The Clear Your Cards debt paydown challenge is the most responsible way to use credit cards and ensure you payoff your credit card debt every month. Credit cards can be great tools with fraud protections, awesome perks, and ease of use, but only if you pay them off in full every month.
Using the Clear Your Cards challenge you’ll learn to use credit cards to your advantage. Thus avoiding mountains of debt which will keep you from saving, investing, and achieving your goals.
As we outline in our Debt 101 guide, it is critical to pay off your high-interest rate debt so you can put yourself in a position to succeed financially and credit card debt is some of the highest interest rate debt around!
What is the Clear Your Cards Debt payoff challenge?
The Clear Your Cards debt paydown challenge is simple. Pay off the entire balance of your credit cards each month. No exceptions.
While it’s simple to understand it can be tough to practice if you aren’t cognizant of how much you are spending or you have a sudden loss in income. That is why Ostrich’s Clear Your Cards challenge was created to help you build the habit of only spending what you can afford on credit cards.
When is the best time to start?
Right now! At the start of 2021, Americans held about $900 billion in credit card debt. In part because of compounding interest, that number is expected to increase another $60 billion.
You may be familiar with compounding interest in terms of investing and growing your wealth. But compounding interest works in reverse when you owe money at a high interest rate. The longer it takes you to pay off the loan the more you pay in interest.
Because of the power of compounding, the quicker you can get out of high-interest rate credit card debt the better. When you don’t pay off your credit cards in full each month, $700 worth of purchases can stretch out costing well over double and take years to pay off.
Check out this credit card calculator to see how much extra money and time it will take to pay off your balance making only the minimum payments.
Who is this for?
The Clear Your Cards debt challenge is for those who want to avoid being in high-interest rate credit card debt and want to build strong money habits.
This challenge is best for anyone who uses credit cards.
If you have a large credit card balance and are unable to pay off your balance in full start by paying off all new purchases in full and using one of Ostrich’s other debt paydown challenges to get rid of those balances.
Consider the Avalanche, Snowball, or Double or Nothing debt paydown challenges.
Are you ready to avoid credit card debt? You can sign-up for the Clear Your Cards debt challenge on the Ostrich app.
How to implement the Clear Your Cards debt challenge
Step 1
Sign up for the Clear Your Cards challenge. Then examine all of your credit card accounts, noting your balances.
Step 2
Pay off your statement balance in full for each of your credit cards each month.
Step 3
If you want to really crush this challenge set up an automatic payment for the full balance. This will make it extremely easy to avoid credit card debt and make your life easier. The key is to make sure you always have enough in your checking account to cover the balance!
Step 4
Check-in for Clear Your Cards monthly on Ostrich to share your progress, get a reminder to make your payment, and get support from The Flock!
Tips for paying down debt more quickly
Here are some debt paydown tips to help you during the Clear Your Cards debt challenge!
Pay your balances down before the due date
For credit cards, this means paying off the entire balance in full, but if you currently are unable to pay off the balance in full, it is best to pay down the balance as quickly as possible.
Many credit card balances accrue interest on a daily basis. That means that if your payment due date is the 30th of the month, but you pay your bill on the 15th, you’ll actually save yourself 15 days worth of interest. This simple hack can lead to hundreds or even thousands of dollars in savings over the life of your loan.
Dealing with overspending
If you have trouble overspending on credit cards, you can try locking or freezing your card temporarily. Locking or freezing your card through your banking app restricts new purchases, creating a stop-gap in your spending.
If you do desperately need to use a card in an emergency, then remove the lock or freeze. The idea is to restrict those impulse purchases that rack up a balance and don’t bring you joy.
Sell your old things for extra cash
You probably have some things you either bought and never used or only lightly used. Whether it’s that new outfit that looked great online but not so much in person or old electronics you don’t use anymore. Hop on Facebook Marketplace, eBay, or Amazon and list those suckers.
Cut out expenses
This is one of the simplest ways to reduce the amount of money flowing out towards new purchases. Find underutilized subscriptions to cancel or things you can live without.
To really maximize expense reduction, try cutting back on larger expenses such as rent or transportation costs if it makes sense. You can join a no spending challenge on Ostrich if you want to join others who are also cutting back on spending.
Benefits of the Clear Your Cards debt paydown method
There are many benefits from completing the Clear Your Cards debt challenge. Who doesn’t want to be debt-free?
Improve your credit
Beyond the good feeling of paying down debt, you may notice your credit score improve. When you reduce your outstanding debt and record regular payments, you’ll be taking actions that factor into your credit score. The beauty of improving your credit score is that in the future if you need to take out another loan on a large purchase you’ll likely receive a lower interest rate, saving you money.
Focus on fun goals
After completing the Clear Your Cards debt challenge you’ll be motivated to see what other financial goals you can tackle. You’ll be primed to start saving more and investing in order to get compound interest working in your favor.
Weight off your shoulders
Staying out of debt releases dopamine to your brain, giving you that feel-good high. You’ll legitimately feel accomplished for staying debt-free and you’ll notice feeling less anxious and concerned about money.
Tools to get there quicker
Automation
Set up an automatic payment for the full balance on your credit cards. This will ensure that you won’t accidentally forget to make a payment and thus avoid high-interest debt. This is easily one of the best ways to take the burden of remembering off of your shoulders and allow you to focus on other more fun things in your life.
Debt Consolidation
This combines all of your outstanding debts into one payment. If you have 3 credit cards with balances you can consolidate that debt into one payment with a lower interest rate. This is for people who carry a large balance that you are unable to pay off in one payment. Check out the Ostrich App to find the debt consolidation providers we recommend.
Personal Loan
Another tool you could use is similar to consolidation and that’s to get a personal loan with a lower interest rate which you use to pay off your current credit card balances.
Related debt paydown challenges to Clear Your Cards include: Avalanche, Snowball, Double or Nothing, and Minnie Me.
What to do with your newfound habit
Once you’ve paid off your high-interest rate credit cards you’ll have built a habit of avoiding negative compound interest. You can now turn that newfound habit into other financial goals.
Build your emergency fund
It’s important to have at least a few months’ worth (6 months is considered healthy) of living expenses built up. This provides a cushion for your quality of life in case you lose your income. If you feel like 6 months isn’t enough try building your savings to the level of your annual salary or until you feel comfortable.
Invest for the long-term
Another great use of your new savings is to invest. Research shows that investing for the long-term (10+ years) is the way to go. We recommend getting started with low-cost index funds vs. purchasing individual stocks and using the dollar cost average investing method. Check out our favorite brokerage accounts and our favorite auto investing tools on the Ostrich App.
Take a small calculated bet
Investing for the long-term is proven to be the most sure-fire and safe way to build wealth, but it is boring. Boring is good for your major goals. We like boring!
But if you have a little extra money after making your boring investments and you are okay with losing a small amount of money, explore alternative moonshot investments. This could be anything from investing in cryptocurrency, NFTs, startups, art, collectibles, or that penny stock. The key is not to make this your main strategy. Never invest more than you can afford to lose not just financially, but also psychologically.
Conclusion
Credit cards used properly are a weapon in your financial arsenal, but when not used properly can hurt you. The Clear Your Cards debt challenge is designed to have you pay off your credit card balances in full each month and avoid racking up high-interest rate debt. Combining automation and Ostrich you will build good money habits and develop a healthy relationship with credit cards. As you gain confidence, you will feel less anxious about money and be able to focus on the things you enjoy most in life. Join Ostrich to get started on the Clear Your Cards challenge and take control of your financial future.
