Money Well Spent with Lee Kent . . .

Business

I have a lot of credit card debt with really high balances, how will I ever get out from under it?

A man is fishing in the middle of a lake. He is having so much fun catching fish that he fails to notice that he kicked the plug out of a hole in the bottom of the boat. Water starts flooding in, filling his boat. He sees the water, but it is only an inch deep so he keeps reelin’em in. Before he knows it, the water is ankle deep. He takes his coffee cup and throws a few cups of water overboard between fish. This is a loosing proposition, for every cup of water he bails; three more are coming through the hole. All through this ordeal the plug is bobbing around at his feet. Finally, so much water has come onboard that his boat is swamped and sinks to the bottom of the lake. Just before his head goes under water, he sees the plug floating along its way and he thinks to himself, “I should have used that to save the boat….”

Why didn’t the man just stop fishing long enough to plug the hole? That was dumb! Let’s not throw names around. Let’s just say he was distracted and failed to realize how quickly inattention to a problem can catch up with you. Many of us are in our own flooding boat. All the while we continue fishing at Wal-Mart or Bass Pro Shop. We are too distracted by the latest catch of a good sale to notice our boat is on its way to the bottom.

Credit card companies want you in debt FOREVER! They want to keep you in the chains of debt. If you fall into this trap you become a slave to the credit card companies. You forever make the minimum payment, most of which is finance charges. Very little of the minimum payment goes to pay off what you actually owe. There are people paying finance charges as high as 20 to 30%. The only way it could be higher is if you owed money to a loan shark. At least with credit cards you don’t have to worry about Vinny coming by to collect with a baseball bat.

If you find yourself in a sinking boat of credit card debt, the first thing to do is STOP using them! Take the cards out of your wallet and put them in an envelope. Take a roll of duct tape and wrap the envelope and cards 10-15 times. Throw them in the back of a drawer. This way you do not have easy access to them. If you cannot pay for something with cash, you do not need to buy it.

As far as paying off what you have already spent on the cards, do not worry about paying off the one with the largest balance. Write down each balance, in order, according to the highest finance charge to the lowest. For every card except the one with the highest finance charge, make only the minimum payment. For the card with the highest finance charge, pay as much extra each month as you can. Continue this until it is paid off. Once you have paid off the highest rate card, move down to the next highest and repeat. Eventually, you will pay them all off. This technique is called “laddering”. You ladder your debt most expensive to least expensive. You then attack the most expensive debt until it is paid off and continue down the ladder.

For those of you who master your credit cards, you can turn the table and actually have credit cards that pay you money! I will talk about this and the correct way to use a credit card next time.

If you see a plug floating at your feet and ignore it, make sure to take a deep breath….!

Leave a comment

Back to Top