How to Get Rid of Your Debt
From this day forward, your debt is guaranteed to shrink! How amazing would that feel? This can be your new reality. Here’s the 10 second solution to stop creating credit card debt forever: Cut up your credit cards! Take inspiration from the Nike commercial and just do it.
The So-Called Benefits of Credit Cards
Sound scary? For most of my clients, it is. They definitely do not want to do this. The two most common objections are: "I need my credit cards! They keep me protected. What if I need to dispute a transaction? I can’t buy an airline ticket with cash!" Quickly followed by "I’m earning points. My credit card makes me money." Let’s pause here for a second and reflect. Who do you think put these "thoughts" in your head? Or more accurately, "who do you think put this propaganda in your head?" The credit card company, of course!
If You Owned a Credit Card Company, How would You Market It?
Let’s conduct a little experiment here. Pretend you own the credit card company, and, to be successful, you need to get people to use your credit card. The more they use your credit card, the richer you will be. What would you want your customers to think? Doesn’t the list of thoughts below seem ideal?
"I need my credit cards."
"My credit cards keep me protected."
"I’m earning points. My credit card makes me money."
"I can’t buy an airline ticket with cash!"
( Yippie! A big ticket item. Much more likely to create debt and stay on the card.)
Its What Credit Card Companies Want You to Think!
Does spending on your credit card keep you safer? Here, I have to admit that the propaganda is powerful. It does feel safer to spend on a credit card. But does it really keep you safer? I have had the privilege of seeing thousands of transactions in the last seven years. In that time period, I have never seen a stolen debit card or disputed charge, not reversed. The victim has always gotten their money back. (I’m not saying that this will always happen. But that’s all I have seen!) Yet, I have seen credit card balances become crippling. People paying hundreds of dollars in interest every month.
Statistically, the more you swipe your card, the greater your debt. Credit card companies want you to use your card for every purchase. It’s like Vegas. The longer you play, the more you pay. So, they tell you that it’s "safer" and you will "earn free points." This is technically true, but it’s a real benefit ONLY for a tiny fraction of all credit card users; the handful of people that never carry a balance.
The Real Impact of Credit Card Debt
The "free" points can easily cost you $250,000! Sound outrageous right? Check out Sam’s example. Sam has $16,178 on her credit card with 16.9% interest. She has had credit card debt for 10 years. If, instead of paying interest (on her credit card), she invested $148 monthly for 10 years earning 10%, she would have $28,304.87. In 30 years, she would have $292,141.38!
| $148 monthly finance charge, if invested would be… | in 5 years | $10,842.66 |
| in 10 years | $28,304.87 | |
| in 30 years | $292,141.38 |
"But, I can’t wish away my credit card debt and start investing?" True that! That’s why the first step is not to get rid of your credit card debt. It’s to stop creating it. Even reducing your debt by $1000, would save you $300 a year in interest. If invested this $300 could turn into almost $50,000.
| $300 invested yearly @ 10% ROI | in 5 years… | $1,831.53 |
| in 10 years… | $4,781.23 | |
| in 30 years …. | $49,348.21 |
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