Creative Ways to Pay Down Credit Card Debt

This week, Maggie gives advice on how to pay down debt, along with creative ways listeners have done it themselves.

Are you ready to pay down your credit card debt? This week’s episode goes into detail about what steps you should take to pay down your debt and also gives you some examples of how others have done it themselves.

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The theme music is called Escaping Light by Aaron Sprinkle. The podcast artwork design is by Maggie’s dear husband, Dan Rader.


Maggie Germano: 00:00 Hey there and welcome to the money circle podcast. My name is Maggie Germano and I am your host. Thanks so much for tuning in. Don’t forget to rate review and subscribe in your podcasting app so that more people will hear about this podcast and listen this week I’m talking about credit card debt so as you know it is the beginning of 2020 which means it’s a new year and it’s a great time to set new goals and a lot of the goals that I have been hearing from folks in the money circle group as well as people who that I’m working with in coaching and just friends of mine. One of those goals is paying down debt and a big piece of that debt in a very frustrating and stressful piece of debt is often credit card debt. And it can be really difficult to know what are the steps I actually need to need to take in order to pay off that credit card debt and actually get it down without, you know, having to move into a closet in a group house full of 10 and never go out to eat ever again and just take on 18 jobs, right?

Maggie Germano: 01:17 So realistic ways to actually take action on paying off your credit card debt and then some ways to make sure that you keep that debt down and don’t accumulate it over time again, because that is definitely a common theme where you get into debt and then you figure out a way to get out of it, whether that’s through consolidation or you know, you just work really hard to pay it down and then the cycle kind of starts all over again. So figuring out how to get that debt down and then implement new systems so that you’re not stuck in the same exact position in another year or two. All right, so real quickly I’m just going to kind of summarize what I wrote in this week’s blog posts about the different ways that you can actually pay off the debt. And then I want to get into some of the creative ways that you yourself can do it based on some of the feedback I got from other listeners and folks in the money circle group.

Maggie Germano: 02:19 So I posted in there asking for um, interesting and, and original ways that people paid down debt if they’ve had experience in doing that. And so I want to go into detail just so that you can hear actual lived experiences and not just me kind of giving you the, the usual point by point of how you actually get out of debt. Okay. So first and foremost, the main way that will actually allow you to get out of credit card debt, or at least stop it from growing is to stop using your credit card. A lot of people don’t like hearing this. This is a point of contention with a lot of my clients, but if you want to pay off your credit card, you have to stop using it. So you might think that if you’re a consciously paying off additional charges that you’re adding to the card, that you’ll actually be able to get that down.

Maggie Germano: 03:12 But those charges really can add up and the interest that builds up can build on top of that and it can just make it harder and harder to actually see the progress and accomplish progress against the debt you’re already holding. Plus if you’re still using your credit card, you might still be using the same behaviors that got you into debt in the first place, which means putting more on the card, then maybe you can afford to pay off at the end of the month. And so it’s just kind of kind of continue to snowball over time. So really the best way to get started is to stop using the card altogether. Taking a break from using your credit cards will force you to practice sticking to a budget and living within your means. So do what you need to do to avoid using your credit cards, whether that’s cutting them up, freezing them in a literal block of ice, locking them in a drawer somewhere, or giving them over to a trusted friend, whatever you know will be most effective for you to stop using it.

Maggie Germano: 04:08 Do that. So next, and this is something I always say and that’s getting really clear on your budget. So it’s good practice to get clear on your budget regularly. I recommend revisiting your budget at least every quarter so that you know that everything is functioning properly, that it’s still working for you. It gives you the opportunity to make changes and adjustments as needed. And this is especially important when you’re taking on a new financial goal, like paying off your debt. So take a moment to get clarity around your budget. Answer yourself questions like how much income is coming in every month? What are my fixed costs such as rent, utilities, subscriptions, student loans? How much am I putting into savings? And after all of that, what is leftover and how much of what’s leftover can you live off of for things like flex spending for groceries, transportation, dining out, entertainment, and how much of that can you consciously and conveniently afford to put towards debt.

Maggie Germano: 05:09 So once you have clear answers to those questions, plug them into a spreadsheet or a budgeting app so that you can go back and review as necessary. Once you’ve done that, that’s going to give you a lot more clarity around how much you can actually afford to be putting towards debt. So I’ve definitely had clients in the past who are so sick of their debt and they’re so ready to get it done with that. They are so aggressive in paying it down and making huge payments every month that they don’t actually leave themselves enough to live off of for the rest of the month. And what that means is they either have to dip into savings that maybe wasn’t allocated for that or they have to just go back to using the credit card anyway. So if you’re over committing to how much you can put towards your debt, you might be putting yourself in a position where you don’t have enough to live off of.

Maggie Germano: 05:57 So be thoughtful about how much you can realistically put towards your debt and go from there. I would also recommend overestimating how much you actually need to spend on your flex expenses so that you don’t have to rely on those cards. It’s always better to overestimate how much you’re going to spend an underestimate how much you’re going to be earning because you want to have more money to work with rather than less. So next you want to choose a payoff method. Basically this means what is your approach to paying off your credit card debt? And this typically applies if you have more than one type of debt that you’re trying to pay off. So basically there are two options. One, which you may have heard before, is the snowball method, which is when you pay off debt in order of the smallest to largest balance, gaining momentum as you pay off each balance.

Maggie Germano: 06:47 So when the smallest debt is paid in full, you rolled the money, you are paying towards that debt into the next smallest balance. So obviously you’re still making minimum payments on your other debts, but you’re focusing all of your extra money onto the smallest one and then that amount that you are putting towards that then goes to the next smallest balance that’s called the snowball method. Basically, I means like the monthly payment is getting bigger and bigger as you’re moving on to the bigger and bigger debts that you’re paying off. And then by the time you get to your last balance, it’s the biggest amount that you’ve ever been paying towards that one. And then you can knock that one out even faster. The other option is the avalanche method, which is when you pay debts with the highest interest rates first. So this route may help you save time and interest over your debt, pay off journey.

Maggie Germano: 07:37 So it’s really kind of a matter of preference. So obviously the avalanche method may save you money in time because you’re tackling the higher interest rates first. And you know, in theory the higher interest rates are going to be adding more money into your balances over time. But the snowball method can be really helpful because you’re able to be hitting goals faster and faster over time. So if you’re focusing on a $500 balance first, you’re going to be able to pay that one off a lot faster than you would a $5,000 balance. And so if you’re able to meet those milestones sooner, it really adds to the motivation and the just understanding that you’re capable of doing this. So that’s why the snowball method can be really useful because you’re having those smaller wins more often rather than waiting years or however long it might be to pay off a bigger balance and then moving on to the next.

Maggie Germano: 08:35 So I personally think this Gnomon method can be really useful for people, especially people who need that motivation and who need to see their wins more consistently. Uh, but it’s really up to you on how you want to approach it. Next is to automate. So a repayment plan is only effective if you stick to it. That seems obvious. It is actually true and it only works if you have the money to allocate towards it. That’s why payment automation can be so important. I’m sure you’ve used auto pay in your life, whether it was her utilities or your student loans. Basically it makes sure that you’re paying your bills, whether you remember to or not. The same idea applies when you set up auto pay for your credit cards or other debts. So once you’ve chosen the amount that you can afford to pay towards each debt each month, set it up so that that amount is automatically paid towards your credit cards monthly and something else that’s important to add towards that is you need to also make sure that you have that money in your account whenever it’s due.

Maggie Germano: 09:34 So a lot of my clients use a method where they have one checking account for all of their bills and another checking account for their spending and they set it up so that their paycheck is getting direct deposited into each, but they set it up so that their direct deposit is always set up so that it’s enough money going into the bills account to cover all of their bills that are going to be deducted on auto pay for the month. So doing math around what that’s going to be and making sure there’s always enough money in that account for your bills to get deducted cause you don’t want to overdraft or miss a payment on your debts. So just be conscious of that and make sure that you’re either going to know that there’s enough money in there, whether it’s you moving the money around manually or you set it up through direct deposit.

Maggie Germano: 10:25 The next step is to, if necessary, generate additional income. The truth is a lot of times the only solution to your financial situation is to increase the amount of money you have coming in. I’ve had clients that have cut out as much spending as they possibly can and they’re still struggling to make ends meet and that’s because they just don’t have enough money coming in. If that’s you, and you also want to get your debt balance down, you have to figure out how to generate more income. Maybe you ask for a raise at work, maybe you apply for a new job that has a higher salary. Perhaps you get a part time job somewhere. Or another option is to start charging for something you know you’re good at like copy editing or crafting. There’s so many ways to be very original and creative with how you’re able to bring a little bit more money in.

Maggie Germano: 11:14 It’s really up to you on what you feel capable of doing, both with your time, your money and your energy. So be thoughtful about that. But sometimes if you really want to get out of debt sooner, the only way you can do that is to make sure there’s more money coming in next is to use windfalls to your advantage. So like I’ve kind of been alluding to many people don’t have enough money to spare on a monthly basis to make a dent on their debt. But that doesn’t mean that you don’t have any other options. That’s why it’s so important to use windfalls to your advantage. So what’s a windfall? It’s basically a larger amount of money that comes to you when you weren’t necessarily expecting it or on it. It could be a large gift from a family member, an inheritance, a tax return, and things like that.

Maggie Germano: 12:01 If and when these windfalls come to you, you should use the majority of them to pay down your debt if that is your big goal. Of course, it’s important to do something fun when you get extra money and doing something fun once in a while is a really good way to keep yourself motivated so that you don’t give up. So allocate 10% of your windfall towards something just for you and put the rest towards your debt. So for example, if you get $2,000 in your tax refund, put $200 aside for just fun for you or something that you’re really interested in or that you care about, and then put the rest of the $1,800 towards that debt so that you can make a big dent faster. Last but not least, it’s really important to decide if consolidation is the right move for you, so some people can feel discouraged or frustrated when they have many different debts to pay back.

Maggie Germano: 12:56 A lot of them with different interest rates and several accounts would be paying back at once. Sometimes high interest rates can make it very difficult or even impossible to make your minimum monthly payments, let alone larger payments. That’s when debt consolidation might be a great option for you. This could look like doing a balance transfer to a credit card with a 0% interest introductory rate. Many of those cards let you pay back your balance interest free over 12 to 24 months. It depends on the card. The key here though is to make sure that you don’t use any of your credit cards for anything else while you’re paying down the balance. So the card where you transferred to, you don’t want to add anything new to that and the card that you transferred from. You don’t want to add anything new to that. So again, giving them to a trusted friend or locking them away in some way really so that you aren’t doing a balance transfer only to realize you are not able to pay off the debt in that time.

Maggie Germano: 13:53 It’s also important to note that you have limited time to pay this off before the interest kicks in. So keep that in mind when choosing a card and and transferring the balance. You want to make sure you can pay it off in that introductory period because then the interest rates go way up. Another option for consolidation is getting a personal loan for the amount you owe on your credit cards. So basically if an, once you’re approved for a personal loan, you get the money deposited in your account in a lump sum, which you would then use to pay off your credit cards. After that you’d make fixed monthly payments for a set period of time back to the personal loan company. Your credit history will determine whether or not you are approved for a personal loan as well as the interest terms associated with it.

Maggie Germano: 14:36 So basically the better your credit score, the better your credit history, the better rates you’re going to get and the more you’ll be approved for. And again, the key here is that you really can’t continue using your credit cards after you’ve gotten a loan doing that. We’ll just make sure that you’re doubling the amount of debt you’re in. So think about it this way. You transfer the money, you pay off your card, then you have the one personal loan to pay off. And if you keep using your credit card, then if you get out of control and end up with more credit card debt, then you have two different debts to be paying off again. And so making sure that you’re not continuing the same cycle, you should also make sure that you immediately use the money to pay off your credit card. I have known people that have gotten a personal loan and the money gets deposited in their account and then they start spending some of that money before they transfer it to their credit cards.

Maggie Germano: 15:30 So then again, you’re left with not necessarily enough to actually pay off the card and successfully consolidate your debt. So treat it as if it’s not for you in any way. It has one specific purpose and that is to consolidate your debt and lower your interest rates and make it so that you have one specific monthly payment over a set period of time. And once that’s over, that debt is gone. Okay. So as promised, I wanted to share some real life experiences with paying down debt, whether it’s credit card debt, medical debt, student loans, at whatever it might be. So for me personally, I had about $25,000 in student loans when I graduated from college and I initially could not really afford to pay down my debt. And I was a, I was an intern making $10 an hour, which was still a great thing because not a lot of interns are paid.

Maggie Germano: 16:28 I also had health insurance, which is also fantastic, but if I was living in DC and paying $600 a month just to split a studio apartment with somebody, I couldn’t afford to spend $300 a month on my student loans. So I enrolled in the income based repayment plan, which meant I didn’t have to pay my student loans for two years. Basically my monthly payments were zero. Looking back now, if I could do it differently, I would have made at least some payment. I would have done, you know, $25, whatever I could actually afford rather than just not paying anything but can’t change that. It worked out well for me. Uh, but once I was able to increase my salary enough to make payments, I realized I wanted to get out of that student loan debt as quickly as I could. So I would, every once in awhile, if I had a little bit extra money, I would throw it towards my student loan, uh, and just try to make a dent where I could.

Maggie Germano: 17:27 So I didn’t really start hitting my stride though until my boyfriend now husband moved in with me. So I had gotten used to paying for my own rent and all of my utilities and all of my food by myself on my salary. But once Dan moved in with me, we were splitting everything. So my expenses basically got cut in half, but rather than start spending that extra money that I was left with at the end of the month, now I decided to put all of it towards my student loans. And so I was very aggressive with that and I was actually able to pay them off in pretty much six months after he moved in with me. Um, that’s not always feasible for everybody. Some people, if they have any extra money coming in, it needs to go towards necessities. So I realized that I am very privileged in my experience because I was also already living in a very affordable space.

Maggie Germano: 18:24 I had a reasonable income. Um, but that was basically the way that I approached it. So that was my personal experience and I pose this question in the money circle group and this is what I heard from a couple of people. One person said she got a surprise inheritance, so that’s another thing that is would be called a windfall. And she basically said that that’s the only way she would have been able to pay off her student loans. When she did, she has no idea where her life would have been without that money. So she had the consciousness at the time to put that money towards her student loans. Another person paid off her student loans while traveling the world in her 20s which sounds like a lot of fun. She said she would work her butt off during the summer while visiting family and then put that money directly into a specific fund.

Maggie Germano: 19:12 As she got older and came to D C she started focusing on her payments with higher interests. And in total, it took her about eight and a half years to pay off her student loans. She said she would have been more aggressive but also wanted to have a life travel and save for retirement. And that is a really good point because it matters how you want your life to look, how you want to be feeling, the things you want to experience as well as saving for the future so you, it can be hard to make that balance between all of those necessities, but keeping them in mind rather than fully sacrificing all of the time I think is the way to do it. Another person commented and said that she used the snowball method with her student loans and so she paid the first one off first and then Pope focus on the bigger one.

Maggie Germano: 19:59 She also said that she had a car initially and decided to trade it back in when the lease was up so that she’d have more money to put towards her student loan payments. Luckily she lived in D C at the time, so it wasn’t the biggest sacrifice for her. So, but that is a really interesting thing to think about. Like what are the things you might be able to do without in order to have a little bit more liquid cash to be putting towards your debt. Another person got really creative with their personal situation, so they owned a house and had a home equity line of credit. They decided to refinance the house for a lower interest rate and they wrapped their student loans into their home equity line of credit so that they were able to pay things off faster with a lower interest. So that is a very grown up way to do it, to work on refinancing your home and getting into the home equity line of credit side of things.

Maggie Germano: 20:56 But depending on your circumstances and what’s going on in your life, being creative and figuring out what is right for you is all going to be individualized. And so figuring out what works best for you is definitely the way to do it. I’ve also had clients who have second jobs, maybe as a yoga instructor or other things like that, and something that I recommend with that is if you don’t absolutely rely on the money that’s coming in from that second job or that you know, that fun thing that brings in a little bit more money, create a specific account or have that money go directly into your bills account and use that extra money for your debt payoff. So if any money that you’re not relying on that maybe isn’t going towards your emergency savings should be going towards your debt to pay that down.

Maggie Germano: 21:52 It takes a certain amount of sacrifice in the meantime in order to get to a place in the longterm that you actually really want to be. So I’m not one of those people who’s going to say, you need to have three jobs, live with a bunch of roommates, give up everything that you enjoy in order to get out of debt as fast as possible. I think it’s really important to do the things that actually realistically work for you and won’t make you miserable. But it does take a little bit of sacrifice to meet our financial goals, right? So if we don’t have endless money to be working with, we’re going to have to cut something out. So identify the sacrifices you’re willing to take, whether that is moving into a more affordable place or taking on a part time job or cutting out any kind of dining out or whatever it might be, wherever, whatever it needs to be that will help you find additional money to pay down debt is going to end up being worth it when you get to the point where you don’t have to make those payments at all.

Maggie Germano: 22:57 And one way that you can visualize that for yourself is to use a debt payoff calculator. So I’ll link to some in the show notes where you can do the math or it will do the math for you around how much you need to pay a month to pay it off in a certain timeframe or how long it will take you to pay off debt if you’re only paying a certain amount per month. So you can do it both ways to see, you know, how long it’ll take you to pay at your current rate or how much you need to pay to get out of to and a year or in two years or whenever you know you want it to be. So that can help you visualize it rather than having it seem like it’s gonna just happen forever and ever. Um, that’s really important.

Maggie Germano: 23:42 And remember, as long as you’re paying more than minimum payment, every month you are making some progress towards your debt. Even if you can only afford to pay $5 more than the minimum every month, it’s better than nothing. So do what you can. And then as you’re able to either get rid of expenses or increase your income, always think about how you can be applying it towards that debt and keep your end goal in mind. Why are you doing this? Why do you want to be debt free? What is your life going to look like? What is your life going to feel like? What are the things you’re going to be able to do once you don’t have to worry about that debt anymore? Get really clear on those things and remind yourself of them consistently. Whether that is putting it on a piece of paper and taping it to your wall next year desk, putting it as the background of your computer or just plugging it into your calendar where you get pop-up reminders of why you’re doing this.

Maggie Germano: 24:40 Just figure out a way that can keep you motivated. Reach out and find other friends who are in this journey together. I recommend joining the money circle Facebook group so that you can complain in there. Tell us how frustrating this process is. You’ll get responses so that people are supportive of you and cheering you on. You can also ask for advice. You can also share your wins, like if you are able to pay off your smallest balance and you’re excited and you want to share it with somebody, share it in there. You’ll get a lot of people cheering you on so you don’t have to do it alone. It doesn’t have to be this lonesome isolated slog that you’re working towards. You can have other people in it with you. If you have other ways that you’ve gotten out of debt, I would love to hear them and I’m sure other listeners would too. So go ahead and share in the money circle group or share with me on Instagram or Twitter. I’d be happy to share, uh, your feedback and your advice. So good luck this year and thanks so much for listening.

Maggie Germano: 25:47 Thank you so much again for listening to the money circle podcast. If you’d like to get more connected with money circle or with me, there are lots of ways you can do that. To join the free Facebook group, visit To stay informed of any upcoming events, subscribe to my weekly newsletter at If you’d like to join the virtual money circle membership group, visit To learn more about my financial coaching services, my speaking and workshop offerings, or just to read my blog, visit You can also follow me on Instagram and Twitter @Maggie Germano. Thanks for listening.