Conquer Your Credit Card Debt

Let’s conquer your credit card debt.

I recently have found myself in a bit of credit card debt. I am somewhat comforted knowing that I’m not the only one — but seeing as we are approaching another financial crisis, it also turns the notches up on my anxiety level. Nonetheless, here are the facts. 

One in four millennials carry credit card debt for over a year, and Gen Z’ers are outpacing other generations in their credit card debt accumulation. Being an in-betweener (I was born in 1995, right after the millennial generation ended, and Generation Z began.), I am at least “on trend.” Though, not in a good way. 

So being the millen-z that I am, I took to my social media to crowdsource some info from my friends and followers on how to pay off my debt. A number of people asked that I share the results – so, here goes!

Well, there’s the obvious advice: “lock em up, don’t spend what you don’t have.” These words are straight from one of my friends, and while I’m thankful for the advice… At this point it doesn’t help. What is of value is the advice to pay off the debt or card that has the highest interest first. This makes perfect sense, as the higher the interest – the longer it will take to pay off the card. So by devoting your attention to what I’ll term the biggest pain in your ass, you’ll save more money in the long run.

So, have you heard of a balance transfer? You have! Great. Still confused? Same. But I think I’ve figured it out — well I guess I have because I just did one. 

A balance transfer is actually a pretty simple concept. You apply for a new card that has a lower interest rate, or even better, 0% APR for 18-24 months. Then you transfer the balance to that new card from the old card. Basically, the new card gives money to the first card. So, you’re using one card to pay off another. Or multiple. You could transfer balances from multiple accounts to this new one, so you can make a single payment rather than multiple payments across different cards. 

Finding the right card can be hard, especially if you are already experiencing some credit card debt, and your credit score took a blow as a result. From this experience, and my trusty friend Credit Karma, I learned that if you use over 50% of your total available credit, it can lower your credit score. Best practices say to only use 20-30% at any given time. 

I used Credit Karma to recommend me credit cards that I would have higher chances of approval for based on my credit score, and then checked those cards to see their policy on balance transfers. I was approved for the PNC Core card. 

A common question about balance transfers is if you can do them across different banks or lenders. The answer is yes! My Capital One account is the problem child, and I used this new PNC card to do the transfer. There is typically a transfer fee.

By doing this I am able to pay off the PNC Core balance with 0% APR for 18 months, and for the remainder of the debt in the Capital One card, I have lowered my interest rate and therefore made it easier to pay off faster. 

Some of my friends and followers suggested taking out a loan to help alleviate credit card debt. Taking out a loan to pay off existing debt is really just moving the money around. The debt is still there, only the lender or bank you need to pay back is changing. But there are three situations where this might make sense for you.

You should only take out a debt consolidation loan if the interest rate on that loan is lower than that of the current interest you are paying. If this is the case, go for it! It can help you pay off the debt faster.

Sometimes by consolidating into one personal loan, you can lower your monthly payment. Say you are paying off multiple cards and the monthly expense ends up being around $500 dollars. If you can consolidate all that debt into one personal loan that has a lower monthly payment, say $400 dollars, you can pay off your debt faster.

Sometimes when we have many bills to pay, we can forget or miss a payment. This in turn hurts our credit score. But consolidating debt into one personal loan, you can focus all your time and energy on that one account. If you do this, you MUST lower or cease your credit card usage, or else you will never catch up.

A few suggestions pointed me in the direction of savings apps – like Tally. Described as, “another credit card payoff app, but with a twist,” this app is designed for people with high-interest credit card debt. As an automated debt manager, Tally directly extends you a line of credit that it then uses to make payments toward your highest-interest debt (refer back to “the basics”), while paying the minimums of the rest. As the user, you are now paying back the Tally credit line, which has a lower interest rate. 

A big plus to Tally is that it helps you to never miss a card payment, which in turn protects your credit card score. One thing to know is that you need a credit score of at least 660 to even qualify. 

If you don’t meet that requirement, I’d recommend something like Digit. Digit analyzes your spending and automatically saves money each day for you. It looks are your expected purchases, upcoming bills, and more and then determines how much would be “safe to save,” each day. It then pulls that amount directly from your checking account and stores it for you. You can then use this money to put towards bills, save for a vacation, or for our purposes – pay off your credit debt. 

Next up, the Avalanche method. This is basically a fancy word for something we already discussed under The Basics. This is the strategy of paying off the line of debt with the highest interest rate first, while making the minimum payments of the others. Once you tackle that high-interest debt, you then move down the line. 

Dave Ramsey, author, radio host, and financial expert, recommends the snowball method over the avalanche method. The difference is that in the Snowball Method, you pay the smallest balance off first, and move upward,  regardless of interest rate. He prefers this method as it helps you stay motivated. The satisfaction of paying off that first debt can help you to push forward and tackle the others. So if you tend to deal with motivation issues, or just are overwhelmed by paying off that high interest debt, go with the Snowball Method. 

Also recommended was doing “odd jobs” as a side hustle. Dog walking or sitting with Wag or Rover, or selling clothes on Poshmark. This sounds like a great idea, and maybe even fun or low stress. But I’ve tried both and it’s both slow and exhausting, with minimal return. I love dogs, don’t get me wrong, but working through those apps has a few negatives. 

First, it’s an over-saturatured market. There are so many people registered on the app that it becomes rare to get a gig. Additionally, if you have a full-time job, this can often make it a challenge for clients that want their dog checked on or watched during the day. Then there’s the general annoyance of watching other people’s dogs. Dogs that are sometimes untrained or have behavioral issues that weren’t disclosed to you. 

I never made much money off Rover. But by publicizing that I was using the app, acquaintances or friends did start to offer me gigs. For long-weekend dog sitting, I was able to make a bit more money. But generally, you are usually giving up weekends around holidays, and you have to be okay with that. 

Now, Poshmark. First off, you have to have clothes to sell in the first place. If you’re like me, this can be hard. I keep my closet to only what I actually wear or have worn in the past year. If you do have some things to get rid off, maybe after doing some spring closet cleaning, cool! The only thing I will say is that people are going onto Poshmark to find clothes at good discounts. So your earning power is quite low because of this. You have to list pretty low, and Poshmark takes part of the profit. I’ve had items sit on my Poshmark closet for over a year, and have ended up just donating them. So while this is an option, it’s not very fruitful. 

The above are just the options suggested to me. I am employing a balance transfer, and getting Tally to help me remember to pay my bills. There are definitely more options out there, so don’t let this little blog be the end all be all. 

From this experience I’ve also realized how little I know about finances and financial health. The following were recommended to me as educational resources. I added in Be Wealthy and Smart, a podcast by Linda P. Jones, a financial mentor. While addressing a number of topics, a lot of her content is aimed at helping women to gain financial empowerment. So, check it out!

Hopefully this helps! I know this stuff can be uncomfortable to talk about. As someone who has always had anxiety about money I’m no different. We weren’t taught about these things as kids or young adults. At this point, the best way to learn is by sharing best practices with one another. Best of luck!