A credit card is a powerful tool and when deftly wielded can be very useful. Used without knowledge or understanding it can be financially deadly. My husband and I use a rewards card. We have several cards on the same account and the majority of our expenses including insurance, phones, travel, groceries, fuel, tolls, entertainment, shopping, dry cleaning, subscriptions and home maintenance are charged to that account. The rewards pile up. The bill is paid on the due date without interest.

There is only one rule about credit card interest; don’t incur it. That’s it, don’t.

There is nothing to gain from paying credit card interest. You might just as well flush your money down the toilet.  

With a home mortgage at least you get a place to live, bring the boys and perhaps appreciation on your investment. Even with a car you buy the ability to get out to the clubs and most importantly to get to work.

Credit card interest gets you nothing. You bought stuff you didn’t need without planning how you would pay for it. Now you have credit card debt and interest that never seems to get lower no matter how hard you try. That’s their plan; card issuers want to keep the cash flowing from your pocket to theirs. Remember the one rule here; don’t.

Oh, you already have credit card debt? I recommend paying it off. That’s right, pay it off. Actually it’s easier done than said, but since you probably won’t believe that statement I’ll go ahead and say it, it’s easier done than said; a bit like opening the conversation with a cute stranger.

Credit card debt reduction begins with the first step of spending reduction. If you are unwilling to implement spending reduction stop reading this, save yourself the time. The mall is more enchanting and those shoes are still on sale.

It is virtually impossible to reduce debt concurrently with creating it. Resources that you have available for debt reduction are going to come from your spending reductions.

First thing to do when working on credit card debt reduction is to understand what resources you have available for the task. Each dollar you spend, no matter what for, is one less dollar available for your debt reduction.

Define what you have available each month for credit card payments. Make a list of all the amounts you owe, the company you owe and the rates of interest you are paying on each. If you are lucky enough to have the option of transferring balances to lower rate accounts, this is a good place to start. Anything you can do to reduce the carrying cost of your credit card debt frees up resources to help achieve debt reduction faster.

When your transfers are made and list complete put the list in the order of the most expensive interest first. Define the minimum payments required for each account. Deduct this amount from the total available for your debt reduction. The remaining available is paid on the most expensive card until that balance is zero.

When you pay off the most expensive card first, rather than paying the same amount to each card, you cut the amount of time necessary to pay off your total credit card balance and save interest payments in the process. If you simply continue to pay minimum balances and do not charge any additional amounts to your credit cards, you will pay for many, many years and pay four or five times the total in interest.

After the first account is paid off apply the amount you have been paying to that account to the second most expensive account in addition to the minimum payment you had been making to the second most expensive account. After the second most expensive account is paid off, apply the amount you had been paying to the account, including the amount you paid to the first now paid off account to the next most expensive account including the minimum amount you had been paying to the account, and so on until all your credit card account balances are zero.

As you pay off each card, destroy the card and notify the issuer that you want the account closed. When I attempted to close my accounts I encounterd heavy resistance from the credit card issuers who wanted me to keep the accounts open ‘at least for emergency.’ Don’t fall for it, they know the statistics. Statistically you will run your debt back up even after you pay it off.

Close the accounts and don’t become a statistic. Some people will argue that you should not close the unused credit card accounts because it hurts your credit score. Maybe closing unused credit card accounts does hurt your credit score, though I do know that the closed credit card account will no longer be available for future debt. Don’t tempt yourself.

When you are done with your debt reduction, you should keep one credit card for true emergencies, travel and regular purchases with a commitment that you will charge nothing that you could not pay for in cash at the moment of purchase. In addition, the commitment must include paying the balance in full at the end of each billing cycle, no matter what. Remember rule number one.

Since you are now going to be a reputable credit card user, you can take advantage of a good credit card, one that gives you something back, commonly known as a rewards card. There are all sorts and you can choose which is best for your needs; get something for your business, you have earned it.

Soon enough the credit card debt will be gone. Hurray! Now get to work on the cars and the house. Use the same habits you formed paying off the credit cards. When you focus your resources on debt reduction, it is difficult to fall back into old spending habits.

There is no such thing as good debt. Unless you are using debt to build assets such as buying a house, you are needlessly handing out your hard earned money. You are too smart for that; your money looks better in your pocket.