The Shovel and the Hole

I received my first credit card solicitation when I was still in high school. I remember thinking they had the wrong person before I ripped it up and threw it away. But in college they began coming in earnest. I would get one a week, sometimes one a day advertising low balance transfer rates, and limited time low APR’s. Even then, I was concerned about messing up my good credit (thanks to my parents), and I never applied. However, many of my friends did apply and without a clue of how to manage the credit cards, they soon found themselves in credit card debt.

I need to do an entire series on credit cards and their dangers and value, but for today I just want to talk about the “minimum amount due”. Nothing will dig your credit card hole faster than being late on a payment or missing a payment all together. This will result in the credit card company raising your APR (what they charge you to use their money), as well as assessing finance charge fees and late fees. If you are already in a credit card hole, a budget is imperative to you ever seeing the light of day again (figuratively speaking).

In fact, if you have a credit card where you cannot pay off the entire balance at the end of this month, you have to stop using your credit card. If all of your needs and bills are being budgeted out of your earnings, there will be no need for you to put any additional charges on your credit card and you can finally make headway in beginning to pay it down. If you continue to spend more than you earn, you will continue to go further and further into debt. The only answer is to stop spending what you do not have, and begin to live in the now through a budget.

Your minimum payment on your credit card must be a part of your budget. By not using that card any longer, the minimum payment should stabilize and you can begin to reduce your debt. After we have fully established your budget, we will return to this topic to see what you can afford to additionally pay toward the card each month. In fact, I want to challenge you never to pay the minimum payment on a credit card. Always pay more, even $5 more, as that will keep your momentum going forward and up out of that hole.

Credit card debt is the most widespread and dangerously beguiling trap that you will encounter in your finances. Most Americans are at least $7,000.00 in debt to credit cards! So if you have fallen into that trap, you are definitely not alone. However, don’t despair because there is always a way out. Credit cards have never been your answer to freedom, they have always been your shovel into the hole of debt. Today, by stopping any additional spending on your credit cards and making your minimum payments, you can get rid of that shovel. It is time to get free from the darkness of credit card debt, but first you have to stop digging the hole.