5 Steps to Successfully Pay Off Credit Card Debt and Increase Savings

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Pay Off Credit Card Debt

The average balance on the credit card in 2017 is $6,354 according to Experian’s State of Credit survey [1].  We are the nation of credit debt. If you are struggling to pay off credit card debt, you are not alone. Here’s the strategic way to pay off your credit card debt. It’s all about discipline and everyone can achieve it. Record, monitor, and cutback recurring expenditure as much as you can. Nurture a mindset to change your life style that you don’t rely on someone else’s money and do not take out another loan to pay monthly due. For those who have children, if you let them adopt these behaviors in early stage of their life, the life-time benefit is going to be significant.

Before you start, you need to have a mindset that credit card is not a means to spend more than you have. It is a means to build your reliable credit history.


1. Record and monitor income and spending

First, start recording your income and spending. This is the most important thing that you need to do before you try anything, else especially spending. Without knowing how much you are spending, it’s really hard to plan how you pay off credit card debt. Collect all the receipts from every transaction and record every spending. Literally everything, rent, utilities, gas, grocery, tips, etc. Do not compromise to allow not to record and make sure not to miss any recording.


1.1. Get a personal finance software

Second, in order to make your bookkeeping work easier, getting a personal finance software is a productive way to monitor your spending. Mint.com is a cloud-based automated personal finance program that allows you to monitor your spending. Since it’s cloud-based system, you can access your account from any mobile device (laptops, smartphones, and tablets). The great news is it’s free.  Quicken is an alternative and a long-time leading personal finance software developed by Intuit but it is going to cost you money.


1.2. Categorize income and spending

Third, when you record, categorize each spending in order to see the percentage of spending based on the type of transactions. For instance, mortgage and rent payment will be under housing expense and electricity, natural gas, water, sewer, water heating, trash collection, and phone bill are fallen under utility category and so on. You can name yourself based on your life style. If you have multiple sources of income, distinguish them as well so you can see the ratio of each income source.


2. Recognize expenses and cutback

Once you start recording your own bookkeeping, you should be able to rank the type of expense from the largest to smallest. Most cases, the rent or mortgage payment is the largest monthly expenditure. If your lease expires soon and you can move in to somewhere else nearby cheaper than you pay now, that’s effective way to reduce monthly expenditure. Limit the expenditure to only things that are essential to your life. You don’t need fancy car, new furniture, or cruise vacation. Leave your ego and temptation. No one is going to judge you because of material you own. Make an effort to maximize positive margin between your income and expenses.  Tell yourself to pay off credit card debt.


3. Create invisible saving

One tip can be given is that use items around you with care to prolong the lifecycles of them. This behavior will delay the spending on the recurring items and mitigate the risk of breakage for non-consumable items.

Following is some of ideas but you can come up your own. When you use paper towel, use only the portion you need rather than using a whole sheet. Alternatively, you can replace paper towel with fabric linen and wash and bleach once a while to reuse it. Learn basic sewing skills, which are very easy, to mend clothing. Seek second hand clothing rather than new. This will save your money and reduce carbon footprint. thredup.com is an online second hand clothing store and it’s worth of browsing them. The plastic bags to pack food can be replaced with glass, ceramic, stainless steel, (or plastic) container. When you drive your car, avoid aggressively hitting on the gas and brake. This will not only stretch your gas mileage, but also extends the life of wearing parts: brake pads, suspensions, tire treads, oil, and so on.


4. Plan payoff schedule

Once you quantify your monthly income, expense, and balance, which goes to pay a part of the debt, calculate how long it takes to pay off all of them and make sure to multiply monthly balance with corresponding interest rate. This will give you approximate timeframe of your payment plan, which will promote your motivation. Keep in mind that the monthly expenses don’t include sporadic spending such as renter’s insurance, auto insurance and any other non-monthly payment and unexpected expenses like medical bills due to illnesses or injuries. Take these into account to your schedule.


5. Focus on the one credit card debt at a time

Furthermore, there are many ways to apply your monthly saving to the credit card balance. Either paying to the account with the largest balance first or pay equal amount to all credit card accounts. The study [2] performed by Harvard Business School indicates that the paying off one account at a time than paying off accounts equally achieved faster results (paying off all the debts) because the participants felt more progress towards goal.

Additionally, in the same study, focusing on paying off the account with the smallest balance first is more effective than paying accounts with larger balance. It increased participants’ motivation towards paying off debts because they can see the progress, which stimulated a further motivation. This does not necessarily mean that you can entirely forget about other account. Instead, increase the ratio of payment towards the account with smallest debt balance and knock it down first. Subsequently, this will make you want to save more and pay off credit card debt faster.



The debt is a consequence of your behavior and takes disciplined mindset to pay off credit card debt and not to create another one. However, being debt free can be achievable by anyone. Recognizing your spending behavior, maximizing positive monthly income expense balance, and focusing on one at time will lead you to become debt free. What helps is to dissect the problem into small segments to visualize executable action items rather than subjectively hoping to pay off your debt. This applies to any issue that you encounter in your life.

Therefore, you can identify the magnitude of workload and which task takes longer and shorter to complete. Maintain your motivation and don’t quit. Only the time you fail this mission is when you quit. Believe in yourself that you can conquer. If you are reading this, I am very confident that you can achieve your goal.  Nurture a discipline to pay off credit card debt.



Optional Reading

Here are some great reading to nurture your discipline to pay off credit card debt


1. Extreme Ownership: How U.S. Navy SEALs Lead and Win
Jocko Willink

Jocko Willink is a former navy SEAL’s team leader served military for 20 years. One day, he was deployed in the field and his mission went very wrong. Later, he was asked to debrief what happened back at the base and he knew what was wrong but he could not say so in front of management. Instead, he reported that it was “my fault”. His lesson tells to take an extreme ownership of what you are doing. This is an incredible lesson you can learn from one of the best and someone who went through tough time. This is one of your reading list to develop a sense of discipline.

Business Insider
Navy SEALs leadership excellence

Extreme Ownership | Jocko Willink | TEDxUniversityofNevada


2. Make Your Bed: Little Things That Can Change Your Life…And Maybe the World
William H. McRaven

Admiral William H. McRaven is a former commander of U.S. Special Operations Command. He shares about his story regarding his Navy SEAL experience. During BUD/S (Basic Underwater Demolition/SEAL), a 6-month initial training for Navy SEAL members, each member are required to make their own bed every morning with military precision. If the finished bed did not meet the rigor requirements, the disciplinary action will be given to responsible person.

He teaches this small first task in the morning will give you a sense of accomplishment and make you keep motivated for the rest of the day, week, and later. It’s hard to tackle an onerous mission but you can start achieving small ones then escalate your steps. This lesson will tell you that completing mundane work is connected to what you do in your whole life. Making each day count will eventually lead to significant achievement in your life.

The University of Texas at Austin Commencement Speech




1. “State of Credit: 2017”, Experian

2. “Research: The Best Strategy for Paying Off Credit Card Debt”, Harvard Business School


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