Strategies 6-10

* Strategy Six: Get and Use a Debit Card Only

This Strategy Works Best For: People who need and appreciate the convenience of credit cards but not the risk of debt accrual that comes with credit cards. Debit cards look like credit cards and offer most of the convenience of credit cards, but they act like checks. You insert the card into an electronic card-reader or automatic teller machine (ATM), and then punch in your personal identification number, or PIN. The information goes to your bank via the telephone lines, and the money for your purchase or cash withdrawal is taken from your checking or savings account.
Unlike a check transaction, a debit card transaction is immediate. The electronic card-reader or ATM instantly determines whether or not you have the funds in your account to pay for the purchase or cash withdrawal. If not, it’s a “no go.” A debit card cannot bounce! For this reason, many retailers who won’t accept checks will accept debit cards. Debit cards are handy when you’re out of town, where your check may not be accepted. Also, you can use your debit card to get cash from ATMs that are not even affiliated with your bank.
But debit cards are a good option for another reason –a reason related to reducing your debt and becoming financially unburdened. You see, with a debit card, you can’t spend money you don’t have. Result: it’s much easier for you to stop creating new debt and start paying off old debt. Debit cards are available from most banks. Two cautions: Guard your debit card closely, and never write your PIN (Personal Identification Number) on it! If your card is stolen, the thief can access your bank account if he also has your PIN. The Federal Electronic Fund Transfer Act limits your liability under these conditions, but you could still be out a significant sum if your debit card is stolen.
Second, be aware of any fees the bank may charge you for using your debit card, and try to minimize them, if you can. Of course, many people pay fees whenever they write checks, too, so the banks have us either way.

* Strategy Seven: Trade in High-Interest Cards for Low-Interest Cards

This Strategy Works Best For: People who carry balances on high-interest credit cards. The credit card industry is highly competitive. As a result, some card companies offer better deals to consumers than others, especially when it comes to interest rates. Why pay 21 percent interest or more if you can pay 8 or 9 or 10 percent with another card?
A high-interest card is not necessarily negative, though … IF you pay off the balance every month. But if you carry a balance, you can save money by switching. And, by saving money in interest charges, you will be able to pay off those credit card debts much sooner.
Take a look at all your credit cards and their interest rates. If you have balances on highinterest cards, see if you can get a lower-interest card and roll over your balances onto the one with the lower rate. (To “roll over,” you get a cash advance from the low-rate card and use that money to pay off your other, high-rate cards). Perhaps you already have a lower-rate card you can use for this purpose.
A couple of words of warning, though: First, make sure that the new card will give you a big enough credit line to absorb your other cards’ balances. Second, look carefully at all the details.
Does the lower-interest card charge an annual fee? If so, how much will that eat into your savings?
Does the lower-rate card charge the same low interest for both purchases and cash advances? (Some credit cards might have a “special,” higher rate for cash advances; the low rate is for new purchases only. If this is the case, you’ll only come out ahead if that “special rate” is still lower than the rate on your other cards.)
In addition, keep in mind that some credit card companies tantalize prospective new cardholders with a low initial interest rate. Unfortunately, that rate may rise in just a few months, and it may end up being as much as –or even more than– the interest rate you were paying before on your old cards. So you really gain nothing except a lot of hassle and disappointment.
The bottom line is this: Read and understand everything, and know exactly what you are getting.

* Strategy Eight: Always Pay More Than the Minimum
This Strategy Works Best For: Anyone who has interest-bearing debt. Paying the minimum due each month toward your debts is a sure way to stay in debt indefinitely –and perhaps permanently. Your creditors want to keep you on the hook, so they don’t ask you to pay too much. In fact, if you look at your statement closely, the minimum payment is often barely enough to cover the interest charges each month. If you consistently pay the minimum each month, your outstanding balance doesn’t really budge because the interest is growing and growing (and growing!). Plus, if you continue to use the account for more purchases or cash advances, the balance will grow bigger (and more insurmountable) than Mount Everest.
Fortunately, with this strategy, a little can go an amazingly long way. As an example, suppose you owe $2,000 on a credit card. If you pay only the minimum due every month (and assuming that you make no new charges), it could take you more than 16 years to pay off this debt. In addition, your interest charges alone would total in excess of $2,500, that’s more in principal payments than your original debt was in the first place!
Now let’s say you can pay just an additional $5 more than the minimum every month. That may not seem like much, but wait until you see the results: You could pay off that debt in just over
10 years and save yourself at least $700 in interest.
The news is even better if you can fork over an extra $10 a month. Your debt would be wiped out in less than eight years and your total interest charges would be closer to $1,400.
Yes, that’s still too long to have credit card debt, and it’s still too much interest. But it’s far better than what would happen if you paid only the minimum every month. As you can see, every little bit helps when you are trying to get out of debt and start getting rich!

* Strategy Nine: Develop a Written Payoff Plan and Follow It

This Strategy Works Best For: Anyone who owes money.
A plan will keep you on track, help to keep you from adding to your debt, and assist you in paying off your debts as quickly as possible. I cannot over stress the importance of having a plan and sticking with it.
Of course, having a written plan is one thing. Following it is another. If you have a hard time adhering to your plan, perhaps it is too unreasonable, too strict and too spartan. Maybe you expected too much of yourself financially, or maybe an emergency came up that took you off course temporarily. Don’t despair. You can always rework your plan so it is more realistic and flexible.
At the same time, keep in mind that the process of debt elimination is not totally painless. If it were, hardly anyone would owe money. To get rid of your debt (and start getting rich), you will have to scrimp here and cut out some frills there. But the rewards you will enjoy tomorrow are more than worth the small sacrifices you are making today.

* Strategy Ten: Pay Off Your Smallest Debts First

This Strategy Works Best For: Anyone who owes money to more than one creditor. Prioritize your debts and determine which one single debt you will work hardest on first. Concentrate on paying as much money as possible toward that debt each month. Many experts advocate paying off the smallest debt first, because you will see real progress much sooner. This will give you the feeling that you are accomplishing your goal of debt elimination –and you are! Then you will be encouraged to continue your efforts with real vigor. Every indebted person should prioritize which debts to work hardest on first. It’s very motivating and satisfying to get at least one debt out of the way (paid off) as soon as possible.