The End of an Era

Earlier this fall, I realized that for the first time in 20 years, I had eliminated my credit card debt. I had been carrying CC debt for so long, it seemed unreal that it would ever end. It felt great to kill it off.

I’m not sure when exactly my credit card debt became burdensome, but it was certainly in graduate school. While the student debt crisis in this country is real and oppressive, you don’t often hear about all the other debts people accrue while getting a degree.

I was in college for twelve years, and I couldn’t have done it without student loans. As an undergraduate, I accumulated about $20,000 in debt over four years. Not too bad, considering how expensive my school was. After eight years of graduate school, I added another $20,000 to my burden. And that had nothing to do with my credit card debt.

To obtain a Ph.D., I ran up $40,000 in student loan debt, and I am still paying that off. But, credit card debt has been far more of a burden and hassle. Thus, it had to go first.

Here is some advice on how to get out of your credit card debt. Unlike many articles on the internet that claim not buying avocado toast or $4 lattes will put you on the road to financial freedom, this is non bullshit advice.

The Situation: Grad School

Despite what the Mitch McConnells of the world believe, my debt did not come from “living it up.” Sure, I put a lot of plane tickets on my credit cards, but they were almost always for trips home to see my family. I lived in Baton Rouge for grad school. My family was in Massachusetts. Flying was cheaper twenty years ago, but it still cost $250-$300 per ticket. That adds up if you are flying home 2 or 3 times a year.

Baton Rouge wasn’t exactly an expensive place to live, but when you get paid very little for your work (teaching assistants received $8,500 per academic year when I was at LSU, with about half of that going to fees), it was easy to fall into debt.

I entered grad school with no real savings. I paid for almost everything myself over those eight years and worked as a librarian ($4.50/hr., I think, was the minimum wage then), teaching assistant, and as a bookseller at the campus Barnes and Noble. I always had a job and sometimes two. I lived pretty simply. I almost never left Baton Rouge. I didn’t even have a car in grad school.  

Debt happens with $30 here, $50 there. Groceries. Dinner or drinks with friends. Christmas presents. And before you know it, you have $3,000 on a credit card. At least one of my $8,000 loans in grad school was not for school, per se, but to pay down credit card debt.

The Reality: A Big Stack of Bills

By the time I graduated, I had several credit cards with thousands of dollars on them with 20% interest rates. The problem became worse once I started working. I’ve never been able to land a good paying job as an archivist/historian. The debt kept piling up. How bad did it get?

Long after grad school ended for me, the CC debt was high. I was shocked recently to see in my files a debt spreadsheet from 2016 that had my (and my wife’s) credit card debt at $34,232.

How did I get out of this hole?   

For years, I played the balance transfer game. Get a new card and transfer your balance and you will get a 0% APR for a year or two. Problem is, these transfers come with fees usually adding up to at least $100 per transaction. And if you are only able to pay off the monthly minimum on your CC bills , you will never get ahead.

Some Tips

Okay. So, what helped? Tell me!

Number 1. Get married. My wife and I didn’t make a lot of money when we got married, but being a two-income household definitely helped with paying bills. You can only get so far with austerity, especially once you have kids. Conservatives love to talk about belt tightening. But that’s usually just a rationale for punishing certain people. The truth is: you have to bring in more cash to pay your mounting debts. Getting married helped, though not much at first. Eventually, though, my wife got a huge raise and bonuses that eased our financial burden.

Number 2. Divide and conquer. Rather than worry about what card has the highest interest rate, I attacked the cards with smaller balances first. Maybe it’s a card with $500 or $1,000 balance. Once that is paid off, you can focus on the ones with bigger balances. Kill them off, one by one. Don’t worry about the one that will take five years to pay off. In the meantime, you need to make some progress, if only for your own sanity: get rid of those small balances.

Number 3. Make big payments when you can. Got a big tax rebate? Got a small inheritance? Wife got a bonus from work? Use that money to pay down debt. Luckily, during the first year or so of Covid, my wife and I were fully employed, and my job had good benefits. I used our government stimulus checks (at times, $5,000 each) to pay off credit cards.

Number 4. Stay on top of your bills. PAY THEM EVERY MONTH AND ON TIME. Late fees can pile up and increase your interest rate. Sign up for automatic payments, so you will never miss one. If you can, always pay (way) more than the monthly minimum. Do the math. A $1,000 credit card bill with 20% interest and a $20 bill per month will take you ten years to pay off if you only pay the monthly minimum.

Number 5. Keep good records. Make a list of all your cards, the interest rates, and what you are paying each month. Sometimes, I had so many credit cards, it was difficult to keep track of them. But if you know how big a problem each is, you can deal with it calmly. Look at your bills, go online and check your balances. Stay on top of it. Don’t hide from it. Don’t be scared.

Number 6. Dig into your savings. Having savings is great, but the money isn’t really yours if you have debt. Use whatever you have to pay down the credit cards. One of the best things my wife and I did was use our 401Ks (which are an unconscionable scam) to pay off a huge chunk of credit card debt. And by that, I mean an entire high balance credit card of around $5,000 for each of us. It made a huge difference. Yes, the 401Ks took a major hit. But they weren’t really going to do much for us in retirement anyway. Unfortunately, the government taxes the hell out of early 401K draws (to the tune of 50%), but it was worth it.

Number 7. Call your credit card company if you screw up. One piece of garbage advice you will hear is that you should call your credit card company to “negotiate” a lower interest rate. I have never had luck doing this. What I have done, however, is call my CC company and ask that they waive a late fee if I honestly screwed up. They have usually been willing to do this as a one-time courtesy, provided I could pay them over the phone that day. Legally, a CC company is not obligated to lower an interest rate, ever. But I have threatened to take my business elsewhere if they don’t forgive a fee. This tactic will work, believe me.

Number 8. Consolidate. Try to get your payments down to as few as possible. Eliminate balances on a few cards by paying them off with another when they offer you a low APR rate for a year or two (by the way, always sign up for the APR with the longer low-interest terms). Eventually, however, you will have to stop transferring balances. Once you don’t feel you need to do this, you have made great progress.

Number 9. Go with a credit union. One of the best things I ever did was put all my banking in the hands of a credit union. Unfortunately, rural areas don’t have them as much. But when I was in Little Rock, I banked with a local credit union. Once I moved back to Richmond, I opened an account with Virginia Credit Union. It’s been great. They don’t have the punitive fees schedule of commercial banks. They gave me low-interest loans, using my car as collateral. They also extended me a line of credit of $2,500 and a whopping $14,000 credit card limit (good for consolidating with manageable interest rates). The monthly payments have sometimes been high ($150-$175 minimum for the CC), but that’s actually helped me pay down the debt more quickly.                      

Number 10. Get rid of cards you aren’t using. Eventually, a CC company will close your account due to no activity. It’s a good feeling when they do this. I’ve heard that it’s bad for your credit rating to have a CC closed due to inactivity, but even if it’s true, I don’t care. After a while, I’d start cutting up all the credit cards I was not using that had a zero balance. Now, I only have a couple active credit cards in my wallet. I keep them in case of an emergency or if my debit card gets declined for some reason at a store or online.

Number 10. Pay it all off every month. If you can afford to pay off your balance every month, do it. Don’t let the debt cycle repeat itself.

Unfortunately, there is no shortcut to freeing yourself of credit card debt. It will likely take years and a good amount of discipline and organization on your part. But with luck you can do it, and without really changing your lifestyle that much. And feel free to get the occasional $4 latte or avocado toast.