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4 Things You Need To Know If You’re Drowning In Credit Card Debt – Ep. 108
Are you overwhelmed by credit card debt?? Let’s dive into the four essential things you need to know!
All without guilt and shame, not all debt is bad, but these steps can have lifelong consequences, so here we go!
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Podcast Key Points:
0:00 – Episode Overview
1:29 – Lifelong Impact
3:24 – Should You Close The Account?
5:35 – What To Do If You’re Struggling With Spending
8:19 – Story Time – Focusing On What You Can Control
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4 Things to Know About Credit Card Debt: A No-Guilt Approach
Let’s talk about credit card debt and four things you need to know if you feel like you’re drowning in credit card debt of course in a no guilt, no shame fashion, because not all debt is bad. But if you’re drowning in credit card debt, here’s what you need to know. So let’s do this!
This is the Your Money Your Life podcast. I’m your host, Aimee Cerka, a money confidence coach for female entrepreneurs on the path to six figures.
After over 10 years in the personal finance industry and multiple personal financial and medical crisis. I was fed up with the lies that are being shouted from the rooftops by the Gurus and the media said I help you simplify, solidify and scale your money. By blending tactile money strategies with mindset work, you can create unstoppable finances together, you’ll finally figure out the money thing. So you can make more money in less time without living off of beans and rice, or sacrificing your lifestyle.
Episodes here on the podcast are short and sweet. Being married, having four kids at home, homeschooling being the CEO running the household, I’m kind of busy. And I know you are too. So let’s keep it simple and get to the point. Welcome. I’m so glad you’re here.
Welcome back to the Your Money, Your Life podcast. So we are talking about four things that you need to know if you’re drowning in credit card debt. Because if you do this wrong, it can can cause like, lifelong impact. Not being dramatic. Okay?
There’s a lot of false information out there when it comes to debt, and credit card debt and some of those things. There’s a lot of gurus out there to talk about, you got to get on debt, you got to get out of debt, you have to get out of debt. And we all know that.
Like that’s not well, hopefully you’ve heard me say by now, like, that’s not necessarily accurate. Okay. And there’s a lot of extra emotions and guilt and shame that’s brought in there that is irrelevant and not factual. There is a certain percentage of the population that yes, they should be debt-free.
And being out of Consumer Debt isn’t necessarily like, it’s not a bad thing. But they’re smart ways. And to leverage that and to do things wisely. So just like shaming all that, no, that’s not what we’re doing.
Right. But you might have noticed, with inflation, one of the things they’re doing is raising the interest rates on credit cards, I don’t know about you, but I looked at mine, because I kind of keep track of that. And one of my worksheet templates, I spreadsheets, what interest rates were charged on our credit cards, like what the interest is, and it went up 5%. And probably 18 months or so since the last time had updated to that. So this is one of the ways that like they’re trying to account for inflation.
Keep Your Credit Card Accounts Open
And this is one of the things that we can do to leverage against inflation, okay, is being smart with our credit card debt. We’ll get to that story in a minute. Okay. So first thing is, I don’t want you closing accounts. Like really do not close the account.
And the first thing is like closing credit card accounts, does not change any of the interest that you’re having to pay on an ongoing basis. It doesn’t change any fees that you might accrue, the only thing that it does is hurts your credit long term because it sacrifices your length of credit history, especially if it’s one of your longer accounts. Like that is something that you can never get back.
That’s where the lifelong impact factors end, right. And the other portion is like your total your credit utilization. Now I have a training inside the academy that we go through like all the numbers and what this actually looks like.
But the more credit you have available to you like the total credit you have available to you versus what you’ve actually used is what your credit utilization is, okay? So if you have the credit available, and it’s not fully utilized, that works in your favor, but the damage that you’re gonna receive, like by closing the credit card, versus just having a high credit utilization, there’s a massive difference or just take the higher credit utilization if you need it right now.
So we’re gonna keep the account open because your credit is going to take a major hit if you’re struggling with using the card and you don’t need to be using it. Of course we have to get to the core here. This is what we do like inside the academy.
Remove Temptation and Change Habits
There are several different programs that I help like walk through. We have to get to the point of it. Why are we making the choices that we make? And that’s why I shy away from doing some of these episodes, because I can give you all the step by steps and tell you what to do.
But if we don’t talk about why we’re doing the things that we’re doing, and correcting those habits, it’s not going to make a difference. But I had gotten a question recently in my Instagram, DMs talking about this, or not only this, but talking about credit cards and like, “Okay, if I should close the account, like what are the repercussions”, and that was something like, “Hey, we need to talk about this. So I wanted to have this as a resource, which is what we’re talking about it”, okay.
If you were struggling using the card, one of the solutions is like just putting the card in the safe, like putting it out of reach, removing it from your Paypal wallet, removing it from LastPass will store your cards for you. That’s where I have mine stored at securely, but removing it from those places, so that you can’t access it as easily. But it’s on hand in case there was an emergency and you need it.
Pay Off Debt Strategically
The next thing that you need to know is paying them off strategically. Okay. So for most of my clients, we do the debt roll down method, which is where you list all of the debts out that you owe lowest amount to largest amount. And we work that way, regardless of what the interest rate is, if you’ve got two accounts that are close, then we factor in the interest rate, some of those things are there.
But just being smart with it with paying off the debt, and doing it strategically, instead of like trying to pay it off at once do that hardcore focus, but have the minimum amount due, like scheduled as auto payment. So no matter what, you’re not getting late fees, because the accounts not paid. We’ve talked about keeping the account open no matter what if they close the account that’s different, that’s out of your control, right.
But for you closing the account feels like it’s gonna give you progress, but in reality, it hinders you. And again, we’re gonna work on, like, why we’re feeling the way we’re feeling. This is like a bonus, like we have to work through those emotions separately than just our tangible actions.
Okay, so leaving the count open, or taking the card away, removing the temptation, if needed, we’re going to pay it off strategically, which, then we also need to look at, like our habits, this is like three or two, but working on like the habits, okay?
What do we have in place to be able to use things smartly, because again, it’s not necessarily a bad idea to use your credit card, especially if you have a card set up to give you rewards. Credit cards are also notorious for working with you a little bit faster if there’s a fraud on your account. We’ve talked about one in four people experiences fraud, some of those things factor in there like that it’s beneficial.
And then if you’re going to get rewards points, why not use the red credit card versus bank account, but then you have to have the habits built in place with your money management system to pay off the credit cards, and then you’re not being charged interest on it. Okay, got it.
So changing habits that was like to be keeping the account open. We’re removing the temptation by removing the card to be changing habits there. Then we’re number three was paying things off strategically.
Focus on What You Can Control
And finally, we have to focus on what we can control. And this is where I want to share a story from when I was working at State Farm and this was kind of crazy. This was early on in like my financial education literacy days.
But with State Farm, they have a bank. So we did vehicle refinancing. That’s actually where I got my first credit card was through State Farm, checking accounts, they do all the things okay.
And but with the car loans, I had a client that had a 0% interest car loan. Okay, she was legitimately 0% interest for the full duration of the loan because a lot of times, that’s not like the they presented a 0% interest. It’s not actually 0% interest, okay? Because of like fees and things that they tacked on.
They just shifted the way that interest slur works. But we looked at the pay work together. It was truly a zero percentage interest loan, but the monthly payment on it was killing her.
And it was so stressful to meet that high monthly payment. So what do we do? We refinance the car loan. So she went from a 0% interest car loan to a 2.3% interest car loan with was what I was able to get her through the State Farm bank.
Now there’s a lot of people that would be like, probably, like the shame. I don’t know trolls, cancel culture, whatever you want to call it like she went from a 0% interest to 2.3 like you weren’t saving her money. You charged her more money.
We focus on what we can control. And what we could control was that monthly payment amount, and that monthly payment made the difference for her. And if it’s the difference between being stressed out, and feeling like you’re out of control, you can’t handle everything that you, you’re losing everything to being confident.
Combating Inflation Workshop
Take the confidence, because when you’re confident, you do the things that you need to to increase your income to show up better to do more than you would just because you got a 0% interest rate. So when we focus on what we control, and we talk about this a lot in the Combating Inflation workshop that I did. That’s still available also, and I’ll put the link to it below in the show notes. If you want to check that out.
The only focus on what we can control then everything makes a difference. We’ve got all that I gave you the step by steps like these are the things that we need to do. We paid off strategically, being smart with removing the temptation, but then we didn’t even talk about stop worrying about the debt and focus on your net worth because like that’s the key there. But then it goes back to the emotions and our habits.
You see how this all like factors together? Do the things that you know you need to do. Take care of it. Focus on what you control, and get the support that you need to make the rest of it relevant. All right. That’s what I’ve got for today.
Connect with Me
What was your biggest takeaway from this episode? Send me a message on Instagram, @aimeecerka. I can’t wait to hear from you. We’ll see you next time. Bye for now.
Thank you so much for listening to the Your Money, Your Life podcast. I’ve got a special gift for you for sticking around to the end. And if you’re tired of your finances being a mess, this is for you.
What if you could take charge of your money without feeling overwhelmed? Even if you’re not a numbers person, even if you just don’t know where to begin, even if you don’t have the time, even if you failed in the past and even if you don’t want to sacrifice your lifestyle. Take messy action and finally make progress with your finances without feeling overwhelmed pinching pennies or staring at a spreadsheet for hours with the 14-Day Money Mastery Action Plan.
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