My Debt Plan for My Credit Cards

The poor economy and the loss of a job have thrown my personal finances for a loop. We have relied on credit cards to see us through a rough patch and next comes the daunting task of paying off those credit cards and getting our personal finances back in order.

The first step to paying off the credit cards is to analyze our budget. We have to know exactly how much we owe to the credit cards, what the interest rate is for each, as well as how much of extra we can afford to pay towards them.

Our credit card balances and interest are: Card A-- $3,240 at 12% interest, Card B-- $4,211 at 3% interest for six months, and Card C-- $1,254 at 24% interest. After analyzing our other bills and income, I find that I have $600 per month to use to pay down the credit cards and reduce our debt. The question is, which credit card a person should focus on.

One rule of thumb is to pay the highest interest rate off first. This will save you the most money in the long run. I noticed something on Card B that is advantageous. I can transfer up to $2,000, which I will, to take advantage of the lower interest rate. I will transfer Card C's balance and include the $75 payment to Card B as well as the $600 extra and the $75 normal payment. By paying $750 per month, the balance will be paid off within the six month grace period.

After Card B is paid off, the $750 will then be applied Card A and all three cards will be paid off within ten months.

One of the keys to having healthy personal finances is to have an emergency fund. Mine was depleted during 2010. Once all three credit cards are paid off, the extra money will go into savings to rebuild our emergency fund. The credit cards will be clear to use as a secondary emergency fund.

Many people are not as fortunate as I am and are struggling to make ends meet. To get out of debt, you have to know how much you owe and to see where you can cut expenses to find the extra money to pay off your debt. The only person who can control their personal finances is that person.

I would prefer to spend the $600 each month on something fun, but it is more important to have my finances in order in case there is another emergency. Ten months of sacrifice to pay off the credit card debt will be well worth the tightening of the belt for my family during economic hard times.

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