Credit Card Snowball

I was listening to the Dave Ramsey show podcast as I always do each week. It is really interesting and the motto of the show is people becoming debt free. Normally this is debt free except for the mortgage payment.

I hear each week people complain about having to much debt, being disorganized and having up to 22 credit cards. This amazes me how someone could let their life become so disorganized and let their credit card snowball to this extent. At this point things get really out of control and you will start drowning and action has to be taken immediately.

The issue is letting yourself get behind on payments thereby destroying your chances of getting a low interest credit card, many at 0% apr or a very low interest credit card for the life of a balance transfer. You do not necessarily have to consolidate all the cards into one account but it makes sense if you can. This is what I would recommend first if you can do it.

The next thing is after trying to get your debt shifted to lower interest debt is to then get rid of it all together. This is a matter of discipline and taking the total debt and coming up with a plan over 1-3 years and make a life change. This means cutting out expenses that are not absolutely critical. This means cable tv, cell phones, restaurant expenses, cutting groceries down and all other expenses that you can. Make it a job to reduce expenses and increase income and take the extra and systematically pay down the highest interest debt first and go from there to each and every debt until they are all paid off. This can be done but the bad spending habits and lack of organization has to change.

Keeping track of income and outgoing expenses has to be done each month so that you can see the progress and areas to continue to improve.

It can be done and after hearing many people calling in that are now debt free is actually very exciting.

I know the system would disagree with me but if you change your life and become debt free credit cards I believe can be used but the amount charged must be part of the monthly budget. You just use the credit card to pay instead of using cash which I still think is a safer and more effective way to pay. With purchases you can build cash back or rewards which can be used for other expenses or vacations. The main thing is to pay the card off each month. If you can't do this than you should not have a credit card and that is where I agree with the debt free no credit card philosophy for those that cannot budget and not get out of control and back into the snowball effect.

If you can use credit cards responsibly there are many advantages, one of the biggest being used as a tracking tool for expenses. A debit card is another good method and this comes right out of your checking account and gives you the benefit of not charging debt but you can still track your expenses. The credit card has the benefit of a 20-30 day grace period on new charges and the ability to build reward points either for cash or airline miles, hotel or rental cards and gift certificates with everyday purchases. It can add up over time and can work effectively if the credit card balances are paid off and on time in conjunction with a good budget plan.

Part of the Dave Ramsey show is that when people meet their objective and become debt free they call in to the Radio show and yell "I'm Debt Free!" and he plays the Freedom yell from the movie BraveHeart which was one of my favorite movies. It is actually very inspiring. Sometimes I kind of wonder if some of the callers are stretching the truth and I have to chuckle when someone says they make 40K per year and have paid off 100K in 1 year you gotta kind of wonder? But most of the callers I beieve are actually acheving there goals and are just really excited and want to be hear and have the opportunity to do the yell.

If you are in the credit card snowball I hope this advice will help and motivate you to change your financial life for the better by coming up with a plan and taking action.

Steve Sikes writes articles on credit and has a credit card comparison site that has 0% apr, low interest, balance transfers, and credit cards and tools for those with bad credit. The site also has auto, home, student, computer, military, payday loans and products as well as credit reporting. The website is called http://www.CreditCardRadio.com so visit and book mark this site as a valuable financial resource. This article can be used freely as content but ensure that all links are maintained and included when using this content.

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[By vantuminh] [05/May/07]