Accelerate Debt Repayment – Stop Adding Debt

Stop overspending by trading out your credit cards for debit cards and cash.

Differences Between Debit and CreditStop Adding to Your BalancesStop the Debt Buildup

Know the Differences Between Debit and Credit Cards

Our wallets are fat with debit and credit cards these days. With so many cards, it’s hard to keep track. They may all look the same and be accepted everywhere, but it’s their differences that will help you on your quest for paying off your debt. Let’s compare.

Debit Credit
They work like cash — you can only spend the money you have. They are typically linked to your checking account and give you access to your cash without having to carry it. They work like small loans — you’re borrowing the money from an institution. If you don’t pay them off monthly, you will be charged interest on the remaining balance.
Pros

  • Easy to track spending and account balance
  • Convenient cash access
  • PIN number for security
  • Spending limited to what’s in your account
Pros

  • Can pay for emergencies
  • Effective management can boost your credit score
  • Rewards — travel points, cash back or other bonuses
  • Fraud protection
  • Security for your spending
Cons

  • Lack of funds in your account can lead to card being declined
  • Overdraft fees
Cons

  • High-interest rates on an account balance
  • Ineffective management can hurt your credit score
  • Overspending can lead to spending beyond your means

The biggest difference between your debit and credit cards is that your credit cards charge you interest on what you spend, so you lose money as you pay off your cards.

How to Stop Adding to Your Credit Card Balances

Don’t make charges to your credit cards while paying them off. Adding to your balances means you’re paying more interest and increasing the time it will take to pay off your credit cards.

Let’s say your credit card debt is a whopping $4,500! And suppose you are making the suggested minimum payments and have an APR (Annual Percentage Rate) of 18%. It can be shocking how much extra you’re paying in interest while paying off your debt.

Minimum Payments

Months to Pay Off Debt

Total Interest Paid

$90

451

$11,897

That hurt to look at, right? But let’s see how it looks if you kept spending on the card and added a $500 charge next month. Couldn’t live without your Jimmy Choo or that new TV, could you?

Minimum Payments

Months to Pay Off Debt

Total Interest Paid

$100

($10 increase)

472

(21 months increase)

$13,397

($1,500 increase)

Ouch. It’s easy, and painful, to watch how your interest multiplies. And it only gets bigger the more you keep charging your card.

As your debt grows, your chances for a new loan plummet. Continually spending on your cards affects your debt-to-income ratio (DTI), which compares your total debt relative to your income. Increases in your DTI hurt your chances of getting a new loan.

Make a Switch to Stop the Debt Buildup

The best way to stop adding to your credit card debt is to stop using your credit cards.

Payoff Tip

Look Out for Overdraft Fees!

We suggest removing your ability to overdraft on your checking account. With mobile banking apps, you can easily access and move your money when you need it and avoid unnecessary fees.

Switching to your debit card is an easy way of hanging onto a card’s convenience with the benefits of tracking your spending online that you simply don’t get with cash.

The first step is to take all the credit cards out of your wallet. You can’t use them if you don’t have them. But how do you keep yourself from putting the cards right back in there? Here’s a few suggestions:

  • Lock them away. Put your credit cards in a safe. Out of sight, out of mind.
  • Put a reminder note on your card. Try “You’re paying this off!” or “Don’t use me!” Anything that will remind your future self.
  • Give your card to a trusted friend or family member. Having someone else to rely on and keep you accountable in these situations is key.
  • Clear all your saved credit card data that’s online. Amazon’s daily deals will no longer be the bane of your credit.
  • Your most permanent method is to destroy your card. Cut it up or demagnetize it. Make it impossible to use your cards, so you can focus on paying them off.

Not ready to lose the card completely?

Try not to add anything to your balance. If you charge $200 on your card for an emergency, then make sure you’ll have enough to cover both your regular payment PLUS the $200.

This way, you’ll stay on track to pay off your card and avoid any added debt.

Accelerate the Debt Repayment

Stop Adding DebtPay More Than the Minumum

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