So, let's make sure we understand independence; defines independence as “freedom from control, influence, support, aid, or the like, of others.” As we celebrate our country’s independence, it’s a good time to think about being independent from debt.

Do you really want that albatross around your neck? A good place to start is credit card debt. My late father used to tell me that only poor people use credit cards for credit; you only use credit cards for convenience.

There are many advantage to credit cards: 

  • You don’t have to carry around a lot of cash, which could be dangerous
  • You don’t have to write a bunch of checks all over town
  • You get points, or at least, on most cards you do. 

... you just have to use them wisely and most don't.

But… That Interest

I use credit cards for just about everything. I NEVER use a credit card unless I have liquid funds to support the charge, that way I can pay my credit card bill in full. Because of this, I’ve never paid a penny in credit card interest.

Interest is the downside. If you apply the Rule of 72 to interest on credit cards, that means your credit card balance will double every 3 years if your rate is 24%, and that’s without making any new charges. (That’s also without making any payments, and that scenario wouldn’t last too long.)

So, How Can I become Independent?

Here are a few suggestions: 

  1. Try not using your credit card for a week. If you manage to make it that far, try another week, and before you know it, it may be an entire month.
  2. Keep your balance to 30% of your limit. So, if your limit is $10,000, make sure your balance doesn’t exceed $3,000. This will put an artificial limit on your card, which will help you tame the credit card demon. In addition, you can actually make payments before your statement arrives. The credit bureaus only see your statement balance, so if you can send in a payment before your cut-off date and lower your balance to below 30%of your limit, your credit score will soar.
  3. Pay yourself for charges you don’t make. This will actually double your savings: every time you want to buy something impulsively, walk away and put the cost of the scorned purchase in an account to be used to pay down your credit card balance. 

Now Watch Your Credit Score Rise!

Having lower credit card balances, and eventually paying your balance in full each month, will cause your credit score to sky rocket. Your credit score is a vital part of your financial wellbeing. A high score will allow you to have lower interest charges, lower insurance premiums, and may even help you land your next job.

Did you know that 25% of all credit reports have mistakes? By requesting a free credit report from the credit bureaus, you can see if there are any errors on your report and have them corrected. This will also increase your credit score.

Taking these steps will free you from the tyranny of your credit card and give you the freedom to use it only for convenience, not for credit.