Subscribe
What is RSS?
Post a Comment
Welcome carnival visitors! If this is your first time here, please look around and leave your feed back. If you like what you see, please add this site to your feed. Monday is when I post my Rich College Student Series. Please check my archives in the BEST OF page of the blog. Thanks!
Handling Credit Card Debt
Last week, the idea or deciding to pay off debt or save for a full emergency fund came up. It seemed that having a barebones emergency fund to keep you afloat while you payoff your high interest debts (i.e. credit cards). According to Nellie Mae, the average college student has $2200 in credit card debt. We’ll use it as an example for today.
Using a Debt Snowball to Pay Down Credit Cards
We have a student (we’ll call him Ed) who has $2220 on two credit cards. Ed saved $500 from his semester’s refund for his barebones savings. He got a 2nd job delivering pizza, which gives him an extra $50/week to play with. This money is devoted to paying off his credit card debts.
Ed puts $150 on the higher interest card and $50 on the other (that’s minimum payment). Let’s see how his net worth changes.
| Account | Savings | Credit Card 1 | Credit Card 2 | Net Worth |
|---|---|---|---|---|
| Interest Rate | 4.00% | 23.99% | 18.99% | |
| Jan | $500.00 | $1,200.00 | $1,000.00 | ($1,700.00) |
| Feb | $501.67 | $1,070.99 | $965.03 | ($1,534.36) |
| Mar | $503.34 | $939.40 | $929.51 | ($1,365.58) |
| Apr | $505.02 | $805.18 | $893.43 | ($1,193.60) |
| May | $506.70 | $668.28 | $856.78 | ($1,018.36) |
| Jun | $508.39 | $528.64 | $819.55 | ($839.80) |
| Jul | $510.08 | $386.21 | $781.73 | ($657.86) |
| Aug | $511.78 | $240.94 | $743.30 | ($472.46) |
| Sep | $513.49 | $92.75 | $646.12 | ($225.38) |
| Oct | $515.20 | $0.00 | $453.18 | $62.02 |
| Nov | $516.92 | $0.00 | $257.19 | $259.73 |
| Dec | $518.64 | $0.00 | $58.09 | $460.55 |
| Jan | $662.75 | $0.00 | $0.00 | $662.75 |
Ed is very excited with this plan. He notices he can be debt free from credit cards in 13 months. He had this card for the past 3 years and now he can finally be in control of his debt. Plus he now has an extra $200 month he can use to save. An important fact that hits him is how much money he could have had if he didn’t have credit card debt. He uses it as motivation not to carry a balance again.
Your Take
Has anybody had success with paying off their credit card debt? Any tip is that they can offer those in the trenches?
Photo Credit: edwin11 79
Related Posts -
How Young People Get Into Debt...And How To Get Out Of It. Good Morning Everyone. Today we are discussing our Student debts. Today we are talking about everything related to our Credit Cards, our Lines of Credit, and our Student Loans. This post will be sort of a “what not to do” guide to staying debt free and learning how to...... - Best Personal Finance Ebooks From Bloggers 2 weeks ago, Adam Baker from Man Vs Debt launched his first ebook; Unautomate Your Finances. Just before that, about a month ago, Peter Anderson from Bible Money Matters did the same thing. Since those 2 ebooks are amazing and I know there are several great personal finance ebooks written......
Here are Some Other Great Thoughts -
Credit Cards that Help? Not for me just yet I have discussed in the past that being that I am not out of debt, a rewards card is not a good decision...right now, but every so often I think about the rewards associated with credit cards. Regardless of my personal situation, I found an interesting article in Wall Street...... - What's The Average Credit Card Debt In America? The stereotypical image of the American consumer portrayed by the media is that of a family with a jumbo mortgage and drowning in consumer debt. But is that the reality? Americans certainly devote a far larger percentage of their income to mortgage payments than is wise, but the average credit......
[...] Debt Repayment [...]
[...] if you have some money leftover from #1 to put towards paying down your debt. This is a step that can make you feel better as your debt shrinks. Depending on the size of your [...]