Pay off your credit card debt, IWT style

We do something unusual at IWT: We forbid anyone with credit card debt from purchasing any of our flagship courses. This decision costs IWT millions of dollars per year, but we believe it’s the right thing to do.

It’s because, if you’re in debt, we don’t want your money — we want you to focus on paying off your debt. When you’re debt-free and have built up your savings, IWT will be here for you.

But I think we can do better to help our students in debt pay it off more easily.

The danger of credit card minimum payments

If you’re reading this, you clearly care about your money. But you would be shocked how many people I talk to that charge purchases to their credit card without knowing how much they’ll actually pay for it. So let’s take a look…

Let’s say you have a $10,000 balance on your credit card and you pay the minimum amount, which is around 2.5% every month. How much will it actually cost you? The answer is shocking. Get ready!

If you only paid the minimum on your $10,000 balance, it would take you 452 months (over 30 years!) and cost you over $19,000 in interest alone.

In other words, you’d pay around $30,000 for a $10,000 balance.

That’s if you just pay the minimum monthly payment. How about if you pay the same amount every month so that you pay down the balance faster over time?

Let’s take the same $10,000 balance and pay $250 off every month.

Credit Card Payment Calculator results

It will cost you about $6,000 in interest and take you 67 months to pay off the balance. This saves you $13,000 of interest AND decades of your life that will no longer be filled with stress over debt payments. Paying off a little extra every month is totally doable using the methods below, and the savings make it worth every penny.

3 Options For Dealing With Credit Card Debt

Before we jump into the different methods on how to get rid of credit card debt, start by listing all your credit card debt in one place.

List out each card include:

  • The card
  • Amount owed
  • Minimum payment
  • APR

Put all of this in a spreadsheet, a note-taking app, or a notebook. Whatever you’re most comfortable with.

This will come in handy when working through any of the pay-off methods below.

It’s totally fine if you haven’t looked at this stuff in awhile, that’s normal. It’s also normal to be surprised by amounts or APR. Don’t feel guilty or shameful, you’re taking action which means you’re already ahead of the game.

Method #1: Pay off the highest APR first

Technically, this is the fastest method to paying off your credit cards.

Out of all your cards, find the one with the highest APR and then get as aggressive as possible with paying it down. Start by paying an extra $50 a month. Make double payments. Make payments every week. Look for ways to save money or make extra cash from a side hustle. Put every extra dollar towards that card.

Whatever it takes, attack the card with the highest APR. For your other cards, pay the minimum payment and then pretend they don’t exist.

By paying down the higher APR card first, you’ll reduce the total amount of interest that you’ll pay.

For example, let’s say I have a 20% APR card with $5,000 on it and a 15% APR card with $3,000 on it. I’d focus on the 20% APR card until it was paid off in full.

Method #2: Pay off the lowest balance first

This is commonly known as the snowball method of paying off credit cards.

Instead of going after the highest APR, we pay off the card with the lowest balance first.

Why would we do this?

Psychological momentum.

Paying off a credit card with a high APR might be the best method mathematically but you know what feels amazing? Paying off a card.

Getting a win in the bag feels incredible. You’ll get your confidence back, build up momentum, and be ready to take on a bigger challenge. The value of this win can not be overstated.

If you’re feeling unsure about all this, I highly recommend that you focus on the card with the lowest balance. Get aggressive, make as many payments as you can, and throw every spare dollar you can scrounge up toward that card.

Before you know it, you’ll have it paid off and you can move to the next card.

Method #3: Use the envelope system

Made famous by Dave Ramsey, the envelope system involves using physical envelopes and cash for all your spending.

This is a good option if you’ve tried other methods but still struggle to control your spending.

Grab a handful of blank envelopes. On the front of each, write the most critical budgetary expenditures like groceries, gas, household items, kid’s activities, and anything else that must be paid for each month. Each envelope will be one of your spending categories.

Look over your spending in the last few months and come up with an amount of money that will go into each envelope. Write that amount on the outside of the envelope. Make sure these amounts are sustainable and allow you to get ahead of your credit card payments.

On payday, withdraw the total amount due in all the envelopes and stuff each one and use that money to pay those bills. It’s critical that you do this with real cash.

Essential points in the envelope system:

  • Revisit the envelope amounts each month if one goes empty quickly while the other is flush with cash.
  • If there’s leftover money in an envelope, do NOT roll it over into the next month.
  • Take the extra money and put it into savings or put the additional money towards that credit card debt.

This works by forcing you to make a conscious choice with every purchase. It also adds more weight to each purchase. Instead of swiping a credit card, using the envelopes forces you to pull out cash and watch it disappear. This helps folks make smarter decisions with their money.

How Big Wins radically accelerate your credit card debt payoff

I’ve written many times about Big Wins – decisions you can make, that if you get them right you’ll almost never need to worry about minutiae like “Can I afford this appetizer?” or “Should I spend $2.50 on this latte?”

We’re going to apply the same thinking to your credit card debt.

What if you could make a phone call and wipe out $3k in interest payments? Would you do it? Of course you would.

Credit Card Payment Calculator - after salary negotiation

I’ll give you the exact scripts you can use to lower your credit card interest rate and save thousands of dollars.

Better yet, one $5,000 salary negotiation can virtually wipe out your credit card debt. And it only takes one 15 minute conversation with your boss.

Credit Card Payment Calculator - after APR negotiation

Imagine being debt-free in 18 months. I’ll show you how to prepare your boss to give you a raise, and teach you what you need to do to land a big salary increase.


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