Get Out Of Debt By Switching To A Cash-Only Policy

When you get a few credit cards and see a bunch of things you want, it's easy to rack up a ridiculous amount of debt. One couple from Georgia amassed $US83,000 in debt and dug them selves out with diligence, a little help from a debt assistance program, and a cash-only policy.

Courtney and Michael Wacker had $US83,000 in debt with a 32 per cent interest rate. That's not the kind of debt you get out of easily, but they managed to nonetheless. They started by seeking help from an organisation called CredAbility (formely the Consumer Credit Counseling Service of Greater Atlanta) and were able to get the 32 per cent interest rate cut to 3%. Obviously this was an enormous help, but it still left them with a monthly payment of $US1456 they'd have to make over a little more than five years. That's like renting a one-bedroom apartment in Los Angeles in addition to everything else.

How did they cope? Obviously their spending habits had to change dramatically, but one smart choice they made was to switch to a cash-only policy. The problem with credit cards and debit cards is that it's hard to control your spending when you're not constantly aware of how much money you have. The Wackers said using only cash was pretty tough for the first year, as it requires a bit of forethought to make sure you have enough money on hand when you need to pay for simple things like gas and food, but after that it became habitual and more manageable.

Changing a learned behaviour can take time, and curbing your spending isn't easy, but if you force yourself to work with only what you've got it'll be a lot harder to overspend.

Photo by J Rosenfeld

Gwinnett couple conquers $US83,000 of credit card debt [AJC via The Consumerist]


    I was thinking of getting a credit card with a rewards program (spending what i normally spend anyway) to rack up points for a plane ticket/holiday every few years. Might save a good chunk of money although i understand how some people can't resist temptation as well as others.

      the higher fees and interest rates of rewards cards, plus any FF programs which require a yearly fee (like Qantas) negates the so-called 'rewards' they offer

    Lots of people reccomend using the rewards programs for those reasons.

    Not one single person who I've ever met who tried this, has actually managed to limit spending to what they would have spent anyway without a credit card. And everyone I've ever met who's tried to claim the reward points from a credit card program was frustrated and annoyed by the process. The gotchya's through those programs make just saving a few months longer and buying the ticket much less frustrating.

    You can still have a credit card and keep it under control! I have a rewards credit card with a limit of $3500 (its what the bank gave me when i signed up). I put groceries, fuel, internet and health insurance on the credit card. My fortnightly budget as taken into consideration these purchases and puts aside money for the credit card bill when it arrives. The balance is paid each time the bill arrives, and I generate at least 500 points a month.

    I could just use a cash only policy for all my purchases, but using the credit card in a tightly controlled method helps with your credit rating and allows you to generate some points. As such in a space of 2 years, I am now getting a great panasonic camera from the points I have accumulated.

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