A long time ago and in a land far far away… well actually it was 1980 and my wife and I, as newlyweds, just moved to Alaska—this is a true story.

I was working for a financially secure and slightly older gentleman who, one day as I was passing by his office, called me in and asked me an interesting question. “What’s the difference between a rich man and a poor man?”

Being young and just starting my career, I thought the answer was rather obvious and so I quipped, “one has a lot of money and the other one doesn’t.” It doesn’t take a rocket scientist to figure that one out.

However, his response back, was somewhat surprising:

The Lesson of the $100 Bill

He stated that the difference between a rich man and a poor man was a $100 bill. He asked me if I had one.

“No,” I answered. He then asked, “how many people out on the street walking around right now do you think have a $100 bill in their wallet, pocket or purse.” I responded, “probably not very many.” He said, “my point exactly.”

He then took his wallet out of his pocket and pulled from it a $100 bill and handed it to me and said, “put this in your wallet, keep it there and know that you have more money in your wallet than most people do, and that if a small emergency comes up, you’ll be okay.”

So I gratefully put the bill into my wallet and left. You know, I actually did feel rather rich, and knowing that a $100 bill could cover about any minor emergency that could come up, like running out of gas or an unexpected business lunch with co-workers or whatever it might be; I really was covered. Back then my wife and I didn’t have a credit card or debit card—just cash and a checking account, and for some reason my wife said I wasn’t allowed to carry the checkbook.

Two weeks had passed, and I was again passing by his office, he called me in and asked if I still had the $100 bill he’d giving me. I lowered my head and said, “the other day I was low on gas and didn’t have any money so I used it to fill the car up.

Once I had broken the bill the remainder went rather quickly.” He chuckled and pulled out his wallet again and handed me another $100 bill and said, “see if you can make this one last longer this time.”

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My first thought was, this isn’t a bad deal we have going here, but he quickly said that this was the last one he was going to give me. Well, again I was back on top of the world feeling rich. This time I kept the bill for almost 6 months before I needed to use it, once again, once it was broken it went fast.

Let’s now fast forward to 2010 where a large percentage of the population of the U.S. carries either a credit card, debit card or some other form of a charge card. Who carries cash anymore?

I went into a Subway the other day and ordered their six-inch, special-of-the-day sandwich, which was only $2.99, and I had to use my debit card to pay because I didn’t even have $3 on me. Is it any wonder that so many people are having financial struggles? Not only because of the current economy but also because of what seems to be an endless supply of money that we really don’t have—credit. This idea of credit, can at some point, come back to bite us hard if we don’t manage it correctly. Here are some interesting credit card statistics.

Credit Card Issuer Statistics

Total cards in circulation in U.S.

• Visa credit: 309 million, as of June 30, 2009 (Source: Visa.com)
• Visa debit: 352 million, as of June 30, 2009 (Source: Visa.com)
• MasterCard credit: 211 million, as of September 30, 2009 (Source: MasterCard.com)
• MasterCard debit: 130 million, as of September 30, 2009 (Source: MasterCard.com)
• American Express credit: 54 million, as of December 31, 2008 (Source: AmericanExpress.com)
• Discover credit: 57.1 million, as of December 31, 2008 (Source: Discover.com)

Americans currently owe $917 billion on revolving credit lines and $69 billion of it is past due, according to the latest Federal Reserve statistics. (Source: www.consumerreports.org, September 2009)

Spending Habits and Controlling Your Money

What’s the biggest difference between now and 30 years ago regarding our spending habits? Yes, 30 years ago many people used credit cards, but many people also carried cash in their wallets. A credit card was only supposed to be used for emergencies or for purchasing large dollar items, limiting the need to carry around large amounts of cash, knowing however, that when the bill came due, it was to be paid off in full, monthly.

So when your cash ran out, buying something else wasn’t an option, you just made do without. People back then understood how easy it would be to get into trouble financially using credit cards excessively. People also know this today; however the idea of doing without, if you don’t have the cash to pay for it immediately, or saving towards purchasing it at a later date ,when you can pay for it in full, has been lost or at least conveniently forgotten.

This idea is still sound financial advice today. When the money is gone, make due with what you have and go without until you have the money to purchase it outright.

How to Stay Away From Financial Trouble

An excellent way to keep yourself from getting into financial trouble is to create a budget and then track your expenses daily.

There are several ways to do this. Create a budget on paper and then jot down, in a note pad, your daily expenses. This is inexpensive but somewhat time consuming.

Another, more efficient way is personal finance software; either a desktop application or an online service. Read “Online Finance Software vs. Desktop Finance Software” to get a better understanding of the pros and cons of both of them. Online personal finance software allows you to easily create a budget and then automatically download your daily transactions.

When your purchases are in excess or getting close to exceeding your budget, you’ll receive an email or text alert warning you to rein in your spending. This will help you stay in control of your money, instead of it controlling you.

Want to feel great each day even if you do have financial stress; since fewer people carry cash these days compared to 30 years ago, tuck a $100 bill into the bottom of your wallet or purse and know that you have more money on you, than most people you’ll meet and pass each day.

Also, see if you can make your $100 bill last longer than 2 weeks or 6 months. It truly is a great feeling.

This has been a guest post from Brent Ropelato from PersonalFinanceManagementSoftware.com, which helps you eliminate debt, track expenses, manage your money, plan for retirement and more.

It is an epic battle, one waged since the dawn of time…well not quite that long, but the battle between credit card rewards and credit card debt is one which polarizes people the world over.

But today we end it with a duel – en guard!

The Strengths of Knight Reward

Knight Reward is often accused of being an underhanded competitor – offering the possibility of the carrot, only to beat you with his stick.

Well you can avoid being beaten and get a hold of the prized carrot if you know how to play to the strengths of credit card rewards.

How to use a credit card for the rewards:

A rewards credit card must be used with a high interest savings account fighting alongside.

Knight Rewards’ most famous battle cry is the fact that credit cards can be used throughout the month, during their interest free days, for all purchases while your salary is in a high interest savings account accruing interest, or is in an offset account linked to your home loan, offsetting the interest you will have to pay on your mortgage in the month.

To be given the chance to win, your credit card must be allowed to fight, and to combat the high annual fees which often come with rewards credit cards, you will need to be spending at least $2,000 each month on your credit card before you consider going in to battle alongside Knight Rewards, to accumulate enough points to make you eligible for rewards which will compensate you for these fees.

You must always clean your sword before returning it to its sheath.

If you fail to pay your rewards credit card balance back to zero before the end of the interest free period, even the fearless Knight Rewards won’t be able to save you – you’ll be ensconced in interest and monthly repayments which will override the value of any rewards you may earn.

However, using a credit card and paying it down to zero each month gives you a strong credit report and shows your financial responsibility.

Choose a rewards credit card which actually allows you to earn rewards.

Some rewards credit cards are drawing you into a battle you’re bound to lose with unrealistic terms, conditions and usage periods for your rewards points.

However, there are many credit cards which will offer you the chance to choose gift vouchers or fuel vouchers with the points you have built up in your spending and some gold cards will also allow you to earn two points for every one dollar you spend.

Know the rules of the credit card battle.

If your rewards points do expire, make sure you can easily keep track of them and cash them in for rewards before you lose them. Also make sure that the rewards you can earn are ones you actually want, and that you are given choices between charity donations or cookbooks, movie tickets or a hair straightener.

A savvy purchaser can deftly avoid interchange fees. Some rewards credit cards will attract a higher interchange fee, but most Australian retailers will advise you of this additional fee before processing the purchase – therefore, look for a credit card with a companion card which attracts lower interchange fees.

For example, take a Mastercard or Visa into battle with a companion American Express card, AmEx can earn you higher rewards, while fighting in a tag team with Mastercard or Visa to avoid high interchange fees. An informed credit card user also knows interchange fees are just one of the many costs of doing business.

He’s put up a good fight, but is it enough to allow Knight Rewards to maintain his dominance on the credit card battlefield?

The Strengths of Challenger Avoid

Challenger Avoid is a somewhat meek competitor – taking the road of least resistance in the battle and in risking nothing, he attracts no ire.

Challenger Avoid knows his weaknesses and if you’ve identified similar weaknesses then you may choose to fight alongside the stoic warrior Avoid.

Avoiding credit card battles:

The cost of not-so-innocent interchange fees is just too high.

Avoid is proud to fight the good fight on behalf of all consumers and holds strong to his belief that interchange fees which merchants are charged to accept credit cards are a cost passed onto all buyers, regardless of their payment method.

Challenger Avoid will avoid credit card use to save himself from the costs of interchange fees, while hoping the decreased use of credit cards will decrease the cost of interchange fees to businesses, and in turn customers.

The battle of the credit cards preys on the weak.

Challenger Avoid chooses not to fall victim to the seemingly enticing deals which he believes are only a clever disguise to get him deeper into debt, in turn earning the credit card companies more interest.

Challenger Avoid knows the credit card companies don’t ever want him to pay off his balance, and chooses not to spend an eternity being encouraged to spend.

Know Your Credit Card Habits

Knowing your spending habits helps you responsibly avoid bad debt. If you have faced past battles with credit card debt and lost, or you don’t want to tempt yourself to spend money which is not yours, Avoid encourages you to not show your weakness to the credit card companies.

If you don’t think you can pay off your credit card to zero each month, or only use it for essential purchases, then the best way to ensure you stay debt free is to avoid the temptation to use credit.

A doppelganger debit card can give you the same convenience as credit. If you have chosen to avoid credit card use, you don’t have to forge the ease and security of paying with plastic.

You can instead employ a decoy – a debit card which looks and acts just like a credit card, but which links to your transaction account and allows you to only spend your own money.

Debit cards offer you the security to pay for bills over the phone or make online purchases and can even offer rewards of their own – Visa Debit cards for example give you first access to concert ticket releases and discounts on audio entertainment equipment.

A worthy opponent, who has now earned himself an equal rank beside Knight Rewards, but has Knight Avoid been able to topple his historic foe?

The battle has been fought and won, with each side offering a mighty show of strength and determination for their cause, with the duel making champions of both competitors.

How About You?

The duel between Knight Rewards and Knight Avoid will go down in history, so which side will you be fighting on in the future?

Fred Schebesta write for Credit Card Finder and Savings Account Finder, where he helps people to compare savings accounts and credit cards

How would you like to win a $500 American Express Gift Card or even a $100 gift card just in time for last-minute holiday shopping? 

Who wouldn’t!?

Joel, over at Credit Card Chaser is running the 2009 Credit Card Chaser LOVE/HATE credit cards contest. 

Head on over to Joel’s site to enter your comments for a shot at the $100 gift card.  If you’re a blogger – write a post about your own LOVE/HATE story with credit cards for a chance to win the big prize! 

In the meantime…

Here’s My Credit Card Story

I absolutely LOVED my Chase Visa Golf Card, but now I HATE it.  With this card I earned dollar for dollar rewards with no limits. 

After a certain amount of points Chase would automatically send me a “golf pack“, which included a free round of golf at hundreds of courses around the country along with a 6-pack of Nike golf balls and a pack of tees! 

Because I ran all my business expenses on this card I managed to earn seven or eight free rounds of golf, about four-dozen golf balls and countless tees!  It was a pretty sweet gig – that is until Chase shut the card down! 

After having the card for two years I got an unexpected letter in the mail stating that they no longer supported the rewards program and that I could no longer use the card for purchases and any points I had earned would be forfeited!  What a crock! 

So Chase Visa Golf Card – I got no love for ya! 

This Week’s Round Up

Here’s a look at a few good posts from around the ’sphere:

• Looking for some thoughts on the prosperity gospel?  Trent over at The Simple Dollar provides an answer to an email question he receives quite often about God blessing his site. 
• Bob over at Christian PF provides a response to Trent’s post and tackles the issue that the Bible oftentimes talks about God prospering or blessing us.  I think it’s a good, well-balanced view.  Bob makes the case that when we compare ourselves to the rest of the world – we in American are filthy rich and therefore we need to know how to use our money for the greater good.
• Matt Jabs, a blogging buddy over at Debt Free Adventure freshened some things up a bit at his site with a new theme design.  Check it out if you get a chance and let him know what you think.

Many times the simple things have a way of sticking with us and helping change our patterns of behavior better than a list of 25 items we need to remember to do on a regular basis. 

If you’re struggling with stopping the use of your credit cards - you could set fire to them, but I hate the smell of  buring plastic don’t you? 

Instead, try to focus on changing just one or two things.  Once you master those then you can move on to the next steps. 

I recently read an article from TheStreet.Com called 5 Ways to Dig Yourself Out of Credit Card Debt.  This post is adapted from that article. 

It will be especially important with Black Friday approaching that you have a plan in place to help with your credit cards.  Here are three simple things you can do to help curb your credit card usage:

1. Delete your cookies

Wait! What? Yes you read that right.  But how does that help? 

Cookies are simply a way your computer remembers information about you to make your internet browsing easier and quicker. 

One thing that your computer stores is your credit card account numbers and information. 

Think how easy is it to jump on a site like Amazon.com, shop for that new book, video game or software you’ve been dying to buy and with a couple clicks of a mouse have the item shipped to your house.

Most people aren’t big dorks like me and have their credit card number memorized  - so by deleting your cookies you at least have to take a few minutes to go dig your credit card out of your wallet and type in the information.

Doing this will probably get old after a while and hopefully will be enough to at least make you pause and think, “Do I really need this?” 

2. Apply the $25 rule

This rule simply says you CANNOT add more than $25 (or $50 or $15 or whatever you amount you decide) to a purchase you were originally going to make.

In other words, say you go to the mall for a new pair of pants, but you notice that sweater you’ve been eyeing for a while is on sale for $29.99.  You need to say, “Sorry sweater, you’re not coming home with me!”  Don’t act like you don’t talk to your clothes!

You should set your target spending amounts BEFORE you go to the store.

Another version of this would be to say you cannot add X amount to your card at any one time – where X is whatever amount you decide ($25, $50, $75 etc.)  This helps avoid those big ticket items that are easy to say to yourself, “Oh, I’ll just pay it off later!”

3. Play the Three Reasons game

This can be one of those games that annoy you to the point of not purchasing the item. 

Basically you need to name three reasons why you should buy that particular item with a credit card.    (Don’t cheat: ”Because I don’t have cash on me” is not an answer!).

If you have trouble with cards don’t fool yourself into thinking that getting your cards rewards points is an answer either.

If you can come up with three solid reasons why you should buy with your credit card then go for it.  What you’ll find is that many times it just doesn’t make sense. 

Try these simple rules this holiday season and see what happens with your credit card usage.  What other simple tricks do you use to help curb your credit card use?

Other posts on credit cards you might like:

• How to Save (Potentially) Thousands by Spending $3.99
• 9 Habits of the Debt-Free Credit Card User
• 5 Mistakes People Make with Their Credit Cards

It’s one of life’s great conundrums: how exactly does the average credit card user stay debt free? Surely the two are mutually exclusive, and therefore the stuff of fairy tales. Yet, while most credit card users find it nigh on impossible to clear their debts, there are a handful of very organized spenders who should be lauded.

They don’t necessarily clear their cards every month; they just use them wisely and manage their money well: think frugal and sensible, as boring as it sounds. And while it is a good thing to be able to clear your credit card debt, it’s actually healthy for your credit history to have some record of debt, so potential creditors can see if you’d be a worthy client.

The debt-free credit card user’s secrets are within your grasp – and all without a pair of scissors in sight. Here’s how they do it:

1. Show Restraint
Don’t throw your money around. The average DFCCU (debt-free credit card user) has had to learn to be strict with themselves and their wallet, and it doesn’t mean they only refrain from extravagance, it means they start with saving on the small things. So, eat out less, buy more home brand items at the store and shop around for cheap gas or better still, ditch the car – it’s often a huge drain on finances. Once you’ve cut costs you’ll find you’ll have more money to pay off debts.

2. Get a Steady Job

Before the bottom fell out of the financial market, the world and his wife were inundated with pre-approved credit card offers, and were often granted immediate credit without ever having to prove they had the means to pay it off.  Now that the financial bubble’s burst those offers aren’t flooding letter boxes in the same way, but the people who were granted the credit are drowning in debt. So, the one and only way to get out of the mess is to have a job that pays well. And if you have a good job but you’re still finding it hard to pay off chunks of your debts, get a better one, or ask for a raise. Of course, changing spending habits would be the best route, but for some that’s harder than changing jobs!

3. Stay Strong

When the assistant behind the counter is trying to persuade you to get yet another store card that you don’t need, just say “No”. Sure you get $10 off the total cost of your bill today, but you’ll end up paying 10 times that over the next few months in exorbitant interest fees, which will probably keep building up because you only pay the minimum amount every month.

4. Have a Healthy Panic

Ignore all the advice you’ve heard to date about not panicking when you find you’re getting deeper into debt. Are they mad? A good controlled panic attack will scare even the most hardened debt junky into realizing that they can’t possibly go on spending as they are – and not on their wage. And don’t worry; even the DFCCU had to go through this stage, too. It’s like one of the five stages of grieving, but for cards.

5. Devise a Plan

Once the panic waves have subsided, take a deep breath, pull yourself together and start planning what to do next. Write down exactly how much you owe – it always looks much worse on paper, so will reiterate just how bad, or good, things are – then start calculating.  How much you allocate to each card should depend on the interest rate of each. Start paying those with the highest interest rate first. If you can, consolidate all your debt onto one low-interest card, or one with a good introductory offer near 0% for certain period. Be warned though, always check the fine print on these offers so you’re not stung with a highly-inflated interest rate once the introductory offer finishes.

6. Make Direct Debit Your Friend

Without a doubt, everyone who has ever had a credit card will have missed a payment at some point, and while this is enough to push most people into setting up a monthly direct debit, others remain serial non-payers. True, it can be a pain getting it organized and usually involves lengthy calls to your bank, but once it’s sorted it is absolutely worth it. All you have to do is make sure there is enough money in the bank every month to cover the outgoing payments. See step 2.

7. Get the Devil Behind You

Do not use your credit card in place of a debit card. It’s a sure-fire way to ensure your fragile financial stability goes into a downward spiral. Many cash-strapped people start to use their credit card once their checking account has gone over the overdraft limit because it’s the only way they can get their hands on some cash. But don’t be tempted. Unless you are very good at managing your payments by paying them off every single month, keep your credit card locked away until desperate measures are needed. And that means not using it to go out with your buddies for a few drinks because you’re too embarrassed to tell them you’re broke! Peer pressure can be shockingly persuasive.

8. Make Small Sacrifices

Not the voodoo type; some of your own.  List what you can do without and write down what you really need for the week/month, depending on how you calculate your budget. If you think you really need something and are tempted to buy it but know you shouldn’t, give yourself a 30-day cooling off period. If after then it’s still as precious to you, budget around it. It’s also a good idea to have days when you vow to spend nothing at all. Pick one day a week, stick to it, and you’d be surprised how much you can save.

9. Give it Some Time

Understanding that you’re not going to be able to become debt-free overnight is important. These things take time. As long you realize that it’s about how you use your credit card, and a budget is in place, things will get easier. And once you’ve mastered the art of debt-free credit card use you can start building those precious points that will lead to well-earned treats, without having to worry about how you’re going to pay for them.

Useful Links: 1, 2, 3, 4

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You gotta spend money to make money!

Every hear those words before?  Typically they’re said by a business owner or a company that spends money trying to grow the business.

When it comes to personal finance and getting ahead, that phrase seems so wrong – but what I’m suggesting is you may need to spend money to save money!

For the price of your favorite grande beverage at your local coffee house you can potentially save thousands of dollars if you put this plan into place.

Drastic Action

We all get to a point sometimes with our bad habits where we just can’t seem to make a change and we need to take some drastic measures.

Jesus spoke of this in regards to fighting against lust in Matthew 5:27-30, where he says “if your eye is causing you to sin you should tear it out and throw it away.”

Jesus wasn’t literally saying we should gouge our eyes out if we are lusting for we’d all be walking around blind if that were the case.

What he was powerfully illustrating is that you need to take drastic action against destructive, sinful behaviors in your life before they ultimately destroy you.

Relating to Your Money

If we apply Jesus’ principle to our money then we need to take drastic measures to correct any destructive behaviors we have with our finances.

If you’ve gotten yourself into debt, there’s a pretty good chance you have abused credit cards.  It’s amazing that a little plastic card could lead to so much damage.

If that’s you – it may be time to take some drastic action.

The Best $3.99 You’ll Ever Spend

Most of you already have one of these in your house so you may not even need to shell out the four bucks – however, even if you do, maybe just going to the store and buying a new pair will help motivate you to perhaps embark on a brand new journey.

It will be quite simply the best $3.99 you’ll ever spend.

Run to Walgreen’s or your local drugstore; or even shop online and buy a new pair of scissors.

This set here should easily get the job done.

Come back home and have a little Cutting the Cards Party! Gather your cards and one by one start cutting away!

Think about how much money you can save by simply stopping the use of credit cards.

Not only will you save money by not racking up any more debt, but you will also save big time money on interest.

The potential savings could add up to thousands of dollars over the course of your life span.

Now, don’t get me wrong.  You may want to keep one since it’s difficult in today’s environment to get away with using only cash, but my point is that if you’ve had difficulty with credit cards in the past it’s time for a change!

With credit playing “hard to get” during this most recent economic downturn and lenders raising their standards for doling out cash, it’s more important than ever to boost your odds of getting a loan with a good credit score.  Here are five tips to help improve your score and give you a greater chance of getting that cash you may need.

A. Annual Check Up

Getting an idea of what your credit score is has become so much easier now with government legislation that gives everyone the right to request one free credit report each year.  I highly suggest visiting annualcreditreport.com to request your free copy.  Knowing where you are will help determine your next steps.

B. Be Punctual

This is so simple, yet it’s amazing that many folks think being a couple weeks late on their payment is no big deal as long as they are paying something.  According to CNN Money, ”someone with an average credit rating of 707 can raise their score by as much as 20 points by paying all their bills on time for one month.” 

C. Clean Up Errors and Old Information

Check you report carefully to see if there is any outstanding information that shouldn’t be showing up.  Perhaps an old doctor bill or credit card still shows a balance.  You’ll want to check for accurate credit limits from your card issuers as well.  These things can typically be taken care of with a phone call to one or more of the reporting agencies. 

Experian – 888-397-3742
TransUnion – 800-916-8800
Equifax – 800-685-1111

D. Don’t Close Old Accounts

This may seem counterintuitive, but closing old accounts will actually hurt your score.  This is because the reporting agencies want to see a nice long history of using credit.  According to Fool.com, “lenders take a hard look at the ratio between the balances on your revolving accounts and your total available credit. If you do have debt, try to keep it to less than 30% of your available credit.”  If you start closing your accounts, your debt-to-available-credit ratio goes up and impedes your score.

E. Eliminate Debt

As mentioned, lenders typically like to see a debt ratio of 30% or less.  No debt would be ideal!  Get serious about improving your credit score by getting serious about eliminating debt, especially paying down those credit cards.  Managing your debt responsibly will help boost your score tremendously.

Breakdown of How Credit Scores Are Calculated:

Improving your credit score won’t happen over night, but with simple discipline and some practical steps you can start seeing improvement in a very short time.

Your debt may be costing you more than you realize especially if you are making these 5 mistakes.  Paying off your debt is a battle you can win by bypassing these blunders:

1. Not paying the bill in full each month

This is where it all begins.  You buy something you can’t afford and think to yourself, “I get paid in two weeks, I’ll just put it on the credit card and as soon as I get the bill I will pay it off” and then something else comes up.  Your brakes go out, your washer quits working  or you find some other trinket you want to buy and you put that on your credit card too.  At the end of the of the month you receive a hefty bill and only pay what you can and wind up leaving a balance on the card that accrues interest at insane amounts. Creating a budget will go a long way in helping to avoid this problem.

2. Only paying the minimum payment

If you are paying only minimum payments on your debt, your credit card companies love you and you should be getting Christmas cards from them each year.  Paying the minimum payment will basically ensure that it will take a lifetime to pay off your debt.  You must pay more than the minimum if you want to get anywhere with your bills.

3. Not paying attention to due dates

This is easy to do because we are busy people, but making a late payment even if it is only by a few days can rack up ridiculous charges that only compound your debt.  Those annoying charges can also have an impact on your credit report.  Being vigilant about paying your debt and paying it on time is key.

4. Not paying attention to the interest paid

If more people understood how much interest they are paying to their card companies each month in interest alone, perhaps they would make a greater effort in getting these debts paid off.  Matt Jabs at DebtFreeAdventure.com takes a revealing look at his own interest payments for the month and shows how interest destroys your ability to build wealth.

5. Not negotiating with the card companies

It puzzles me that more people don’t call their card companies to negotiate with them.  You can negotiate things like interest rates, late payment fees or even payment plans.  If nothing else, it doesn’t hurt to give them a call and find out what they can do for you.  Bob Lotich at ChristianPF.com tells about his experience in  negotiating with credit card companies. 

Getting out of debt isn’t easy, but don’t make it harder on yourself by making simple mistakes that can easily be avoided. 

According to creditcards.com, the average American household credit card debt is surveyed to be at $8,329. Even if you are not one of the average ones you probably know the devastating affects debt can have on you and your family.

If you are burdened by credit card debt and are serious about breaking free from the bondage that credit cards can put you under, then let me offer some practical steps to begin your journey.

1. Pray

Prayer is an essential component for any aspect of our lives. If you are in over your head in credit card debt, might I suggest humbling yourself and spending some quiet time alone with God to be honest with him about where you are at financially. He’s not going to be shocked by the news and He offers wisdom to those who ask for it (James 1:5).

2. Take Inventory

Gather each credit card statement and write down the name of the card, the balance, interest rate, minimum payment due and the amount you are currently paying toward that debt. I would also suggest you write down the toll free number of the card company as this will come in handy later.

Taking inventory also means you look carefully at each card companies offers (i.e. balance transfer rates, 0% offers etc.) This will be important in step four.

If you are married this should be done with your spouse. You would be amazed at how many couples I come across that do not know that the other one has credit card debt or are unaware at how bad the problem is. Typically one spouse is more of a spender than the other and so it can be quite a shock at first, but paying off debt is a team sport and must be fought together.

3. Stop Over-Spending

This sounds pretty basic, but if you are in credit card debt you have been spending more than you earn. You must be tenacious in reducing expenses and stopping your use of credit cards in order to fight this battle. Christian Personal Finance has a great post on where and how to cut expenses.

4. Negotiate With the Card Company

I am amazed at how often this is overlooked. Many companies are willing to work with you if you approach them and let them know that you are wanting to pay off your debt, especially in this economy, where many people are not paying their bills or even filing for bankruptcy.

I suggest calling your card company and be honest with them. I would ask for a manager right away or an account closing specialist so that you get straight to the decision maker that can help you. Let them know you want to pay down the debt and you’d like to know if they can reduce the interest rate for you. Find out if they have any special balance transfer rates and that you may be willing to consolidate some of the debt to them if they can give you a decent offer. Also let them know that you are willing to transfer their balance to another company if they cannot work with you. Here is a helpful post about negotiating with credit card companies.

5. Consolidate

If possible, take advantage of special balance transfers offers. This only works if you stop your over-spending. You don’t want to consolidate your debt and then rack up another couple thousand dollars on the card you just transferred. You don’t want to get into the habit of doing this either because it can have some negative impacts on your credit score, however, if you consolidate some of the debt to a much lower interest rate then more of your payment will go towards paying off the principal.

6. Snowball the Debt

Some people believe you should pay off your highest interst card first. I tend to disagree. I think snowballing your debt is more of a confidence builder and can start the momentum towards getting you out of debt. According to Dave Ramsey the best way to knock out debt is to get some quick wins under your belt.

” The math seems to lean more toward paying the highest interest debts first, but what I have learned is that personal finance is 20% head knowledge and 80% behavior. You need some quick wins in order to stay pumped enough to get out of debt completely. When you start knocking off the easier debts, you will start to see results and you will start to win in debt reduction.”

The first step in snowballing your debt is to pay minimum payments on all your credit cards except the one with the lowest balance. You pay as much as you can on that amount until that debt is gone and then you take whatever that payment was and apply that towards the next smallest balance. Each time you pay off a debt, apply that payment to the next smallest card and before you know it you will have created some great momentum and will see the progression at a more rapid pace.

Final Thoughts

Getting out of credit card debt is not easy and it won’t happen over night. It will take discipline, sacrifice and patience, but the results will be worthwhile. Find some friends to keep you accountable and do your best to keep plugging away. You’ll be glad you did.

Recently I was listening to a sermon by Matt Chandler, lead pastor at The Village Church in Texas. He was talking about God’s heart and passion for the poor, orphaned, weak and challenged and what our response should be towards them.

Chandler was challenging his church to be generous towards people whom God has such a deep concern for and asked the question, “why aren’t we more generous as Christians?”. In reality, we should be the most generous people of all because of how compassionate God is toward us through Jesus.

If I am really honest with myself I go back and forth between generosity and stinginess with my money, my time and my talents. I find it difficult many times to be missionally minded with the gifts God has given me.

So what prevents us as Christians from being more generous? What follows is my non-exhaustive list of what I’ll call generosity killers:

Debt

Liabilities have a way of choking out generosity because our additional resources are going towards paying off debt. So many Christians are paying ridiculous amounts of interest on stuff they thought they needed. Many of those items will end up in a landfill in a few short years. We are far to easily amused by gadgets and other items that we’ll plunge ourselves into massive debt in search of joy.

What if we as Christians decided to simplify our lifestyles and live debt free. Imagine how generous we could be towards those who are poor and underpriveliged.

Greed

Jesus said to “Watch out! Be on your guard against all kinds of greed; a man’s life does consist in the abundance of his possessions.” (Luke 12:15). Greed leads to a mindset of getting rather than giving. “Just a little more” is how John D. Rockefeller famously answered the question “how much money is enough”. Greed is blinding, and most of us probably feel we are doing a good job managing this sin, which is why we should pay careful attention to Jesus’ words and “watch out”.

Stinginess

Proverbs 23:6-7 says, “Do not eat the bread of a man who is stingy; do not desire his delicacies, for he is like one who is inwardly calculating. “Eat and drink!” he says to you, but his heart is not with you.”

A penny-pinching person is constantly calculating every last cent to make sure no one gets more than they should. Notice the verse says that a stingy person’s heart is not with you. He does not have a generous heart.

Busyness

Busy lifestyles can rob us of opportunities to be generous. It seems especially true in America where we numb ourselves with self-centered activities, hobbies, and endeavors and give little regard to our neighbors let alone the poor, weak and powerless.

Lack of Compassion

A person who is merciless and lacks compassion will not be generous. How many times do people see a homeless person and assume they would use any money given to them for drugs or alcohol and so they keep on walking.

God has a heart for the weak, the underprivileged, the orphaned, the widowed, the powerless and the poor and we should too.

So what are your thoughts? Are there any other generosity killers that you would add to this list?