Save 2,000 $ with your credit card

Do you have debts with your credit cards? Have you begun to use the card recently and has increased your debt without realizing it? Do you always shop with your credit card and pay the monthly minimum? Think you could make better use of your credit cards?

If you answered "yes" to either question, I have to give you a bad and good news. The bad news is that "you have a problem," the good news is that " It is possible to manage debt and go slowly reducing it if we develop an appropriate plan . "

First, we must be aware that the money spent on credit is not free and that the interest we pay for using that credit is very high (around 20% APR). Second, you have to write to the head as follows: "NO COSTS OR BUY SOMETHING IF YOU DO NOT HAVE MONEY FOR IT" (the credit card is not your money).

Just use your credit card if you pay the total month-end.

I recently asked a friend who had three credit cards with a debit balance of  2,000 $ each, how he had come to that situation. He shrugged his shoulders and he said he only used his card to buy and pay the minimum on each (60 $) per month because it was more convenient.

Well, it's time to take the bull by the horns and design a plan to pay off our debts. Let's do the numbers:

What debts should you pay before

One of the main objectives that everyone should keep in mind is to pay debts.

It is a worthwhile goal, but sometimes it can be difficult to know where to start.Without a plan, it is easy to get discouraged because the debts do not disappear overnight.

Knowing your debts is the first step to create a plan that will allow you to cancel before and save money in the process. 

Therefore, you should ask your financial institution features a breakdown of your debts (outstanding amount, interest rate, cancellation fees, etc ...)

Pay off debt with highest interest rate first 

Each debt has its corresponding interest rate, some higher than others


The first type of debt to be paid are the credit cards. Typically this is the kind of debt that charges a higher interest. Once your credit cards are paid, we can start looking for other debts, personal loans or car loans are the following alternatives.


Saving for the mortgage when we´ve already canceled the rest of the debts

The mortgage debt is often the greatest, but at the same time has the least interest rate. Being a big debt, your cancellation will take years. Better to pay all other debts first, increase our level of savings and our self-esteem to get eliminated loans. Before you cancel your mortgage, check your other debts have been paid.

Have you developed a debt settlement plan already?

What are you waiting for?

Fight against your loans

Can you save if you have outstanding loans?

It is possible but preferably eliminate these debts because the interest we are paying are higher than we think (if you have a credit card with an outstanding balance of $ 2,000 and are paying every month for delayed payment $ 50 , the interest you pay the bank in one year is almost $ 400 )

Basically, we have three types of debts: 

1. MORTGAGE: It is the most important and the most dificult debt to cancel. For all this, it's worth to do a lot of effort to snap out of it. For instance: 

• $ 250,000 mortgage over 30 years. Average interest rate over the life of a mortgage 4% (we are generous). The total interest paid to the bank are almost $ 180,000, so that the house cost us $ 430,000. Not worth making an effort not to pay so much interest?

2. PERSONAL LOANS:  from loans to buy a car, going on loan to furnish the house, pay our wedding or even to go on holiday. Absurd, right?

3. CREDIT CARDS:  money spent on credit without it. Expenditures are basically whims. Even more absurd, is not it?

The average mortgage is around $ 800 month, a personal loan to buy a car is $ 300 month and the monthly payment on a credit card could be $ 100 month. A total of  $ 1200 each month to pay off debts, A lot of money or a slab?

What insights can we do about these three types of debt?

1. The mortgage is there and is what it is, but we can "fight" against it. Do you really want to return to the bank $ 180,000 in interests? Would you do something if I tell you you can save $ 50,000? And if they were $ 100,000?

2. Because we buy a car if you have no money. So need a car to be the first big spending ahead of the home purchase? How often do you change car? Why not do otherwise than other people? It is usual to buy the car, borrow and pay $ 300 month for five years. It would be better to save those $ 300 during all months and 5 years, and then with the money saved, bought the car.

3. How many cards do you have? Why use them? Why buy if you have no money to spend? A credit card should be for cases of extreme emergency. A tip: Do not carry it, be tempted to use it. Want to know how to design a repayment plan card? Sign up here to receive the best tips to save.

Break your credit card

1. If we spend what we earn, we can never have an emergency savings fund.
2. Furthermore, if we spend more than we earn, then we will need to borrow money to finance the excess spending.
3. If these costs are recurrent we have to return the borrowed money in ever smaller amounts and longer term.

In each of these situations, creating a pool of money that allows us to save for contingencies can be impossible.

Therefore, before creating a short-term savings, we have to solve our problems with credit cards.

If you're in the situation (1) , I recommend you do a detailed analysis of your expenses and to differentiate those that are essential expenses (mortgage, school children, food, household supplies, etc ...) of those who do not are. Only by adjusting the latter, we can start saving.

It is true that not all months are going to spend the same and that there will be months that expenses exceed our revenues slightly (2) . The problem here is the easy to use (credit card) rather than creating an emergency fund.

The problem with credit cards is that they have a perverse effect on our finances, since any money you have our card (unless you have payment later this month) we will have to return with their interests (such interests vary depending on the card and the interest rates, but usually around 20% APR)

Imagine a person who has a debt in his credit card of $ 2400 and he pays $ 120 each month to cancel the debt, broadly speaking, the client will take more than 2 years to repay the loan and will pay more than 500 € in interest.

Could you create a short-term savings if you pay € 500? As this amount is what you save in the event that you had the savings and did not have to resort to credit card under the above conditions.

Have I convinced you to break your credit card or at least not have it at hand?