Skip to main content
Plan Well, Retire Well

Singing the Credit Card Blues

Now is when the holiday bills arrive and our budgets feel stretched! It's easy to feel overwhelmed by debt payments and end up avoiding them. But when you don't take control of your debt payments, the interest charges pile up – and grow and grow! Let's consider strategies to help take control of credit card bills.

First, get organized. Make a list of each credit card or other debt with 1) the total amount owed, 2) the annual percentage rate (APR) you're being charged, and 3) the required minimum monthly payment.

Be sure to note the current interest rate you're being charged. Sometimes the interest rate changes and we don't notice the change.

Add up all the minimum monthly payments. It's important to at least pay all the minimum monthly payments to avoid late fees and, ultimately, trouble from debt collectors. Paying the minimum monthly payments on time helps your credit history too.

Second, use a strategy called PowerPay to reduce your credit balances more quickly. For example Jeremy has three credit cards with balances, and the total of the minimum payments for these cards ($25 + $50 + $75) is $150 each month. Jeremy can afford to pay only the minimum payment amount for the three cards now.

Using the PowerPay technique, when one of these balances is completely paid Jeremy will continue to pay $150 towards his debt. However, the money that would have gone towards the paid balance, Jeremy now adds to one of his other payments. Each month Jeremy continues to pay a total of $150 until all three of the credit card balances are paid off.

You can use the online calculator,, to see what an amazing difference this can have on how long it takes to clear the credit card balances and how much interest charges it can save. This free website is from Utah State University Cooperative Extension.

On the PowerPay website, enter all the debts you owe. Then, the fun of using a calculator begins! You can easily calculate different scenarios. For example, what happens if you put just $20 more a month towards paying off your debt?

Or, what happens if you pay off the debt with the highest interest rate first versus paying off smaller debts first to simplify bill paying? You can see the time and dollar cost of one approach versus the other by using the calculator. With this information, you can make a plan.

Once you have a plan on how to approach paying the bills, a little extra money would help pay them off quickly. Here are a few creative ideas to "find" money that you can add to your monthly payments.

  • Do you have any unspent gift or prepaid cards laying around! You may have recently received gift cards as a gift, or you may have loyalty or other prepaid cards stashed away. If so, here's some unexpected cash. Perhaps you can use these cards to buy something you need (instead of using your earnings) and then put the extra earnings to pay down the balance on your credit cards.
  • Another idea is to have a "spend nothing week." Try to go all week without spending any money and put the money you would've spent towards paying off your debts.
  • Reduce your spending at the grocery store or at restaurants by using up food in your cupboards or freezer.
  • Do you have a jar of coins? Money under the sofa cushions? Convert the change to cash and pay down that debt.
  • Spring clean your closets early and find clothes or other items that you can sell.
  • Receiving a tax refund? Pay down that debt!

The more quickly you pay down your debt, the less money you will lose in interest charges paid to credit card companies or other lenders.

What other strategies can you think of to find extra money to reduce your debt? I'd love to hear your ideas in the comment box!