Heather Allen

My credit card payoff journey continues. I never thought I would be writing this. I mourn the fact that my goals were totally off the rails in 2020, but it was a matter of necessity.

Check out the full story: 6-month, 1-year, 18-month, and 2-year.

The Reality

In March 2020 my fiancé lost his job working in restaurants in New York City. We had built up a little savings for our wedding which has kept us afloat through 2020 and into this year (in addition to unemployment payments, until they expired). But during 2020, I knew that we wouldn’t be able to survive on that nest egg forever, so I started saving more than I ever have in my life. I wrote more about it in this blog post. If absolutely necessary, my thoughts became that I could use credit cards to help us. But that completely undoes every lesson I’ve learned about handling credit cards, that they are not an extension of income!

It’s been extremely challenging for me to balance the needs of our household with the need to save as much as I possibly could. My federal student loans have been on pause so I’ve saved all those “payments” and I rearranged my debt payoff that I described in my last update for my credit card to go into savings. But the reality is that I still want to pay off this card!! I’m frustrated that half of the payment goes toward interest and how slow the paydown is going now.

But let’s take a look back at the beginning: in January 2018 my starting balance was $9,943.70. As of January 2021, my balance is $3,089.22. The payments made in 2020 total: $2,100, but the total interest paid $632.65.

Even with the pandemic and making emergency plans, I’ve not made any charges to this card and I’ve kept the card frozen. That being said, there is The Other Card, which I have been using regularly to charge things that we would normally be buying anyway like groceries and household goods. The other card I pay off every two weeks when I get paid, so it’s paid in full, and no interest accrues. We’re getting so many rewards points this way so we can use it to travel hack when the appropriate time comes. However, this card is what I meant when I said it’s been challenging for me because now Josh and I are no longer splitting the payments on this joint credit card and I’ve had to take on the responsibility of paying for household things while he’s out of a job and not receiving unemployment payments.

When I started this credit card payoff, I had three interest rates. In these past two years, I paid off two of the interest rates on the card, so essentially now I’m paying for really old purchases prior to 2017. So bizarre to think about it that way.

• Purchases made 4/12/17 and after, an interest rate of 18.49%
• Purchases made during a promo period of 12 months interest free, 20.24% (2016 maybe?)
• Purchases made between 8/20/10 and 4/11/17, an interest rate of 17.99% (from the time I opened the card to 2017) 

The Strategy

I would say this is barely a strategy at this point. I can’t change my saving/payoff plan until Josh gets a stable job. I do think that I can increase my minimum payment on the card from $100 to $150, but the paydown will still be slow. I am also considering making debt snowflake payments, meaning every time I have a bit of extra cash, like $10-20, I make a small payment here and there. The extra cash will probably come in the form of cashback rewards from places like Ibotta, Honey, or my new app find, Surveys on the Go (review to come!).

I have been debating whether I should use the money I’ve saved in student loan payments toward paying off the card in full, but I don’t think I would be comfortable with that until I had saved at least 3 months living expenses for both me and Josh (minus the credit card balance)–working on it, but not quite there yet. Also, I did receive a $40 bump in take home pay from my job because they raised the minimum salary for entry level employees so I can offset the cost of increasing my minimum payment to the card.

Also, I’ve been reading that there are plans for at least one more stimulus check, but I don’t want to use the stimulus money for 100% debt payoff when I know that we could potentially need the cash in the future for something else. Also, I’ve learned something about myself with these rounds of stimulus money, which is do not spend money on potential future money, until that money is in your bank!

The Future

In a lot of ways, 2021 will be similar to 2020 in that it is completely cursed and everyone is impacted in ways they never could have anticipated. The only thing I know for certain is that prioritizing debt payoff was not the best course of action then, and still isn’t now. I follow quite a few personal finance/ FIRE (financial independence, retire early) people on Instagram who were able to continue their debt payments (and pay off significant debt), but that is not my reality and it is not in my best interest to compare myself to them. Especially when the work from home situation was not clear around April to June, I was concerned that my job might be in jeopardy. I feel a bit better about my financial security now, but not enough to completely switch back to my previous paydown plan.

Stay tuned for the next update and thanks for reading! ♥

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