Credit Card Debt: Is Cutting Up Your Credit Cards A Good Idea?
These days the average American household has around $15,654 USD in credit card debt (source), and it is a number that is steadily rising for many. More people than ever have credit cards, and they are getting them at younger and younger ages. For people with high balances, paying off these credit cards can be a process that takes years, especially when only making the minimum payment.
The real problem comes when only paying the minimum is combined with continued use of the card. Any small progress you make can be wiped out in a moment’s notice when you make a new purchase. Not only that, but some card companies will also allow you to overspend your limit in some degree, with a larger than usual minimum payment the following statement.
The only real solution is the cliché one: cutting up your credit cards. In addition to cutting up your cards, you should also cancel them. In addition to decreasing the number of active credit sources on your credit report (a good thing in the eyes of some lenders), it eliminates the chance of a replacement card arriving and tempting you to spend again.
I don’t necessarily recommend cutting up all your credit cards, as I personally keep one around for online purchases, hotel rooms, airline tickets, etc. Some purchases simply require the use of a credit card. Unless you are a compulsive spender, keep one card around for such purchases, but try to keep the balance down, and if needs be bury it in an inside compartment of your wallet instead of in one of the credit card slots so you are not tempted to use it.
Another trick to avoid using your one remaining card unnecessarily is to ‘gift-wrap’ the card in a plain piece of paper. You can write a little note like ‘Only For Emergencies’ on it, and it makes the card less tempting to use because it cannot be seen and you have to go to the trouble of unwrapping it when you need to use it (something you won’t likely do just to get lunch).
In future entries I plan to offer some additional tips on managing credit card debt but I think this is the best start you can make, not only is cutting the cards practical, it is also a declaration of independence from credit card companies and credit card debt.