YOUR PERSONAL CREDIT CARD MAKEOVER ACTION PLAN - Part 3

←   continued from Part 2

☐ Step 3. Stop using your credit cards and pay down your debt.

☐   Stop using your cards altogether if possible. Use cash or debit cards for your monthly expenses using the envelope system (or your own system) and follow your new budget.

☐   If your cash flow is so bad you need to float bills for now, at least stop using the higher rate cards and charge no more than you can afford to pay off each month. Stop all non-essential expenses. (Starbucks is NOT essential and bag lunches can be healthy.). Put the unused cards in a drawer, cut them up, or freeze them in a can so they aren't available for impulse purchases. Don't close the accounts which can hurt your credit score, even after they are paid off.

☐  Use any free cash to pay down the highest interest rate card first by paying only the minimum on all other cards. (In some cases it may be a balance with the highest rate on a card that has more than one interest rate.)

☐  Once the highest interest rate balance is paid off, then you pay off the 2 nd highest rate balance using all the money freed up from the paid off balance plus the 2 nd card's original minimum payment, while continuing to pay the minimum on the other remaining cards. Each paid off card frees up its minimum payment increasing the cash available so you pay off the cards faster and faster creating a "snowball" effect.

☐  Optional: If it feels better for you to pay off a small credit card balance first then do it and stop using that card.

☐  One great feature of the new credit card rules is the statement shows how you can pay off the card in only 36 months by just paying a bit more than the minimum. If you free up enough cash every month, you can easily be credit card debt free in only 3 years.

☐  Change the due dates to better match your cash flow, if needed. For instance if you are paid twice a month and pay your rent or mortgage on the 1 st maybe paying the cards on the 15 th or 20 th will work better for you. If you're paid weekly, maybe spread the due dates across the month.

☐  Set up Automatic Minimum Payments to avoid late payments, penalties, and marks against your credit report, especially when on vacation etc. You can usually do this online. You can make extra payments as needed by check or online to pay more than the minimum.

  Credit Card FAQs continued in Part 4 →

A free consumer debt consultation is available from the:

National Foundation for Credit Counseling

(also known as Consumer Credit Counseling Service or CCCS)

www.nfcc.org or 800-388-2227 (your call will be routed to the nearest office)