underwater sparkler symbol of credit card debt

Debt Reduction: Credit card debt update #1

Remember when I explained that I have two “extra” paychecks per year? One of them came in this week and I had been waiting eagerly to decide what to do with it. I could apply it to my scary 401(k) loans, or reduce my credit card balances, or add it to my savings for some extra cushion, or even invest it.

What did I decide do with my extra paycheck this week? I used it to punch my credit card debt in the face.

Yesterday my American Express balance was $5210.87, and today it is $2210.87. My paycheck was for $3054, so I paid $3000 of that toward my balance.

I have one credit card with a higher interest rate, but the balance is lower. I chose to make the payment against my Amex card because the monthly interest payment would be the highest of the two. Now that it’s down to almost the same level as the other card I will probably make larger payments against the other card for a while, or at least until it is down to a level where its interest payment would be lower than the Amex again.

This stupidity won’t last long though, because I plan to pay off both of them within the next few months.

So! Here are my current credit card debt balances. The important thing to know is that not all of these balances are revolving. I put most of my regular monthly expenses on my cards to earn the reward points. Doesn’t mean much when you’re carrying a balance month to month (and paying much more than you earned in points), but there is a goodly chunk of a couple of these balances that will be paid off every month.

American Express: $2210.87 ($35 – $75 goes toward automatic expense payments and doesn’t carry over)

Capital One Visa: $283.25

Quicksilver: $1765.12  ($718 goes toward automatic expense payments and doesn’t carry over)

Citi Visa: $348.82 (this is for groceries and gas and doesn’t carry over)

By some banking calculations, a balance isn’t considered “debt” until after it crosses the monthly billing threshold and begins accruing interest. So I could consider the numbers above in two ways:

Total owed on all cards: $4608.06

Revolving balances: $3466.24

Any way you want to look at it, it’s too high and I need to cut expenses. I thought it would be worth pointing out, however, that not all credit card debt is inherently evil as long as you can manage to not go overboard. Obviously, I have gone a bit overboard.

My biggest concern is those 401(k) loans looming out there on the horizon like Cthulhu rising from the deep. I feel like I need to get this interest-generating revolving debt taken care of as quickly as possible so I can focus on the loans.

So here’s to the first step!

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