The Comfort of No Credit Card Debt

This morning, I got an e-mail that advised me that the statement for one of my credit cards was ready for download. I opened a browser, typed in the link for the site, and checked my statement.

As I expected, the balance owed on the card was $0.00. It was a comforting feeling knowing that I owed nothing to my credit card company.

Now that's not to say that I haven't used the card -- I have. My wife and I use this card for grocery shopping, gas, the occasional meal out, and our online movie rental subscription. This month we used the card a total of eight times. Although that's not a world's record, the card did get used.

So, you might wonder, how did I manage to use the card and not end up with a balance at the end of the month?

It's easy: Instead of paying my credit card bill at the end of the month, I keep tabs on my spending and make frequent, smaller payments as I go.

Now it may seem stupid, but every time I make a credit card purchase, I record the amount in my checkbook register like I would a check. Then, whenever is convenient, I set up an online payment to send the money to my credit card company. When the bill arrives, it's usually paid off, or if it's not, I know that a payment is already set to go.

Because my credit cards are always kept paid off, I don't sweat when the statement arrives. Sure, I still review it for errors and to make sure vendors who bill my card aren't trying to rip me off, but I never have to think about whether or not I'll have enough money to pay the bill.

I don't have to worry about it, because the money has already been sent.

I haven't always lived my life this way. Before I filed bankruptcy, I carried some pretty hefty balances because I was using credit to make ends meet. After my bankruptcy (I re-affirmed one card) it often seemed like there was always some emergency or some reason I had to carry a balance. Although I was much more careful with the amount of debt I was carrying, it was still there, hanging around my neck like a dead albatross.

It took a very long time to get to this point. My wife and I had to exercise some very strict discipline to accomplish this goal. Here's how we did it:

1. We agreed that carrying a credit card balance was no longer acceptable.
2. We stopped making purchases on cards that were carrying a balance.
3. We had one card (a certain green credit card that Karl Malden used to pitch during the 1970's and 1980's) that didn't allow us to carry a balance. We used this for convenience purchases such as gas and groceries, and kept it paid off every month.
4. We made minimum payments on all the credit cards, and used our extra cash to hammer down the others.

Now there are several theories on how to pay of credit cards:

• Pay off the card with the highest interest rate first, since it makes the most mathematical sense and will save you the most interest.
• Pay off the card with the lowest balance first, since it will seem like you are making more progress.
• Pay off the card that has the heaviest emotional load first, because the debt bothers you.

Math experts will certainly argue that paying off the highest interest rate will save you the most money, and you can't really disagree with that fact. From an emotional standpoint, however, the other two options might feel better.

In either case, I don't think it matters a great deal. Pay off your credit cards, however you can, as quickly as you can.

Because when you get a statement in the mail that says:

Balance Due: $0.00

It feels terrific.