SHPC Blog

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How About a Game of Freeze Tag?

 

By: The Budget Guy, Allen Gunter

 
Ready to get rid of your credit card debt?  All it takes is a game of Freeze Tag!
 
Rule #1 – Freeze Your Credit Cards
Literally. Put your cards in a baggie, fill it with water and put the baggie in your freezer. You ain’t never gonna get rid of your credit card debt if you keep using your cards.
 
So why not just cut them up? Because you may end up with an emergency and you can always thaw those cards out and use one of them. Just make sure it’s a real emergency and you have no other options!
 
Rule #2 – Freeze Your Monthly Payments
No matter how many credit cards you have, freeze the amount you pay on each at whatever amount you’re paying now. Don’t pay less next month just because the minimum amount has gone down.
 
Do you know why your minimum goes down each month? Because that keeps you in debt and paying interest longer!  And it makes it easier for you to add to your debt.
 
Suppose, for example, you have a VisEx card from Friendly Bank, NA:
 
All you have to pay right now is $90, so that’s what you pay and next month your minimum has gone down to $88. Cool! So you only pay the $88 and the month after that your minimum has gone down again so you only pay it.
 
Keep doing that and it will take you more than 9 years to pay that card off and you will have paid more than $1,300 in interest! How’s THAT for a waste of money!
 
And if you didn’t follow Rule #1, things will be even worse!! But what if you continue to pay $90 each and every month instead of being suckered into paying just the minimum? You’ll have that dude paid off in just over 3 years with less than $700 of interest!
 
Rule #3 – Tag a Card
You can stick with Rules #1 and #2 and they will work fine. But if you have debt on more than one credit card, you can get rid of all of it faster if you tag a card and use the “avalanche” or “snowball” approach:
 
  1. Add up all of your frozen monthly payments from Rule #2.
 
  1. Each month, pay only the minimum on every card other than your Tagged Card.

 

  1. Pay what’s left of your total monthly payment on the Tagged Card.
 
Here’s how it works. Suppose you have three cards and these are the minimum payments:
  • Card A: $ 100
  • Card B: $ 150
  • Card C: $   90
  • Total:    $ 340
You pay the $340 and here are your new minimums for next month and the payments you would make under Rule #2:
 
Card Minimum Payment
A $    97 $ 100
B  145 150
C    88   90
Total   $ 340 $ 340

 

But using Rule #3, you’ve tagged Card C. So in the second month, you’ll pay the minimum on Cards A and B and whatever is left on Card C:
 
Card Minimum Payment
A $    97 $ 97
B  145 145
C    88   98
Total   $ 340 $ 340

 

You keep doing that month after month – minimums on Cards A and B, the rest on Card C – and before long…boom!Card C is paid off! But you don’t stop there. You keep on paying $340, but now it’s only split between two cards. Pay the minimum on one and the rest of the $340 on the other. You might decide it’s time to go big or go home. So you tag card B to get rid of your biggest remaining balance:
Card Minimum Payment
A $    97 $ 97
B    145   243
Total   $ 340 $ 340
 
That dude’s going to go down fast!  And once it does, all of the $340 goes to the last card standing. Before long it’s time to party!  (Just don’t charge that party!) And you’ve even got $340 extra each month you can put to much better use than credit card debt. So how do you decide which card to tag first?
 
  • If you want to get out of debt the fastest and save the most on your finance charges, tag the card with the highest interest rate.
  • If you want to get at least one balance paid off as soon as possible, tag the card with the smallest balance.
 
Now go start playing Freeze Tag!
 
If you have questions or would like some help making this work for you, Just ask the The Budget Guy (aka Allen Gunter).  “If he don’t know, he’ll tell you so!”
 

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