And then there was one. Our last personal credit card. Is it a giant sum? That’s a relative question. To some, like my frugal-minded parents, the total would make their jaws drop. Many others will snort and say, “Is that all?” or, “Oh, that’s not that bad.”
And neither opinion matters to us. It’s our debt. It’s our life. We know how it impacts us on a daily basis, and we know what we’re doing about it.
Wanna hear what it is?
As of this day, Sept. 18, 2019, our last credit card has a balance of … mmmm … boy, this new whole bean coffee is good. I better change the cat litter today. Wow – would you look at that? The leaves are changing already. September really is a nice month.
Eight thousand seven hundred seventy-eight scourges of our existence.
At this time last year, before our family went on budget lockdown, the balance on this card was about $11,400. And we had several other credit cards, as well, and student loans. (Those cards and the loans are all paid off now, thanks to the magic of a budget, and Dave Ramsey’s debt snowball idea.)
In 2018, the interest rate every month on that card was about $200. So, every month, in addition to paying the minimum amount due, which was also around $300, we were paying another $200 in interest. A total of $500 every month went to this credit card company instead of in our pockets.
If we’d continued to only make the minimum payments on that card, it would have taken us 25 years to pay it off. And we would have paid more than $28,000 in interest.
Where did I find all of this useful, sucker punch information? It was right there, in our online credit card account. Turns out, there’s a “minimum payment warning” displayed in plain sight. It really should be labeled “screwed for life warning.”
Now, fast forward to present day. We’re nine months into the debt snowball. The credit cards with smaller balances and the student loans are gone. We’re four months into tackling this last credit card, and we’ve reduced the balance by about $2,600.
Our interest rate is now $160 per month. If we continued making just the minimum payments now, it would take us 24 years to pay off this card, and about $23,000 in interest. The minimum payment hovers around $200 per month.
Now, if we increase the minimum payment to about $340 per month, we’re on track to pay off the card in three years. We’d still lose $12,000 in interest. But what a difference? By bumping up the minimum payment just a bit, we’d shave off about 20 years!
Right now, we’re throwing anywhere between $400 and $500 a month at this card. Our hope is to have it paid off by January 2020. This is an (overly) optimistic goal. In reality, we’ll probably use our 2020 tax return to smash the remaining balance next spring. But keeping that January goal in sight is a helpful way to make sure every spare penny is going toward debt. And if we miss that January “deadline” will I be disappointed? Nope. Because I don’t mind spending an extra couple of months eliminating this debt, and then having the freedom to put all that money toward something useful for the next 20 years.
And the good news for anyone with even more credit card debt – even a lot more – is that we’re doing this on one income. And, it’s a relatively modest income. So, yes, it might take you longer, but you’ll get there, too.