How I attacked my $10,000 Credit Card Debt

Today’s post is about the strategy I used to get myself out of credit card debt.  Eight months ago I had almost $10,000 of consumer debt.  I knew that January 1st was going to be when I had my personal financial revolution but getting to that date was beginning to become overwhelming.

I had a mountain of debt, and it was slowly breaking my back as well as my psyche.  Things were not going well.   At the time, I had two credit cards.  My Visa had a limit of $1,500 and my Amex had a limit of $15,000.  Surprisingly throughout 2008, Amex kept raising my limit without asking me (I started 2008 with a $4,000 limit).  The Visa had a 27.74% APR (yikes!) and the Amex had an APR of 17.24% (a post on lowering your APR will be coming in the near future).

Carrying debt can be an overwhelming burden

Carrying debt can be an overwhelming burden

Now, there are always two methods that people suggest for paying off credit card debt.  The first is to pay off the highest interest rate card first.  This makes economic sense as it will end up costing you less in interest fees in the long run.  The other method a lot of people recommend is Dave Ramsey’s debt snowball.  This involves paying off the card with the least debt on it first, allowing you to feel like you are making progress towards your goal of being debt free.   He describes it as building momentum as you pay off your debt.   I really like Ramsey’s method as it involved setting goals, reaching milestones and achieving successes.

What was I doing 8 months ago?  Neither of these methods.   I had studied advanced economics and I wasn’t following simple economic theory.   I always try to use common sense when approaching a problem, and I wasn’t following the common sense method of Dave Ramsey.  Instead, I was playing mind games with the worst possible opponent, myself.  I was desperately trying to get that large amount of debt on my Amex down to help my psyche.  In order to do this, I was letting more debt add up on my visa (with its higher interest rate) and barely making progress on my Amex bill because it was so large.  I was in debt and being dumb about it.

So how do I find myself where I am today with paid off credit cards?  It was by combining the two methods discussed above.  I paid off my Visa quickly, reaching a milestone and stopping the accumulation of higher interest charges.  With only one card left to focus on, I threw every dollar I could at my Amex bill, eventually going from being in debt to having accumulated cash when I received my tax refund for the year.

While it turned out that I was combining the two aforementioned strategies, it was my singular intention to use Dave Ramsey’s debt snowball method.  I feel having several small milestones (paying off one card at a time) on the way toward a larger goal (getting out of consumer debt) is the best way to feel progress as you are trying to climb a mountain of debt.

If you had a similar story, or took a different approach to getting out of debt that you want to share, please comment or email me at

29 Responses to How I attacked my $10,000 Credit Card Debt
  1. Jessica
    June 18, 2009 | 3:54 pm

    I’m in the process of paying off credit card debt– I have about $8,000 left on 2 cards. Technically, it’s only 1 card since I canceled one of them. My Visa Platinum has a $3,200 limit and my Visa Gold had a $7,000 limit.

    It hit me that I really had to watch my expenses more carefully when I maxed out on my Visa Gold and my Visa Platinum was nearing max. The Visa Gold has a higher interest rate at ~17% and Visa Platinum has around ~13% .

    A couple of months ago, I received a letter informing me that my interest rate on my Visa Gold was about to go up to 25% BUT I could lock in my current rate by NOT spending any more on the card. Thus, I canceled the card and locked in my rate.

    Now, I’m basically tackling the high-interest rate card first (Visa Gold), but paying off roughly the minimum + finance charge on the Visa Platinum. I’ve stopped carrying around the Visa Platinum completely (for emergencies, I have my corporate credit card) and primarily use my debit card.

    I figured out how much to pay by making a budget, and then on the day I get paid, I’ve scheduled an automatic transfer for both cards. I also have an emergency fund if my funds are low. However, as soon as I get my next paycheck (or as soon as it’s possible), I replace the amount taken out of my emergency fund.

    I’m also paying off set payments for OTHER debt– furniture and student loan. The furniture is 0% for 1.5 years, so I pay the same amount each month so that it’ll be completely paid off by 1.5 years. I also pay a fixed amount per month for student loans.

    If all goes well, I should have my credit card paid up in roughly a year! Oh yea, and I have a BS in economics and a masters in accounting, lol. People are shocked to hear I have credit card debt!

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