Episode Transcript
[00:00:00] Speaker A: I'm on the phone with Mansa Musa. That means it's take control Tuesday. Mansa, today we're going to talk about something that a lot of people have to deal with right now, and it's credit card debt.
[00:00:11] Speaker B: Yeah, let's talk about how to pay it off. I mean, since interest rates started going up, credit card debt now is carrying like 18% to 24% interest rates. It's ridiculous. And if you have credit card debt, it's hard to get out of that hole at those interest rates. So let's talk about seven strategies that work with credit card debt. Number one is the avalanche method. The avalanche method is where you take your highest interest credit card. First of all, you list your credit cards in order from the highest to the lowest interest, and then you focus on paying off the highest interest first. And how you do that is you make minimum payments on everything except the highest interest, and then you put extra money on that. You do that until it's paid off. Then you roll that over to the next debt and so on. Now, the reverse of that is what we call the snowball method. Number two.
[00:01:17] Speaker A: Okay.
[00:01:18] Speaker B: And this is the one that most people prefer because it gives you success the earliest. Once again, you want to list your credit card debt from the highest balance to the lowest balance. You want to make minimum payments on everything but the lowest balance, and that's where you want to put the extra money.
[00:01:37] Speaker A: Okay?
[00:01:38] Speaker B: Once you get that paid off, that gives you a sense of victory. But then you take that money that you were paying on it, you add it to the minimum payment of the next card, and you start paying it off. So on. So off. As they say, wash, rinse, and repeat.
[00:01:54] Speaker A: Yes.
[00:01:55] Speaker B: The other thing you can do is consider a balance transfer card if you're eligible for one. Sometimes you can transfer a balance from a high interest credit card to an offer on a balance transfer credit card that sometimes runs at 0%, and once again, you can pay that down at 0%. You'll save money over the long run.
[00:02:19] Speaker A: Okay.
[00:02:20] Speaker B: Number four, stop using your credit cards. It's hard to get out of a hole if you don't stop digging. Now, it can be tough to go to 100% cash, but it provides discipline to people, and it's something that you ought to consider. Number five, grow your emergency fund. The reason that people overuse credit cards is because they don't have an emergency fund. Yeah, something happens, and they have to go to credit. Develop your own emergency fund. We said before on the program that $2100 in an emergency fund is enough to help most people over most situations. The 6th thing to do, I mentioned this before, is just switch to cash, figure out how to not use your credit cards, put them away, go to cash. Your lifestyle will change, but it can be done. And the final one is to explore debt consolidation loans. And basically what that is is when you take your credit card debt and you change it into an installment loan and that will give you a lower interest rate and lower payment. The problem with that strategy though, Randy, is if you don't deal with why you're in debt in the first place.
[00:03:45] Speaker A: Yeah.
[00:03:46] Speaker B: Then all of this debt consolidation loan does is allow you to get even more in debt if you don't control your credit card spend. So those are the seven strategies that we encourage people to look at. If you need help, personal help with these, you can go to hopedetroit.net, sign up for one of the classes there, or reach out to me with operation hope and we'll coach you one to one to help you get out of credit card debt. Stop letting these high interest rates steal your money and your dreams.
[00:04:19] Speaker A: Absolutely. And sometimes you joy too.
[00:04:23] Speaker B: Amen to that.
[00:04:25] Speaker A: Again, it's hopedetroit.net so that you can get into these no cost seminars and webinars and mansa, they can go to my website. I'm finally getting back up to speed with it at take controlTuesday.com for the archives. Thanks so much.
[00:04:44] Speaker B: Thank you.
