This year, I am facing one of my biggest personal finance challenges: I need to pay back my parents loan on November 1^st, 2010. The amount owing will be $31,000. We had borrowed this money as cash down for our first house and the deal was to reimburse in full (plus interest) after 5 years. So I have only a few months before I write “the big check” and I am looking at different ways to pay off this debt.

Sometimes, the best defence is a great offence

I am a big hockey fan and ever since the Pittsburgh Penguins won the Stanley Cup with Mario Lemieux back in the 90’s, I have understood something: in general you are better off with a strong defence play but there are moments where an attacking offence is the best way to defend yourself. So when you want to pay off a debt, you have 2 options: 1) cut down on your expenses (defence) and 2) multiply your sources of income to increase your cash flow (offence). Since I am not great at cutting down expenses, I have decided to take option #2:

#1 Sell your stuff

There is no easier way to generate a few extra bucks every month than selling your old stuff on eBay. While this has become a cliché for most personal finance blogs, I still think this is one of the best way to gather a few extra dollars and put it down on your debt. Compared to the traditional garage sale, eBay is superior in terms of the time and effort required. You can also expect a higher price for more valuable or popular items.

#2 Get a sideline

There are plenty of small jobs that are not good enough to be a full-time job (either because it doesn’t pay much or it doesn’t require 40 hours of work a week). However, they can be perfect as a sideline. Among the most common sidelines you can find, there are; painting, cleaning (houses but possibilities for commercial space too!), taking care of pets, delivering, barman/barmaid (on the weekend), salesperson (in boutiques), secretary work at home (resumes, professional letters, transcription, etc.)

#3 Start an online business

As many other of my fellow bloggers, I am earning a few bucks from my blogs and this helps me to pay off my debts. There is a very interesting article about how to start an online store here. The beauty of an online store is that you don’t need much to start with: a computer, internet access and a few rudimentary technical skills. If you don’t know much about programming and html code, you can always outsource this part using a forum such as SitePoint or Digital Point.

#4 Teach people

You are good in English or know another language? You know something about computers or you can raise pets in a easy way? Use your talent and teach people. We all are good at something (just think about what your friends ask you to do for them), it is now time to structure your knowledge and offer it to the world. Some people can make quite a good income by tutoring.

#5 Become the intermediary

If you have access to a specific product, direct from the manufacturer or distributer, there is nothing stopping from you delivering the goods to people you know. Some companies are already structured this way but they often are known as multi level marketing companies (such as Mary Kay, Primerica or Goldstar). I am a bit divided about those companies but there is nothing stopping you from creating your own distribution network. For example, my wife is presently looking at distributing local fruit & vegetables in her neck of the woods. If it works, she will provide a good and healthy products to the neighbourhood and will make a few bucks on each delivery.

#6 Repair stuff

Since most Americans concentrate on paying off their debt and saving money, they will definitely be reluctant to buy new stuff.  Especially if they have the possibility to repair what they own already own, at a decent price. One of the best businesses right now is  repairing computers. We all know that computers slow down, even stop once in a while. Sometimes, you just need to replace the computer fan ($15) and it runs like a new . You can also repair cars or furniture according to your knowledge.

#7 Open a daycare

This is perfect if you or your spouse stay at home. Even if you are currently unemployed for the moment, taking care of a few kids could be a nice way to keep your day busy (and your mind away from negative thoughts) while earning a few extra bucks.

#8 Find a service for your community

Since we are all moving towards a more frugal way of living, if you can find ways to improve frugality within your community, there is a big chance that your neighbours will follow and help your out. As I previously mentioned, my wife is trying to build a local product distribution system so we can all eat fresh, bio food. Hope it works!

#9 Fill out taxes

If you can afford to buy a tax software (such as TurboTax for example), you can surely pay for it quickly by doing a few tax forms. If you take simple cases (salaried individuals without anything fancy in their personal finance structure), you will surely do a great job and earn a few extra bucks in the meantime!

What about you? Which one do you use?

How do you multiply your sources of income? Have you ever tried to make more money? How did it go?

Author: Mike.

Image source: danielbroche

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Since the major cut in the interest rate back in 2008, we haven’t heard much about the FED cranking up the intraday rate so far. However, with recent GDP stats (5.7% annualised rate for the last quarter), we will surely hear some whispered rumors about the prime interest rate going up.

What is the intraday interest rate?

The FED has control over the inter bank rate. This is the rate established for banks lending to each other for one day. At the end of every day, banks look at their balance sheet and borrow or lend money in order to balance their assets with their liabilities. These loans are for 24 hours since their balance sheet changes daily. This is why we have an intra day interest rate.

How does the intraday interest rate affect my personal finances?

So even if the intraday interest rate is being set for banks, it does have an important impact on your personal finance. In fact, the intraday rate is the basis for the determination of all mortgage rates. This will affect directly the variable mortgage rates and will have an eventual impact on fixed mortgage terms.

Since mortgage rates change along the intraday, it is the same thing with a line of credit and personal loans. When the intraday goes up, you can be assured that all interest rates on banking charts will go up. The good news is that if you don’t have any debt and you are looking for sure deposit options; high yield savings account and CDs will increase as well.

So if the FED talks about increasing the intraday interest rate, this will have a direct impact on your savings and debt.

Why can the intraday interest rate go up?

It is a fact that the US economy is far from running smoothly. The unemployment rate is over 10% and people that find themselves a new job are being underpaid compared to their previous position.

However, if the GDP keeps going up, inflation will surely come back sooner or later. Unfortunately, the best way to stop inflation is to increase the intraday interest rate. By doing so, all interest rates go up and this motivates (read: forces) consumers to spend less and concentrate on their mortgage loan and other debt. This is how the FED can slow down the consumption and inflation at the same time.

What will happen to my mortgage rate?

If you have a fixed rate, the change in the intraday rate won’t affect your payments. Your mortgage will continue as agreed in your contract.

However, if you are about to get a new mortgage, you will most certainly have worse lending conditions in 2011 than in 2010. A few weeks ago, the FED declared that they won’t touch the intraday rate for now. Even though the economy seems to wake up, it is still a slow comeback. The last thing we want is to kill the economy in its sleep!

Final Thoughts

I don’t think there is much to worry about regarding the interest rate in 2010. However, it is being unrealistic to believe that we will ride on low interest rate for the next 25 years. It will eventually go up so you better pay off your debt while the interest rate is minimal!

Author: Mike.

Image source: clifff1066

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Our family finances get a lot of attention this time of year. I clean up the Christmas mess, every year we get better at handling Christmas expenses, but we are still not where we would like to be. I start to review my files to make sure I am ready to finish our taxes. Finally, January is “budget month”, the time of year that we review our budget. By the beginning of February, I have a really good grasp on all the numbers. Not so much meaning that I have control of the numbers, but that I can recite them at a moment’s notice.

Our budget is an Excel spreadsheet with the columns assigned to months and the rows assigned to budget items. I keep track of everything – health insurance premium, social security taxes, medicare, gasoline purchases, everything. I am a little obsessive compulsive at times and when I work with spreadsheets, that side of me comes out in full force. Every major category is color-coded:

• Income – Dark Green
• Giving – Purple
• Saving – Light Aqua
• Taxes – Pink
• Debt – Orange
• Insurance – Tan
• Living Expenses – Light Blue
• Mrs. Stew’s Budget – Light Green

I stare at the budget, I tweak stuff, I add and remove formulas, I play “what if”. It is all great fun.

Except for that Orange patch. Boy, do I hate that section. All the money that we owe. In many cases we spent that money years ago and the stuff we bought with that money . . . well, I cannot even remember what we bought with that money sometimes. What were we thinking?!

Do you know the debt that bothers me the most? It is our car loan. We still owe around $11,000 and we are paying right around 9% in interest. Every month, I send in a payment of $306.68, with a lot of muttering under my breath. We overpaid for that car, the interest rate is too high and when we finally pay it off in three years or so, it will probably quit the next day.

If it even makes it that long.

What is your worst debt? Which one irritates you the most? Or maybe you do not have any debt, in which case, you irritate me. But I am happy for you.

But you still kind of irritate me.

Article by Stew

Photo by AlishaV

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Debt is perhaps one of the most pernicious things known to modern mankind. As nobody likes to own someone something (not even a kind remark), we soon become obsessed to pay back our due. Some do it by spending less, cutting back on their lifestyles through frugal habits, others will get a second job or study in the hopes of earning a promotion and generating a bigger income. We all do this because we desire much, hate debt and want to sleep in peace.

Debt is stressful

Often, the most common reason for dispute among couples is money. We challenge our spouse on “unnecessary expenses” and she replies back about the promotion you didn’t get, haunting isn’t it. This is a story we have all heard time and again. When one loses his job and the couple starts to accumulate debt, the note of discord starts to infiltrate the home. Stress increases as are payments accumulate, while interest rates rise due to one or two “forgotten” bills on the kitchen table. The same stress reaches a crescendo when the money is spent (read gone) before it has been deposited into your bank account. You are one step away from payday loans… you are one step away from giving back the keys to your once loved and cherished beautiful home…

At this point, you can’t see straight anymore. You don’t sleep well, are less productive at work and constantly run into disputes about money. Debt is literally consuming your entire existence from within. As you can’t walk straight because you are stuck in the fog of debt, saving money becomes an issue. Each time you save a dollar, you think about the 10 dollars of interest you have to pay at the end of the day. Your efforts seems pointless… you are crumbling under the weight of your debt.

There are people to help you see your way through the fog

If you feel as if there is no hope anymore, you are wrong. Debt is like extra pounds, it is quite easy to gain them but much harder to shed! When you are stuck in the midst of your problems, you have difficulty imagining solutions anymore. It is normal, our brain has a tendency to creating a barrier around what we know and rarely accepts an idea from outside of the box. And these walls get thicker as the problem grows.

This is why it is time to reach out for help. The very first step to helping yourself out of debt is to talk about it with other people. I know, money and debt are more taboo than sex these days. But you need to reach out and ask for help. Friends and family can give you tips, point out new solutions because they see the problems from an external, preferably objective, point of view as they are not directly linked to it. Why do you think psychologists are able to help anxious people? Because they see problems from a different angle and help people to see their issues objectively.

If you know a good financial advisor, they would be your best bet to help you get your finances in order. Unfortunately, there are a lot of peddlers in the industry and you are definitely not looking for another salesperson! You need constructive advice regarding your situation.

When you think about debt in a detached manner, you will conclude it is only a math problem. There are 3 variables:

- Your income and possible sources of income

- Your expenses

- The payments attached to the debt built over time

Technically, you need to find the perfect equation:

Your income – Your expenses – Your debt payments = 0 or higher.

You can increase your income in many ways:

- get a second job

- get a promotion

- work more hours

- make money online

- sell things (temporary)

- have a sideline according to your skills

You can also reduce your expenses:

- by being frugal

- by sharing expenses, i.e. rent with another person (when possible)

- by looking for deals (read this article about how to cut down your grocery expenses by 20% while being lazy)

And you can improve your debt payments:

- by finding a better rate (zero balance transfer credit card) (temporary)

- by consolidating your debt using a personal loan with a longer amortization (it costs more in interest over the term but frees up some cash flow)

- by including your debt in your mortgage (not really the right timing to do so…).

As you can see, there are no magic ways to get out of debt. However, by talking with people around you about your problems, they may help you find alternatives to increase your income, decrease your expenses and improve your debt payments in order to help you sleep better at night.

Once you have a plan, the hard part is yet to come; you must follow it. Many people remortgage their house a few times thinking the property was a cash machine (a sort of ATM). Unfortunately, this only works for so long. Sooner or later, you have to look at your budget and make some changes to get out of debt definitively.

Author: Mike.

Image source: Okinawa Saba

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How to be debt free is a question I get asked often via email.  The process of getting of out debt is easy…but actually doing it is hard.  See, getting into debt is easy.  It only takes a few minutes to make a $5,000 purchase on a credit card.  Paying it back though can take years.

In debt and want to get out?  Here’s how:

1. Commit yourself to paying off your debt.  Make it the most important thing in your financial journey.  Swear that until you pay off your debt, you won’t buy anything you don’t need.
2. Recognize that you are the reason you’re in debt.  Find the closest mirror, look yourself in the eye and say “You are the reason I’m in debt.  Your bad habits of the past have gotten me where I am today.  I can’t change the past, but I can change the future.”  Don’t look back, don’t kick yourself, what’s done is done.  Just recognize you were the problem, but now you’re going to be the solution.  We all make mistakes, just don’t make the same one’s twice.
3. Stop going into debt. It does absolutely no good to start the process of getting out of debt if you continue to go into debt.  If you don’t have the self discipline to stop it, than cut up and throw away your credit cards.  Don’t feel bad about this, I didn’t have the self discipline either, so I cut up my cards.  I haven’t used a credit card for more than 2 years.  I don’t miss them one bit.
4. Control your money. Start living on a budget.  Cap and control your spending, and put all available money towards paying your debt.  This may involve stopping your saving, stopping your 401k contribution for a while, skipping vacations, no longer eating out, etc, etc.  Do whatever it takes to put as much money as you can towards paying off your debt.
5. Start a debt snowball. The most powerful technique for paying off debt is a debt snowball.  A debt snowball places all of your debt in order, and helps you attack one debt at a time.  It then takes the payment from that debt and adds it to the minimum payment on the next debt and so on down the line.

That’s it.  The process is very simple, but it won’t be easy.  Getting out of debt will take time, mostly likely a few years or even longer.  It will be tough to live on a small budget, it will be tough not to buy things.  Unexpected things will come up, and detour your progress.  These are all normal.  But don’t give up, stay committed, stay focused and you will one day be out of debt.

I am now debt free, expect for the house.  2 years ago I never thought I would be.  I had more than $60,000 in debt between credit cards, car loans, and RV loan, and home equity loan.  I sold stuff, did everything I could to increase my income, and cut corners like crazy.  It was hard, but now that I am here, it worth it.  Just the stress of the debt being gone is worth it.  Well what are you waiting for???  Go get out of debt!

author: Larry

Photo by: tfkrawksmysocks

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Are not two sparrows sold for a cent? And yet not one of them will fall to the ground apart from your Father.  But the very hairs of your head are all numbered. So do not fear; you are more valuable than many sparrows. Matthew 10:29-31

Several years ago, we made a dumb decision to take out a loan in order to purchase a car. It was a relatively sensible used minivan, nothing extravagant, but I have regretted the decision ever since. Fortunately, our car has held up well and we have had no more than the usual types of repairs. :twists fingers and rolls eyes heavenward:

Our loan is scheduled to be repaid in less than three years, I will be on pins and needles until that happens. A blown engine, a collision, a deer in the highway and we could be in a world of hurt. I am working on leaving this particular bit of worry with God.

I was speaking with a friend in church yesterday and “Tim” mentioned yet another possible event for me to add to my bucket of worry – remember that storm that we experienced back in July? Well, my friend, Tim’s car was outside during the hail and took on major damage. So much so that the insurance company totalled his car – even though it still ran perfectly. No windows were broken, not so much as a tail light – just dents from stem to stern.

His car was financed at around $7,100 and the Bluebook value was set at $6,500. Tim had full insurance coverage as required by law, including gap insurance (covers the gap between the amount financed and the actual value of the vehicle).

Here is what happened: the insurance money went directly pay off the loan and the insurance company towed his car away. There was nothing he could do – he offered to purchase the car back from his insurance company and he tried to talk them out of totalling the vehicle to no avail. They told him that they plan to tear the car apart and resell it for parts. Tim then offered to purchase all of the parts at once, before they towed it. They appreciated his sense of humor, but no dice. I understand the why’s and wherefore’s of this situation, but I was wondering if any of you have experienced this type of thing?

And the moral of the story? Do not purchase a car with credit! Swallow your pride and save up for a sensible, reliable vehicle that does not come with anything having to do with APR’s, monthly payments, gap insurance or “notes” and start saving up for that next vehicle. If something goes wrong, you will not be stuck with no transportation or worse – making payments for a car that no longer exists.

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Last month I applied for another Discover More card.  I had to end up getting two cards as the first one in my wife’s name wouldn’t cover the entire remaining balance on my 29.9% Bank of America credit card (crooks!).

Before any of you freak out about me getting additional credits cards, I’m transferring the balances to get a reduced rate and won’t be using the cards for anything else.  As a matter of fact upon receiving the cards I immediately scanned the cards and stored to images in Evernote then sent them straight to the shredder.  I just don’t need the temptation laying around.  I am sure I’d be fine, but I just don’t trust myself enough.

I’m digressing….back to Discover card.  I waited a week or so after receiving the card to see if the zero percent balance transfer request went through.  After still receiving no notification, I logged into discovercard.com and checked on the status.  Before I even got to the point of checking on the transfer, I noticed my interest rate for balance transfers was 3.99%.  Whoa, hold the phone!  I didn’t apply for a 3.99% card, I applied for a zero percent balance transfer card.  I immediately called customer service.

Deceived?

Before I go any further, let me just say that in all fairness to Discover, out of all the crooked credit card companies, thus far Discover has been the most pleasant to deal with.  Their staff is incredibly friendly, courteous and helpful.

Back to the story…  After navigating their crazy/insane phone menu system, I was finally connected to a real representative.  She looked at my account and told me that I had in fact responded to a 3.99% balance transfer offer, not a 0% balance transfer offer as I had thought.

I just love it when they tell me I’m wrong.  In fact, I replied via a mail-in offer they sent me instead of using an online offer.  I did this more out of convenience than anything.  I do seem to recall some benefit of using the mailed code vs. an online offer though.  Regardless, I specifically recall the offer being a zero percent balance transfer similar to the ones I offer here.  Unfortunately I didn’t keep the original paperwork.

Lesson: Always keep your paperwork.

In hindsight I should have scanned the paperwork into Evernote* to have for reference.  Not doing so gave me no proof of the offer and unfortunately no leverage to make them work with me.

The representative was very kind, but also firm that the offer they had in their system was a 3.99% offer and that she couldn’t change it.  This is fairly typically though as most of the initial representatives that you get from credit card companies can’t do much.  I asked if I could speak with someone that could further assist me and was transferred to some other group responsible for new accounts.

While the lady I spoke with was professional, she wasn’t near as nice as the prior rep.  We talked and argued for a good 10 minutes, and the conversation finally came down to this: They would rather lose me as a customer than convert my current card from a 3.99% balance transfer offer to 0% balance transfer offer.  She said that the system would no allow her to convert the card over.  I’ve found that blaming the computer systems is a common escape goat.  We hung up.  I was livid.

While I am not 100% sure in my mind the offer was indeed a 0% offer, I am 99% sure.  The other thing that makes me suspicious about this is that during the application process I had to fax in proof of income to a special group in the new accounts processing area.  I don’t recall ever having to do that for any previous cards I’ve applied for, ever.

Here’s my theory: I probably didn’t qualify for their 0% balance transfer offer, so rather than decline me, they converted the application to a 3.99% offer hoping I wouldn’t notice.  Why would they decline me?  With 2 mortgages, a home equity line on the old house, and remaining credit card debt my credit score probably isn’t to attractive. I also lower my available credit as I pay these down too, which further hurts my score (for those of you who value your credit score, please don’t waste your time educating me about how stupid this is, I don’t care about my credit score as I plan to live debt free as soon as I can).  It wouldn’t surprise me if somewhere in the fine print they told me this and I just failed to notice and they didn’t want to tell me.

Long story short, I seriously considered canceling the card, but honestly I didn’t want to go through the hassle of applying for another card only to find out that I wouldn’t qualify.  To be honest, I’ve been happy with Discover card’s customer service.  Also, 3.99% is far better than 29.99% as well as is just part of the stupid tax I’m having to pay for living on money I didn’t have in the past.  I’ll just put this card at the top of my debt snowball and get it paid off as quickly as possible.

* I have an article I’m working on that will review Evernote in detail, but if you’re looking for an awesome place to keep pretty everything about your life, Evernote is the bomb.  Check it out (not an affiliate link).

Think this was a bait and switch manuver by Discover?  Have you had a similar experience with Discover or any other card?  Want to just vent about how crooked credit card companies are?  No problem, add a comment!

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“Nope, no credit cards for me.  I don’t even carry one.”  I cannot tell you how many times I have said this phrase or something very similar to friends and family over the past 3 years.   Most recently it came up at the store while looking at a “great deal” on something in the electronics department.

I was talking with a guy there who was considering purchasing the same item.  Since we hadn’t allocated the money for it in our budget, I decided to pass on it.  I said something to the effect of  “I’ll have to pass this time, I don’t have the money.”  to which he replied “Heck, I’m buying it.  That’s what credit cards are for right?”  I wanted to just walk away, but since he asked, I just couldn’t help but reply: “No.  You’re using money you hope you’ll have in a few weeks.  If you don’t or you elect to not pay it off, you’ll end up paying more for it than you would have without the deal…potentially way more.”  He looked at me with a deer in the headlight look, and I just walked away.  It was obvious that he really wasn’t looking for an answer, nor did he want to hear a lecture on credit cards.  His mind was made up.

My wife and I stopped carrying credit cards when we had our financial epiphany.  We cut up our credit cards and haven’t carried one since.  Unfortunately we still owe on them, but we haven’t used one in a long time.  Here are just a few of the reasons why we stopped and why many of you reading this should consider stopped too:

Buying things you can’t afford

It took me years to realize it, but we (more myself than my wife) used credit cards to buy things we couldn’t afford.  If we went to a store, saw something we wanted (and wanted now) and if we didn’t have the money to buy it, we would use a credit card.

I distinctly remember walking into an HH Gregg store looking at large screen TVs.  I remember convincing myself “that I deserved it“.  I worked hard right?  I made sacrifices for my kids right?  I deserved this TV.  My wife applied for a zero % interest deal they were offering (I couldn’t apply as I wouldn’t have qualified due to the amount of outstanding debt I had).  We walked out a few minutes later with a $3000+ big screen TV.  I can’t believe how stupid we were.

Everything came to a head for me when I was buying groceries and gas one night on a credit card because we had no money in our checking out.  A huge sign that you’re in big financial trouble is when you’re buying life basic items on credit because you don’t have the cash.

You can barely pay the combined monthly payments

A very common financial tool that myself and many other personal finance bloggers talk about frequently to assist with paying off debt is the Debt Snowball.   I have a debt snowball now, but the first one I had was a very different kind.

I had my first credit card as a teen.  I got a few more in college, then a few more after I was married and employed, then a few more later.  After a while I probably had more than 5-10 different credit cards, all maxed to the limit.

The initial minimum payment was easy, but the payments snowballed on me from there.  Each minimum payment from a card added to the next and then all of the sudden one evening I had more minimum payments than I could make!  Believe it or not, I actually used other credit cards to make minimum payments on my credit cards!

The worst part is that at the time, those minimum payments weren’t even enough to keep me ahead of the game.  The credit card companies were loving me.  I was paying huge amounts of interest on items I had bought years before and making zero progress on getting the balance down.  I’m pretty confident I was on their list of top 10 best (read stupid) customers.

Living off of potential future income

After getting our finances under control, I realized at some point that when you make purchases on credit cards, you are using someone else’s money.  In my case, I was literally using someone else’s money because I didn’t have any of my own.  When that finally clicked with me, I felt terrible.  I wasn’t good enough at managing my own finances, so in order to live I had to rely on someone else that could.  Looking back, I still can’t believe I didn’t see that.  If you are struggling with debt, please re-read what I just wrote and let it sink in.

Using credit cards, you are also borrowing off of your future income.  If you buy something today on credit that you intend to pay off next month or maybe even over the next few months, you’re making the potentially dangerous assumption that you’ll have the money then.  This is not a safe assumption to make, especially in today’s economy where lay-offs are becoming far too prevalent.  Instead, live off of money you have now, not my money you hope to have sometime in the future.

Stop being slave to the lender

I realized this pretty quickly when I was calling credit card companies asking for reversal’s of $40 late fees and decreases in 28%+ interest rates that I was definitely slave to the lender.  I had nights were I wouldn’t sleep due to the stress of having more than $60,000 – $70,000 dollars in debt (excluding our mortgage) and having no clue how in the world I would ever pay it off.  I some how had convinced myself that it was normal, that everyone had a large amount of debt and that it was just the American way.  I had a dark cloud of debt following me around everywhere I went.

I finally got tired of not sleeping, worrying and relying on those credit card companies.  I finally did something about it.  While I’m not debt free, I’ve paid off more than $50,000 in debt in the last 3 years by selling things, using a debt snowball, and through cutting up our cards to avoid going in the wrong direction.

We’re still slave to the lender, but far less than we were.  If things go as planned, in 2-3 more years with the exception of our home, we’ll no longer be slave to the lender and will be debt free.

How about you?  Do you use credit cards?  Why or why not?  Did you have a major turning point like I did?  What did you do?  Add a comment!

Photo by: smlp.co.uk

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My disdain for credit card companies and their unethical practices isn’t a secret.  I’ve written quite a few articles here on Gather Little by Little about how I dislike them.  The unfortunate reality for many of us that previously lived in the land of stupid for too many years (or maybe even still do) is a large amount of credit card debt that we’re stuck with until we can get it paid off.

Unless you can find options for transferring that debt, we have no alternative other than to continue to deal the credit card companies.  If you’re in that boat like I am, than I highly suggest you make every effort possible to minimize the amount of profit they get from you while you’re with them.  Not sure how?  Here are just a few ideas:

Zero Percent Balance Transfers

Credit card companies are highly profitable due to high interest rates and fees.  The best and most effective way you can “stick it to them” is to minimize their profits.  A few credit card companies still offer zero percent balance transfer options.  If you’re currently paying any interest at all on a credit card, you’re crazy to not move that balance to a zero percent balance transfer card.  I did this recently and have literally saved myself hundreds in interest alone over the past few months.

In today’s economy, zero percent balance transfer options are becoming very rare, but there are a couple of the one’s still around and that I personally like.  Applying for these cards literally takes only a few minutes and depending on your credit card balance, could literally save you hundreds of dollars each month!  To be real honest, I am not sure how much longer these types of offers will be around.  I’d suggest taking advantage of them while you can.

Personally, I moved my balances to the Discover More Card – Sealife Collection. Thus far, I’ve been very happy with my decision.  Don’t wait folks, there is no reason to continue to pay interest to credit card companies.

Make your payments on time

While they don’t act like, credit card companies love it when you pay late.  That’s when they get to nail you with a $25 or more late fee.  If you have a zero percent balance transfer option, they’ll also immediately bump the 0% rate up to some crazy level of internet like 25% or more.

Make sure you pay your monthly minimums on time.  Better yet, pay early and pay more.  I recommend starting a debt snowball along with debt snowflaking to optimize the amount of money you are paying on your card, and minimize the amount of time you have to deal with the credit card companies.

Cut up your cards

Credit card companies of course love it when you continue to use your credit card, especially if you fall back into old habits of not paying off your monthly balance.  Many personal finance bloggers utilize credit cards as a source of income, and if you are 100% responsible with your credit cards and have some level of trust with the credit card companies, I can see how that would make sense.  I don’t trust them though, so I doubt seriously you’ll ever see me go that path.  I just don’t like playing with snakes, and that is what credit card companies are in my opinion, venomous snakes.

If you don’t have the plastic in hand to use it, you can’t use it right?  So cut up your cards.  Yes, I said cut up your cards.  Take a pair of scissors and literally dice them up and throw them away.  I would suggest writing your account number down in a secure location, so you have it, but you don’t need the plastic.  Scissors too boring for you?  Here’s a list of 10 creative ways you can cut up your credit cards.

For those of you like me that are anti-credit card, what suggestions do you have for sticking it to those credit card companies?  What steps have you taken to reduce that amount of profit they make from you?  Add a comment!

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I’ve written before on how to get out of debt using debt snowflaking even before PaidTwice came up with the great name and started the snowflake revolution.  Since then I’ve gained a number of readers and thought it might be useful to discuss the concept of debt snowflaking again, especially as  it’s something I’m really trying to get back to now.  I’m refocusing on my debt snowball again after it sadly melted.

What is Debt Snowflaking?

Debt Snowflaking is an awesome tool that compliments your debt snowball.  With a debt snowball, you set up fixed monthly payments to attack your debt and pay it off as quickly as you can.  If you’re interested in setting up a debt snowball, I have a full primer in my get out of debt article.  Debt snowflaking is the concept of supplementing your debt snowball by using any extra money and applying to your debt.  Here are just a few examples:

• Receive an unexpected check in the mail?  Deposit it and immediately make a payment against your debt.
• Save your change?  Count it up, deposit it and make a payment on your debt.
• Sell stuff on eBay or Craigslist?  Take the proceeds and apply it to your debt.
• I’ve been using my blog coaching and consulting revenue as snowflakes over the last month as well.
• I use MyPoints to earn relatively free money.  When I redeem those points for gift cards, I transfer that money the money I would have normally spent from my account to my debt.  For example, if I redeem my MyPoints for a $50.00 Amazon.com gift card, I also make a $50.00 payment against my debt.

The point is whenever you get “extra” money, immediately apply that money to you debt.  I’ve had a few months in the past where these snowflake payments were in the area of $500!  That’s a big snowflake.  Mostly though, my snowflake payments are between $100 – $200.

Snowflakes make snowballs

What is a debt snowball?  Just a bunch of debt snowflakes.  Using this analogy, making lots of snowflake payments each month against your debt can quickly form another debt snowball.  What better way to attack your debt than with multiple debt snowballs right?  Remember, no amount of money is too small for a snowflake payment as many small amounts can add up to be large amounts.

If you made $50 a month in snowflake payments against your debt, that equates to an extra $600 per year, and depending on your interest rate (hopefully you have a zero percent interest rate) the result could be much larger.  That’s making a pretty extra dent in your outstanding debt especially when coupled with your normal debt snowball.

Do you snowflake?  If so, what extra money do you use.  If you don’t snowflake, is this something you might start doing?  Add a comment!

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