The rule for getting out of debt is pretty simple - stop charging things and start paying it off. It's a simple thing to grasp. But like so many things in life, simple isn’t always easy. If you're $5-10,000 in debt or more, how do you pay it off? This is MoneyWise Live - biblical wisdom for your financial decisions. <ul><li>It’s a question we get a lot - “I owe “so many thousands of dollars in debt. What should I do..." First, be encouraged. In Matthew 19:26, Jesus says, “ … with God all things are possible.” While paying off debt is no picnic, the rewards are great!</li><li>On this episode, we’ll focus on consumer debt, primarily credit cards. The rule is simple, but by taking certain steps, you can make the process a lot easier. </li><li>1.) Tackle the one thing that slows down debt repayment the most - the interest you’re paying especially on credit cards. Call your credit card issuer and simply ask for a lower rate. You’ll increase your chances if you have an offer for a balance transfer to another card in hand. Tell the customer service rep about the offer, and ask if they’d be willing to match the lower rate to keep you as a customer.</li><li>If you’re turned down, don’t automatically do the balance transfer. You would only do that with a great deal of caution. Don’t even consider it unless you’re living on a budget and below your means. That means you’ve stopped using the credit card for at least six months. </li><li>To transfer, find the right card to transfer to by looking for 3 things:<ul><li>	After the introductory period expiration, the new card must have a lower rate than what you’re paying now.</li><li>No annual fee</li><li>No balance transfer fee. (look at bankrate.com)</li></ul></li><li>Commit to closing the old credit card account immediately after the balance is transferred. If you don’t, opening up a new account will probably just lead to even more debt.</li><li>2.) Start paying more than the minimum on your credit card(s). Use the snowball method. You’re already on a budget and you know how much discretionary income you have left over. Put half of that discretionary income on top of the minimum payment for the card or debt with the lowest balance. Don’t worry about interest rates and pay off the smallest balance first to get the psychological boost of making headway on your debt.</li><li>When the smallest balance is paid off, take half of your discretionary income each month (which is greater now) and put it on the smallest balance that’s left. Keep repeating the process. Your debt reduction will pick up speed like a snowball rolling downhill.</li><li>You're only putting half of your discretionary income against your debt so with the other half, begin building up your emergency fund. Put money aside for things like car repairs, medical expenses or a job loss - things that drove you to use a credit card in the past.</li><li>This will take awhile. You want to have 3-6 months living expenses in liquid assets where you can get to it if you need it. Put it in an online bank like Ally, Markus or Capital One 360 to earn a little better interest.</li><li>3.) Leave home without it. Make it harder to charge things. Get rid of the idea that you can use plastic to buy things. </li><li>Studies show that you’ll automatically spend up to 30% less using cash just because it’s harder to part with real money than it is to swipe a credit or debit card.</li><li>4.) Use it and lose it. If anywhere in this process you use a credit card, you have to get rid of it or you’ll never make any progress. </li><li>The first time you buy something with a credit card, close the account. Your credit score will take a bit of a hit if you close an account while still owing a balance on it but that’s okay. It will steadily go back up as you pay down your debt.</li><li>Still need help? Contact ChristianCreditCounselors.org who’ll get you on a debt management plan and lower your interest rates so you can pay off the debt up to 80% faster than going it alone.</li></ul>Next, Rob answers these questions at 800-525-7000 or via email at Questions@MoneyWiseLive.org:<ul><li>What is the custodian of an IRA?</li><li>What is an IRA?</li><li>If you're 61, still working for a few more months, your husband does not have a pension and is drawing Social Security and it is being recommended you cash the entirety of your pension in to buy a life insurance policy to cover your spouse, is this a good recommendation and, if so, how much insurance would be correct?</li><li>If donate your RMD to avoid taxes on the gains (QCD), do you lose the charitable donation deduction?</li><li>If you have 3 grown children and own a home with 30 acres of property how do you divide these assets considering the fact that some of the children don't need houses?</li><li>Where should you send your tithe if you're between churches?</li><li>What are the basic steps one should take to improve your credit score?</li><li>If you currently have a 5% mortgage and have received a refinance offer that will take you 15 year, 2.5% loan but it will increase your payment $500/month, is this a good deal?</li><li>Is there a way to reduce your payments on $123,000 you owe on your home, worth $500,000, if your husband is ill and you are financially struggling?</li><li>How can you buy back an inherited house with a reverse mortgage on it?</li><li>How much of your surplus income should you be putting toward credit card debt and how much to investments?</li><li>What's the best way to ensure your assets will be distributed to your children and grandchildren after you die?</li></ul>Be sure to check out the rest of MoneyWise.org to connect with a MoneyWise Coach or access our books and our many free helpful resources. You can also find us on Facebook (MoneyWise Media) and join the conversation. Thanks for your prayerful and financial support that helps keep MoneyWise on the air. And if you'd like to help, just click the Donate tab at the top of the page.

FaithFi

Listen to MoneyWise Live each weekday at 4pm EST on Moody Radio.

MoneyWise Live

The rule for getting out of debt is pretty simple - stop charging things and start paying it off.  It's a simple thing to grasp.  But like so many things in life, simple isn’t always easy.  If you're $5-10,000 in debt or more, how do you pay it off?

How To Pay Off Credit Card Debt

FaithFi | Feb 23, 2022

Show Notes

Where Faith Meets Finance

You May Also Like