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How to Pay Off Credit Card Debt with the Destroyer Method

Pay off credit card debt

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So you want to pay off credit card debt? We’re sure you do! Being in credit card debt can cause serious trouble for years to come as you get buried in paying interest.

But you don’t have to let debt keep you down. It’s time to regain control by using our step by step guide to walk through how to destroy credit card debt.

Let’s do this!

PAY OFF CREDIT CARD DEBIT: READY, SET, DESTROY!

There are many ways to escape credit card debt. Choosing the method that works best for you doesn’t have to be an overwhelming process. Below you’ll find four steps to paying off credit card debt.

Step 1: Hide the cards

The absolute first thing you should do is put all of your credit cards in a safe place in the back of your closet.

Do not even think about using them until all the debt is paid off. Unless there is a medical or other emergency, forget these cards exist and focus on repayment. Also, be sure to hide your virtual versions, too! Log into any online accounts that have the account numbers stored and remove the saved cards.

Or, better yet, hack your way through it by calling the credit card companies and report the cards as lost. Because they will have to issue new cards with new numbers, your former card won’t work in all of the stored locations. This way you are 100% covered from accidentally using them somewhere online.

Step 2: Find the lowest possible interest rate by consolidating or balance transfer

With debt you have principal and interest. Principal is what you borrowed and interest is what they charge you for the loan. You want to make sure your payments mostly go toward principal. To achieve this you need to pay the lowest interest rate available to you.

Even if your interest rates are low, call the credit card company and request a 0% interest rate. You never know what you can get until you ask. If your credit score is 760 or above and you pay more than 15% interest, you should have more leverage to get a lower rate. Then if the company says no, do a balance transfer to a credit union credit card (they can’t charge more than 18% by law and with a good score, it’s usually much lower).

Step 3: Start paying off that credit card debt

After you acquire the lowest interest possible rates, do the following:

  1. Add up the minimum monthly payments of all your cards.
  2. Determine what 25% of your minimum monthly payment (if you can’t afford 25%, do 15-20%).
  3. Pay the minimum payment on every card, except the highest interest rate card. Put the additional 25% toward that card.
  4. After you pay off the highest interest rate card, put the extra 25% toward the next highest card.
  5. Rinse and repeat until you pay off all your credit cards.pay off credit card debt pinterest

Alternative Method: Debt management through a credit counseling agency

If you have high interest rate credit cards and a low credit score, you might need to use a credit counseling agency (NFCC.org or AICCCA.org) to get out of credit card debt. After discussing your financial situation with a counselor, you pay them, and they pay your credit cards off for you (usually, over a period of 4-5 years) via your debt management plan.

The benefit of an agency is that you can get a lower interest rate by paying a small fee for their financial management services. Oftentimes you can even have the fee waived, so be sure to ask. It’s also important to know that your credit score will not be affected by working with a credit counseling agency. However, if you choose to close a bunch of lines of credit, that probably will lower your score.

  • Note: Debt settlement is something different. You make all payments to the debt settlement company, which normally withholds payments to the credit card companies, even if you paid a lump sum to said debt settlement company. Once all your credit cards are in default due to this non-payment, the debt settlement company has leverage to force the credit card company to accept a reduced lump sum payment as settlement. Your credit rating goes down significantly due to the default, especially if the you were not behind on payments before the negotiation period began. Even though the accounts are “settled,” the default appears on your credit record for seven years. This method of debt reduction can be better than bankruptcy in the long run.

Step 4: Once your credit card debt is paid off

After you’re out of credit card debt (hooray!), you might be wondering whether to keep your cards open or close them. The answer is, it depends. If any of your credit cards charge a fee to keep them open, you should consider closing them. There is no reason to pay a fee on credit cards.

If you are a big spender and unable to keep them open without being tempted to use them, you should close them.

If your credit cards do not charge a fee, and you can control yourself, then keep them open. These credit cards give you a credit limit. About a third of your credit score is made up of what you owe to your credit limit ratio. If you close all your accounts, it could hurt your credit score.

HOW TO STAY OUT OF CREDIT CARD DEBT

Once you are out of credit card debt, you need ensure you stay out of credit card debt.

Step 1: Determine why you got into debt in the first place

Ask yourself why you want “things”. Then tell yourself that you don’t need stuff because it just weighs you down and gets you into trouble. Doing this over and over should help you start to question why you’re buying ANOTHER thing from Amazon.

Talk with family members and see if there are deeper reasons from your family history that explain unnecessary spending habits.

You need to know why you got into debt in the first place if you want there to be lasting change.

Step 2: Change your bad habits

If you’re accustomed to spending and maintaining a credit card balance, your mindset is that this is acceptable. Remember, the goal is to create a strong financial foundation. To do this, you need to begin thinking differently and create new habits that help you progress toward financial success.

Step 3: Minimums no more

If you continue to use credit cards after you’re out of debt, make sure you are a transactor, not a revolver. A transactor pays off credit cards in full every month. A revolver keeps a balance on credit cards, paying only the minimum. Being a transactor proves to credit agencies that you are trustworthy and grants you good credit juju.

Step 4: Rethink rewards

Your credit card rewards programs might seem great, but if they are keeping you in debt, how great are they really? Companies can change rewards programs whenever they want, leaving you with less valuable points. By using a credit card, you are way more likely to spend more than you would if you used cash. So, are those points/miles/ponies really worth risking your financial future?

Step 5: Be thoughtful

Really think about using credit cards. Ask yourself if credit cards are right for you. If you are a spender and cannot commit to paying off your cards every month, then credit cards are not for you. Only you can understand this about yourself.

If you are in credit card debt, you are creating a huge roadblock in the way of building a strong financial foundation. Is that “stuff” really worth it?

“If you know the enemy and know yourself, you need not fear the result of a hundred battles. If you know yourself but not the enemy, for every victory gained you will also suffer a defeat. If you know neither the enemy nor yourself, you will succumb in every battle.” – Sun Tzu

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