For a good portion of my early adult life, I battled credit card debt.
Several years ago, I wouldn’t have been able to even write that sentence. I would have written and deleted it about ten times. Then I would try to find some way to circumvent the admission and try to talk about credit card debt without admitting that I had my own.
But I’ve had a few years of writing about personal finance to practice saying this out loud. And in that process, I’ve realized how important it is to be able to do so – how publicly admitting a problem is the first step in solving the problem.
It’s so hard to admit to credit card debt because there’s always going to be someone who assumes the debt was born out of irresponsibility. Sometimes that’s true and sometimes the debt comes from a lack of budgeting skills or earning too little to get ahead. No matter the case, no one should be shamed for debt – not just because we should refrain from judging lives that aren’t our own, but also because…
We are never properly taught how to manage our finances.
We don’t learn how to manage our finances in school. We don’t get a special budgeting lesson with our first bank account. And, while credit card companies are getting better at showing the problem with making minimum payments, they don’t talk to us about the wildly addictive nature of credit cards.
So if you’ve been beating yourself up for your debt, here’s your permission to take it easy. None of us were given the tools we needed to manage our finances unless we learned them from our parents. But what we do have is an opportunity to turn the situation around now!
First up is learning the most important way to prevent further accumulation of credit card debt: learning to live without credit cards.
Cut, Freeze, or Close Your Card(s)
When it comes to not using credit cards, cold turkey is my preferred method. I’ve tried and failed at weaning off of them so many times and finally realized that just getting them out of the picture was the only way I could be 100% sure of not accumulating more debt.
It’s painful for the first few weeks, but worth it. Even after I paid off my debt, I set out with wonderful intentions of using my credit card but not accumulating a balance (meaning I paid the card in full every month). While I was successful at not accumulating a balance, that didn’t mean I was successfully sticking to my budget.
Put simply, I found that having credit cards made it way too easy to go over my budget. A simple swipe at a coffee shop when I was out of cash or a buy with one click experience on Amazon would always seem like no big deal – until you add them up over 30 days. While it may seem like not much money is being spent, that’s often not the case over time.
Don’t nickel and dime yourself. Don’t even give yourself the temptation to keep acquiring anything on credit. Cut, freeze, or close your credit card or cards. That’s the only guaranteed way to not accumulate more credit card debt.
Use Cash on All In-Person Purchases
I recognize that advising anyone to use cash only makes me sound like I still tell time with a sun dial. I promise, I’m not anti-technology in any way (far from it – I got my career start in Silicon Valley!). But I am anti-ease-of-making-purchases with a credit or debit card.
Even if you use an app to track all of your purchases, apps don’t change the fact that it is just too easy to swipe a card. Every single unplanned purchase feels like no big deal when swiping a card – we don’t feel the pain of the action until we look at our statements online later. And sometimes we can avoid it by just not looking at the statements at all.
If you’re serious about not using credit cards anymore, try to cut all cards out of your life (or at least when making a purchase in person). When you write out a budget and allot a certain amount of money to in-person purchases, it will be a lot easier to see how you’re doing when the results are in your wallet. You either have the amount of cash you need on hand or not.
Bonus: if you have one bad month where you run out of money twice as fast as you intended to (highly likely in the first few months), you’ll learn really quickly what was happening with your cards before this. Again, anything you can do to stop nickel and diming yourself will be the best thing you can do.
Create a Separate Bank Account for Online Purchases
It goes without saying that there will be times you have to use a card. (It’s not exactly easy to purchase plane tickets in cash.) For purchases made with a card (anything online), use a separate bank account that you fund only when you need to. You can also add an emergency fund to that account so you still have the emergency backup people want when they keep at least one credit card in their wallets.
Having this card with a separate bank account helps in a variety of ways. First of all, it should alleviate any security concerns you may have. If for some reason that card is compromised, at least it won’t be possible to access all of your money. Second of all, it should help you stick to your budget since you won’t have access to all of your money – just the money you set aside for card purchases.
For me, this tip is a big one. I’m always a bit nervous about certain purchases (especially in any store), due to the frequency of cards being compromised. It definitely helps that most cards are getting the chip, but until then I prefer not to use my main bank for any kind of purchase that could get compromised.
Just Give It a Few Weeks
There’s no question that what I’m suggesting will seem borderline crazy or completely out of touch with reality. I’m advocating for this anyway because of a point I mentioned above:
Credit cards are shockingly addictive – even if it doesn’t seem like it.
Yes, credit cards are convenient and perfect for emergencies. But they’re also perfect for enabling a debt habit.
Even when we have the best of intentions and the most well-plotted out budget, that swipe is just so easy and so tempting (almost even more so when it comes to the cheaper purchases). If you’re serious about getting out of debt and never acquiring it again, give this method a try. If you try it for a few weeks and it doesn’t work out, then try a new plan.
The important thing is that you fully commit to every plan you try and then iterate until you find the perfect one for you.