If you are serious about paying off your debt, this is the perfect first step to take. Until you have stopped adding more debt, you can’t make a realistic plan to clear your current debt. As the saying goes, if you want to get out of a hole, then stop digging.
If this is one of your 2017 New Year resolutions, with any luck it should be a little bit easier in January as people tend to cut back after the excesses of Christmas, with fewer parties and nights out, perhaps even a “dry” month or “no fast food”.
Common excuses for not giving it a go
You may be just using credit cards for convenience as they save having to think about how much money is in your bank account at every point in the month… or you are just using them because of the legal benefits… or because you get cash back on the purchases?
Well possibly, but unless your debts are clearly going down each month, you may just be fooling yourself to some extent with these excuses. So try stopping using the cards for a month and find out just how much you are dependent on them.
How to manage without them
Ignoring the neat but impractical idea of just stopping spending on anything (!), you have basically two options: use cash or use your debit card.
Using cash means you don’t have to track what is in your bank account every day, only when you withdraw money. And it may well have an extra psychological advantage that you find yourself more reluctant to hand over “real money” for something than flashing the plastic.
If you decide to use your debit card routinely instead, then you do have to keep an eye on your account balance, especially if you have a joint account. Be especially careful when you use contactless payments. In October 2016 there were over 250 million contactless transactions on a debit – people love them because they are so quick and convenient – but it can feel like you aren’t spending “real money” at all.
If your income doesn’t all come at once – two pay-packets and tax credits say – then you may find it helps to postpone less urgent spending until the end of the month when it is clearer how much money you have.
What to do with the credit cards
Cut them up? That’s a serious suggestion if you have any cards which are either nearly maxed out or are on a 0% balance transfer. And if you have a whole collection of cards, cutting them all up apart from one (which ideally would have both some spare credit on it and a comparatively low-interest rate) is a good idea.
Otherwise you could leave them at home or, if spending online in the evenings is your biggest downfall, freeze the card in a block of ice. This won’t damage the card (unless you try to defrost it in the microwave!) but may be sufficient of a deterrent to give you that extra dollop of will power not to spend.
Also go in and delete your credit cards from any online accounts you often use, including Paypal.
Ooops I just had to use the card today
Don’t let that make you give up on the whole idea! There may have been a very good reason or you may be very cross with yourself. But carry on trying…
At the end of the month
At the end of January, have a think about how easy this has been, because that is going to give you a good idea of how hard tackling your debts is going to be. If you found it pretty easy, just a bit inconvenient, then have a read about “Snowballing”, as that is very likely to be your best option – it clears your debts as fast as possible and leaves you with a great credit rating. If you found it a struggle, then the rest of the year’s resolutions may help a lot, starting next month with looking at your expenditure.
If you failed dismally and your debt has gone up a lot during the month, then unless you can improve your finances a lot (check out the full range of ideas here) or you are going to have to look at the debt options such as a DMP or insolvency. Have a read up about the alternatives so you feel better informed, then get some good advice from National Debtline – they are independent, confidential and non-judgmental.