The Long and Crummy Road Out of Credit Card Debt
It almost goes without saying that one of the worst financial mistakes you can make is carrying a credit card balance month to month. Yet, until this week, I was one of the many, many Americans that had outstanding credit card debt. While it has been a long and crummy road getting to this point, I am happy to finally be rid of a burden I have carried for almost ten years. Actually, I’m not going to lie, it feels a lot like…
Smart Decisions: I Didn’t Make Them
I got my first credit card (Discover) back in 2006 without any real knowledge of the card itself. I knew that I needed to pay my balance in full each month, but didn’t see much of an issue carrying one either. At the time, I mostly used the card to buy jerseys and DVDs off Ebay. My debt was reasonable (to me at least) and so I didn’t give it much thought. When I moved out of my mom’s house, I used the card to buy most of the furniture and assorted items for the apartment. This immediately put me deeper into debt than I had been at any time prior. But I was never really fazed by it. I made my monthly payment (the minimum) and just went about my life. I paid no attention to the interest rate and whether or not I was making any sort of dent in the debt. I was by all accounts, pretty naive and stupid. Before I could really grasp what had happened, I was in way over my head. I needed a plan.
Get a Plan and Stick to it! (I Mean REALLY Stick to it!!)
My first plan to get out of credit card debt was to sign up for a zero percent interest credit card and start paying down the balance. Which was great in theory, but my first month, I was late on my payment, and the regular interest rate kicked in. To this day, I’m still not really sure if I couldn’t have just called the company and explained the mistake and gone back to zero percent, but I wasn’t really all that interested (still) in fixing the problem.
Somehow, I tried this same strategy again a few years later and finally, something clicked in my brain. I did the math (not my best subject!) and calculated how much of my balance could be transferred and paid off under the fifteen months term that I had a zero percent interest. During that time, I was able to pay off one of the two credit cards I had been carrying a balance with. Luckily, the same credit card was running a promotion at the end of my payoff and was willing to allow me to do another balance transfer for the same time frame with the same interest rates. I ran the numbers and marked the beginning of this year on the calendar as the date that I would finally be rid of all that credit card debt. With a little help from my tax refund, the debt was officially wiped away.
Ok, What Does This Have to do With Points and Miles?
One of, if not the biggest and easiest way to increase your points and miles balance is signing up for credit cards. Read any blog out there and that’s guaranteed to be an essential component of getting where you want to go, whether it be flights, hotels, or other. And while that is certainly true, it’s important to remember a few of things:
- Those points aren’t worth nearly as much if you don’t pay your balance off in full each month. In fact, that is a HUGE part of this hobby.
- Make the credit cards work for you, not the other way around. This is something it took me a long time to understand. You can earn points and miles for so many different things, and it is certainly a great system to take advantage of. Just don’t allow yourself to spend beyond your means.
- If you don’t anticipate being able to clear the card’s balance each month, reevaluate whether or not you need to make that purchase. There are certainly going to be times where this isn’t possible (car repairs, medical bills, etc…) but the best way to enjoy these rewards is without getting yourself into debt.
- Interest rates are everything. A zero percent interest card is a great way to cut out old credit card balances. If you have the credit for it, you can really do yourself a favor and go that route. But a high interest rate isn’t the end of the world, as long as you never carry a balance.
I spent A LOT of time without a solid understanding of how credit works. And while I learned from mistakes, I spent several years making them, so there was a good deal of damage to repair. But it can be done and I can attest to that. My credit never really took a hit because I always paid something, even if was just the minimum. Now though, my credit score has gone up and the opportunities for new cards have improved.
I got into the points and miles world at the end of 2013 and it has helped me tremendously expand my understanding of how credit works. Before you jump in, make sure you understand all the risks associated with credit cards, and remember never carry a balance! With a solid foundation you can achieve your travel goals!