was to start out paying about $50 (or however much you can afford) more than the minimum on the card with the lowest balance. On the remaining cards you continue paying the minimum. Once that balance is paid off, take that previous payment you were making to that card, and add it to the card with the next highest balance. By doing this, we were able to pay off our debt in five years - while it would have taken us over 20 years had we only paid the minimum payment on all of them for the whole time.

#7 Monitor your debt closely. Always know how much you owe. Far too many people don't even pay attention to the balance of their debt. This makes it far too easy to continue using the credit card, because if you don't know the damage that already exists, it's much easier to do more damage. Force yourself to look at the balance on the credit card bill whenever it comes in, and tally up what you owe in total for the month. Keep a running list from month to month so you can watch your debt relief progress.

#8 Be careful not to relapse. Some people who are devoted to paying off their credit card debt do exceedingly well, until some major event like Christmas, or a new baby comes along. During major holidays or life events, people find it much easier to convince themselves that using debt to pay for things is "necessary." Remember - debt was never necessary for survival. Years ago, families used to put money in their savings accounts so that they could eventually buy the things they want. The need for instant gratification wasn't so epidemic back then.

#9 Boycott all credit. When you start doing this, you will feel great about yourself and what you're accomplishing. So good, in fact, that you may even consider swearing off all forms of debt. You may consider using your savings account, instead of a credit card, to buy things like your next car, for college tuition. It is possible to survive without using credit.

#10 Enjoy your debt free life. While you are devoting energy to saving for things, and making sacrifices so that you can pay off your debt faster - remind yourself what the ultimate goal is and how important it is to your life. Place a picture of an ad for a tropical vacation, or a picture of your dream car, on the refrigerator. These will serve as a reminder of the things that you'll be able to easily save for very quickly when you don't have to send such a large chunk of your paycheck to the credit card companies.

Most importantly, never give up. There may come a time when the credit card company tries something underhanded to charge you finance fees. Always call and complain. And if they don't remove the charge, do a balance transfer to another credit card, taking advantage of a low fixed rate transfer offer (make sure the transfer fee has a maximum limit.) Remain mindful of your interest rates, and never let them increase on you.

Staying mindful of your debt, and working hard to completely wipe out your debt for good, will pay off in the long run in ways that you've never imagined. A debt free life doesn't have to be just a pipe dream. It can be a reality, and far more quickly than you ever thought possible.