Credit card debt is the most cunning financial adversary you will ever
encounter. Credit card companies use enticing promotions to lure consumers by
increasing credit limits and offering pre-approval. All of these strategies and
tactics attempt to install the habit of spending now and paying later.
Unfortunately, many people don't realize how destructive credit cards can be until their
payments become the largest part of their monthly budget. Credit card debt,
as a percentage of income, has been on the rise for the past two decades.
be difficult to break the habit of using credit cards; however, the reward is
worth the effort. The Debt Elimination Pyramid is an innovative and
proven method to paying off credit card debt.
Debt Elimination Pyramid is designed to help you pay off your balances
quickly and painlessly. This strategy is the same as if you tear down a pyramid.
If you did this, where would you start? The most logical place is the tip, since
the foundation is so enormous.
You would begin at the top, removing one brick at
a time until the entire pyramid is torn down. You'll pay off your
balances, one payment at a time. too. The Debt Elimination Pyramid
contains four simple steps. These
- STEP ONE:
- The first step of this strategy involves writing down all outstanding
credit card balances in ascending order (smallest to largest). This is
referred to as the Debt Pyramid.
- STEP TWO:
- The second step of the strategy is to concentrate on completely paying off
the lowest balance. By paying off the lowest credit card balance, the top of
the debt pyramid is eliminated. In addition to the minimum monthly
requirement, you should pay as much as possible over and above the minimum.
For example, if the minimum monthly payment is $40 on the smallest balance,
a check could be written for $75. ($40 minimum required plus an additional
$35) Pay this extra amount every month until the entire balance of the first
card is paid off.
- STEP THREE:
- Once the lowest card is completely paid off, concentrate on the second
position. After the credit card balance at the tip of the pyramid is paid
off, add the minimum monthly payment of the first card to the minimum
monthly payment of the second smallest credit card. For example, if the
minimum payment on the first position was $40 and the payment for the second
card is $55, then your monthly payment to the second credit card would be
$95 ($40 +$55 = $95). The benefit of using this step is that the minimum
payments are already allocated into your budget. Thus, no additional money
is reallocated to pay off outstanding debt.
- STEP FOUR:
- Continue using this strategy until all credit cards are completely paid
HOW TO STOP USING CREDIT CARDS
Once you begin conquering your credit card balances, the worst thing to do is to
begin using them again. Here are four ideas to follow to stop using plastic:
- Lock Up or Cut Up Any Credit Cards:
- One of the best ways to stop using credit cards is to not carry them.
However, everyone should have access to at least one card in case of an
emergency. There may be times when a large amount of money is needed
immediately. For example, to purchase an airline ticket in a family
emergency or rent a car. An innovative way to remind yourself of this is
tape a piece a paper on each card with the words: "FOR EMERGENCY USE
- Write Checks: Get in the habit of writing checks:
- This offers two advantages: The first benefit is you can't make a purchase
unless the money is in the account. This may eliminate frivolous spending.
The other advantage is it will wean you out of the credit card habit.
- Use Debit Cards:
- A debit card is similar to a credit card with one distinct difference.
Whenever you make a purchase, money is subtracted from your account. You
cannot spend more than what is in your account.
- Put a Reward System in Place:
- Every time a credit card is paid off, treat yourself to a long walk on the
beach or a dinner out, but not a shopping spree to put you in more debt.
By following the Debt Elimination Pyramid, anyone can take control of
and completely eliminate credit card debt.
The above strategy is only a portion of The
Debt Elimination Pyramid. If you would like additional in-depth information on
eliminating credit card debt and personal finance planning including sample
pyramids and blank forms, Click
In addition to following the Debt Elimination Pyramid, you may want to consider
a debt consolidation program. Click
Here for Debt Consolidation Information
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