Paying off your credit card balance each month may seem next to impossible if you're living on minimum wage. At $7.25 an hour, as reported by the Bureau of Labor Statistics, minimum wage earns you $15,080 a year — before taxes. Add on a few too many extra card swipes for the broken dishwasher and forgotten birthday, and you could be risking the red, and your credit score.
Still, while it may look tough, paying off your credit card consistently and with minimal stress is possible. It just requires some foresight, organization, and a few tricks.
For myself, a couple decades of experience has helped me solidify a credit card strategy that not only keeps me on top of my bills, but has also saved me thousands of extra dollars. But it wasn't always so smooth sailing.
I grew up in a cramped house in a small neighborhood in Tampa, Florida called Sulphur Springs, way below the poverty line. My parents worked hard but still supported us paycheck to paycheck, all year round, with zero wiggle room for illness or vacation. At school, I was also a C student with a preference for hooky over trigonometry. Maybe I can partially blame my dyslexia, but it doesn't change the fact that I never earned a four-year degree.
So as you might imagine, this all made everything tougher when I started out on my own. I was broke, having trouble finding consistent work, and quickly maxed out a handful of credit cards to keep the fridge running. It wasn't until I met my wife Sarah that she and the rest of my family intervened to teach me a few things about my finances. It wasn't an overnight transformation, but a few bill cycles later, I had my finances down to a science. After a year, with my wife and parents' consistent motivation, I was debt free and investing in a newly opened 401(k)!
I know it can feel overwhelming.
We all have multiple friends and family members who have overly complicated financial lives that have left them in still-growing debt. Especially in today's world where you can pay for things with cash, credit, debit, Venmo, and Bitcoin, among other currency, it's very easy to buy into all these claimed "simplifying" financial tools, only to lose yourself in the variety.
But trust me. The biggest hurdle is just sitting down and taking the time to make a plan — which is why we have you covered. Below we've mapped out a plan of action and included scores of ideas about how you can start chipping into your balance so you can start saving your hard earned cash. By adopting a few life changes and spending a few hours a week doing extra work, we believe you can make a dent in your credit card balance and lessen the burden of those pesky payments each month.
Still having doubts?
Let me give you a concrete example of what happens when you can put more money towards your monthly balance.
If you had a credit card balance of say, $5,000, paying an interest of 18%, and you were only putting $100 each month toward the debt, it would take you over 8 years to pay off this credit card. Worse, you will pay $4,324 in interest over this period of time. That's nearly as much as the balance itself!
But if you increased that payment by 195$ so that you were paying $295 each month, then you could pay off the card in 20 months, and only pay $815 in interest. Woo hoo!
Even if you've tried before and failed, the key is persistence! And the first step is knowing where your money is going each month so you can start to save to pay off those credit cards. The sooner you start making monthly payments the sooner you can start saving for things you want. By following these steps below, you will have the tools and tips to start getting out of debt today.
Four simple steps to getting your credit card paid off when you're making minimum wage
Step 1: Learn how to make a quick and simple budget (it's easier than you think), so you know how much you're earning and what you're spending your money
Step 2: Discover how to find hidden cash, so you can apply the money to your card balance.
Step 3: Earn extra money by taking advantage of what you already have or can do.
Step 4: Take advantage of credit card offers to lower the interest you are paying, so you can pay off your card more quickly.
With a budget, an aggressive saving strategy, and a plan that has you earning extra income, a smart balance transfer can be a great solution to paying off your card while earning minimum wage.
Step 1: Learn how to make and use a budget so you know where your money is coming and going
A budget is a way to organize and categorize your income, expenses, and spending. There are a few steps to take when creating a budget. In order to be successful, we have found 5 helpful steps to take when creating a budget according to financial blogger, My Money Coach, and highlighted them below.
Set realistic goals. In this instance, your goal is to pay off your credit card on minimum wage, a hard, but not impossible task.
Identify your income and expenses. Knowing how much money you make, and how much money you spend is the foundation of a budget. A budget will help you monitor your spending, expenses, and income. Once you figure out where your money is going each month you can start to find ways to pay your credit card bills.
Separate needs from wants. This will enable you to stop spending and save more money. Use your savings to pay off your card.
Design your budget. We have highlighted apps and strategies to help you with this below. There are scores of options, and a personalized budget will make the process simpler and easier to pay off your credit card debt!
Put your plan into action. Use your newly built budget to monitor your spending and expenses. This will help you find ways to save and let you pay more on your credit card than you are now. More money saved equals more money to you get out of credit card debt.
Creating a budget is not only important, it's also easier than you think! Many of you hold the key to building a budget in your pocket, your smartphone.
Free apps to help you budget
Many budgeting apps and software are free of cost, and super user-friendly.
Here are a few of our favorites:
BUDGT. This app is unique in that it aims to aid those of us who have small monthly incomes. By accessing your day-to-day spending, it creates and updates a budget based on how much available income you have. BUDGT lets you create target savings, which in this case could be a targeted amount you'd like to pay your creditors each month to get out of debt and start saving for the future.
BUDGT works because it lets you know how much money you can afford each day to spend. A constant reminder of your financial journey toward debt repayment and living an affordable life, BUDGT lets you see the bigger picture every day by tracking your spending and savings toward your monthly expenses.
Mint. You may have heard of this ever popular finance app. Mint is easy to use and a great tool to start monitoring your finances. It allows you to sync all of your accounts, see how you're spending your money, and create, manage, and pay your monthly bills with a few taps of your finger.
With the help of Mint, creating a budget and understanding your financial state couldn't be easier. If you find yourself forgetting your bills and monthly expenses, Mint is the place to start. The best feature to get back on your feet and make your credit card payments is their bill calendar, it alerts you of upcoming due dates--which could save you money on late fees. Apply those to your credit card bill and voila!
PocketGuard. PocketGuard prides itself on helping you make better financial decisions. By downloading this free app, you gain access to tools that sync your accounts and track your spending.
PocketGuard automatically creates a budget for you based on your bills and income. This app monitors your recurring bills and helps you find ways to save and better deals on things like your cell phone bill or your cable bill. These savings add up and are important to conquering your credit card debt.
It even tells you how much extra money you have in your "wallet" by tracking your spending with your monthly income! This can be a great help for paying off your credit cards quicker each month.
Once you discover a budgeting tool that works best for you and know exactly how (and where!) you are spending your money, the next step is to focus on allocating your income to get the most bang for your minimum wage buck.
Easy way to organize your new budget
Allocating your money is extremely helpful and makes making monthly credit card payments easier. You will see that there is more money to be saved and put toward your credit card payments if you utilize effective strategies like the 50/30/20 rule.
50/30/20 rule. This is a popular rule used to budget, and very easy to calculate.
- Use no more than 50% of your income on all life necessities.
- Put 20% of your paycheck towards your debt repayments.
- Use no more than 30% for entertainment and lifestyle choices.
On a minimum wage income, this would allow you around $200 each month to put toward your credit card debt. Learn more about this method from financial blogger, Scott Allen Turner.
By using the 50/30/20 rule, you will see that there is more money to be saved and put toward your debt if you follow this rule properly.
Let's say your minimum wage job rakes in $267 a week in take home pay, or $1,068 a month.
After creating a budget you find that you are spending $700 in expenses (rent, utilities, living expenses) and spending $350 in entertainment (drinks with friends, date nights, video games).
This leaves you with a measly $18 to pay towards your debt repayment.
If your credit cards are maxed out, then simply factoring in your spending habits shows that you are spending more than you earn. Implementing the 50/30/20 rule, for example, would mean that you have $534 to spend on expenses, $320 on entertainment and non-necessities, and $213 to put toward your credit card debt repayment. That's $195 more than you had before budgeting!
Personally, I cannot recommend this rule enough. I first heard about it from an old friend while we were out for a beer one night. I now realize he was probably just sick of hearing me complain about all my financial stress, but he outlined a handful of budget strategies that sounded super intriguing nonetheless. When I got home that night, I looked them over and chose the 50/30/20 rule because of how intuitive it seemed.
Trust me, proper budgeting will result in saving more money for knocking out your credit card debt.
Saving strategies to support your budget
There are multiple tactics to make following your new budget easier and with more money saved to pay your credit card bills than before your budget.
Direct deposit.Have every paycheck automatically deposited into your account for quick access to your paychecks and convenient debt repayments. You can set up direct deposit through your employer and have your paycheck go straight to a free checking account. Simply submit a voided check, or fill out paperwork to link your accounts routing number and your employer can have your paychecks deposited for you.
Benefit more from direct deposit by allocating a percentage of your check into your savings account. Use those savings to pay your card each month. If you get paid on the same days each month, set up auto-deduction to have your payment immediately taken out toward your credit card bill each pay-period and get ahead quicker.
Pay yourself first. This is a helpful saving strategy that requires you to put aside money each and every paycheck for your goals (paying that darn credit card off) and savings before you spend anywhere else within your budget.
Use the pay yourself first method to pay your credit cards first, simply move the balance each month to your credit card bill and watch your debt dwindle.
If you find yourself struggling with spending within your budget each month, use the envelope method, a more hands-on approach to handling your income.
The envelope method. Designed for people who hate parting with cold hard cash, this system works by using your budget to divvy out your monthly expenses. Collect and label envelopes for each of your expense, billing, and spending categories. Cash out your paychecks and deposit the money into each envelope.
This helps make sure that you have your expenses paid each month and eliminates any risk of swiping your debit card and using your rent money for drinks with friends. In addition to securing timely payments, you should label an envelope for your savings and use all your extra income for paying off your credit card balance.
These strategies will help you start effectively paying off your credit card with all of your savings through budgeting.
If you have many credit cards you may not know where to start making payments. There are tactful ways to knock out your card balances.
The snowball method. This method suggests you pay off your lowest credit card debts first. On a low-income wage, you will see progress faster using this method. Chip away at the lowest debts and knock them off one by one. Save on monthly interest rates and feel good about your diminishing debt.
Let's say you have three outstanding credit card balances. $5,000, $3,300, and $1,750. It's important to remain in good standing with each lender, so pay the minimum on the two largest balances. Pay any extra savings toward your card with the $1,750 balance and you will see a zero balance credit card sooner than with your higher balance cards. Once you've paid off the card with the lowest balance, shift the savings to the next smallest, and so on. By focusing on the smallest credit card first, you steadily can eliminate multiple monthly credit card balances.
Use these strategies and tools to establish good financial habits. Paying your credit card on minimum wage can be tricky but it is possible! Keep the goal of paying your credit card off in mind when figuring out which budgeting methods are best for you.
Although you might not have a lot of extra funds right now, there are tons of ways to save in your everyday life that can make budgeting and saving money against your credit card debt even easier!
Step 2: Discover how to find hidden cash, so you can apply the money to your card balance
Now that you have a way to budget and know how to budget, it's time to get saving!
Minimum wage is next to nothing, so we're going to have to get creative to figure out ways to pay off your credit card. Finding yourself strapped for cash at the end of the month and struggling to make monthly payments toward your debt balances can be agonizing.
But, once you take a hard look at your spending and you realize that you can cut spending in some areas of your life. Cutting spending=saving money, use all your savings and put it toward your card!
You may also find hidden savings in areas that you would have never guessed.
Do you pay for checking? Often times banks assess pesky fees to checking accounts and savings accounts for their services. This is often associated with big banks, for example, Bank of America charges $15 for a monthly maintenance fee.
That's $15 extra dollars out of your account that you could spend on your credit card balance. Seek out local banks or credit unions for free accounts that are often easier to manage and much more personal.
After budgeting do you find that you spend more frivolously than you should?
The good news is that once you distinguish wants from needs, you will find there are tons of ways to cut down on wasteful spending, some might even shock you with how easy and obvious they are.
Here are just some of the creative ways to cut spending and save toward paying off your debt:
Save at the grocery store
Buy in bulk. Save on those items that you purchase regularly like paper products, non-perishables, and more in bulk and save on unit costs. This is my favorite tip because of how simple it is. I know a wholesale store, like Costco, is an added membership fee, but the savings overtime are unbeatable and more than worth the expense. (Plus you can practically eat a whole meal off the free samples while in-store; my family and I do it all the time).
Use rebate and coupon apps. Apps like Ibotta allow you to digitally clip coupons on your phone and all you do is scan the barcode of the item and your receipt and receive cash back for your market purchases. Once you hit $25 in savings, you can withdraw your savings and put that toward your credit card bill. SnipSnap snips coupons for you to use at checkout the next time you shop, making saving at the grocery store simple and easy. Check weekly flyers in your newspaper for coupons at your local grocery store, too!
Eat in season and locally. It's easy and practical, not only do you get fresher and tastier ingredients, but the cost is lower than out of season items being shipped from other areas of the world.
Eat less meat. Meat is expensive and can be overindulged by many. It takes a lot for the body to digest and often you can get valuable protein and nutrients in other, less expensive forms. For example, produce is inexpensive when in-season and offers more nutrients and vitamins the body needs to stay healthy. Learn more from MindBodyGreen on the benefits of making this diet change.
Save on transportation
Ditch your car. You might not realize how much money your car is costing you. If you can ditch your vehicle altogether and opt for public transportation then you can save big annually on maintenance, gas, and insurance. Putting hundreds or even thousands more toward your credit card debt annually.
Use your bike. Bike to work and save money while benefiting from daily exercise, this could save you in healthcare expenses in the long run.
Buddy up. Carpool with your significant other, or a neighbor that works near you. If you have a coworker in the neighborhood, include them and make a friend while saving both of you money on gas and vehicle maintenance.
Re-evaluate auto insurance. Is your car worth less than $2,000? Save hundreds and even thousands a year by reducing your insurance from full-coverage. Check your insurance policy annually for savings opportunities. Comparing your current insurance policy with others is easy with online tools that offer free quotes. (Progressive, Insurance)
Save by cutting back
Brown bag it. Simply packing your own lunch for work or making your own coffee could save you anywhere from $10-$26 a day. On minimum wage, these prices equal the cost of a couple hours of labor. Last year, my wife bought me a big Rocky Balboa thermos for Christmas, which has since become my go-to coffee mug; not only am I saving money, but also calories since I can keep track of how much I'm drinking.
Go green. Cut back on your home energy bill bychanging your habits at home. Simply falling asleep to TV at night costs you $55 a year! An easy way to save is by swapping out your normal bulbs for CFL and LED bulbs, which cost ⅙ of what a normal bulb costs you in energy.
Capitalize on extra space. Save by downsizing your home, or sharing a space. If you have an extra room in your house, rent it out to generate extra income without doing any work! Renting a room can add hundreds of dollars to your credit card bill each month.
Save on entertainment
Cut out cable T.V., those hours dedicated to watching programs can be put to use earning extra income, and saves you around $70 a month. Put that money toward your credit card bills and see your debt dwindle.
Cut out costly entertainment. Movies cost you $10-$15 a pop. Simply saving $10 a few times a year adds up to more money toward paying off your card! Are you an avid concert-goer? Tickets to these type of events can cost you anywhere from $25-$100. Make a credit card payment instead.
Take advantage of your local library. Not only will books keep you entertained and expand your knowledge, but many libraries offer free library cards and free programs. From books to movies and magazines, libraries offer an affordable option for entertainment.
Avoid stress spending. Buying things makes people feel better, but avoid stress spending and save on items you don't need. Instead read, nap, listen to podcasts, get some fresh air or exercise, these activities are free!
Implementing a few of these saving strategies can save you big time each month! Don't believe me?
Don't see something that you can or want to do? No problem. There are many more saving, earning and budgeting ideas to consider. I made a monster list of the best tips out there. Take a look at this!
When I was still getting CreditLoan.com off the ground and thus spending more than I was making, I started bringing a little ice cooler of Diet Coke to work instead of going with colleagues to McDonalds or throwing money into a vending machine. A few months later when I finally crunched the numbers, I realized I was saving an additional $30 month! I put all the money into getting out of debt and now, in my savings account. All it took was an extra two minutes in the morning. By cutting out the drink and snack runs, you could possibly double your monthly credit card payment.
Adding as little as $100 extra to your credit card balance each month will eliminate your debt quicker and is an easy way to implement the Snowball budget method. Freeing up some extra cash will also allow you to stop using your credit cards, accumulating more debt, and give you extra money to tackle those smaller debts quicker, and save on interest.
An added benefit is more available lines of credit and adding points to your credit score.
Step 3: Earn extra money by taking advantage of what you already have or can do
If you don't have the time or the energy to get a second job, you aren't out of luck. There are many ways to earn extra money by taking advantage of what you already have or can do.
Many of the tools you need to earn extra cash might just be lying around your house.
What's easier than earning extra income with the stuff you already have? Not a whole lot.It might seem too good to be true, but the following list is just some of the ideas you can implement in your life and see the cash flow increase in your bank account, and cut down on your credit card debt.
- Sell your stuff. Spend a Saturday emptying and organizing your home. Ridding yourself of non-essentials will make you feel lighter and give you extra money to put towards your bills each month. Sell anything from clothing, appliances, antiques and more. Do it the old fashion way and have a garage sale, or enlist the help from sites like Craigslist or apps like PoshMark. After all, one man's trash is another man's treasure.
- Earn cash online. Take a few hours each week to make money in the comfort of your home. Take online surveys using sites like SwagBucks and earn you up to $250 a month! Sharing your opinions in focus groups can earn you up to $200 for participating. Sign up for eJury and review facts, evidence, and answer questionnaires for attorneys before they take a case to trial. You'll get paid $5-$10 per case, and put all those hours of Law & Order to work.
- Drive. If you have a car, put it to use and earn easy money driving for companies likeUber or Lyft. You set your own schedule, and you earn based on how many rides you give. Give city tours and show off your passion for history or the outdoors to tourists. You can earn up to $100 an hour in your free time by working as a Vayable Insider tour guide, and possibly make some new friends along the way. Run errands and deliver goods to locals in your neighborhood and earn up to $25 an hour driving for Postmate's fleet!
If you were to sell your old couch on Craigslist for $100 and spend a couple hours participating in two or three focus groups next month you could find yourself with an extra $200-$500.
Finding items you don't need, decluttering your home, and using your extra time making money rather than binge watching your favorite Netflix series, can add hundreds of dollars to your credit card payments, and lessen the stress of monthly expenses and interest rates-- without breaking the bank.
Step 4: Take advantage of credit card offers to lower the interest you are paying, so you can pay off your card more quickly
Yes, the point is to figure out ways to lessen the sting of those monthly credit card bills on minimum wage and ultimately become debt free.
What you might not know is that comparing your current credit cards with others might open your eyes to potential savings, and shave off years of debt repayment.
Take advantage of balance transfers
Balance transfers are a blessing to those paying high interest on credit card debt, with little wiggle room to pay more each month.
They are options available through credit card companies that allow you to transfer your existing balance from another credit card for a low fee (2%-5%) and sometimes free.
Many banks offer promotions for signing up for their credit card and performing a balance transfer. They often offer interest-free periods (12-18 months usually), this means that you will save monthly on interest will save you hundreds to thousands in interest.
Let's say you have a balance of $5,000 at the national average interest rate of 16%. Your monthly interest on that balance, without spending more, is $800 alone! A balance transfer will eliminate that cost to $0 in interest.
When I was first getting my finances back in order, it was a smart balance transfer that saved me from selling my beat up (but only) car. The key is to use your new card purely for paying off your debt, and paying it off quickly to maximize your savings during the interest-free period.
Moving your credit card balance can be the most effective way to save if you struggle each month with income. CreditLoan offers a tool to help you find low-interest rate credit cards and the best balance transfer cards out there.
There are risks involved with balance transfers, but they are easy to avoid.
If you continue to use your new card, you will be charged interest on the new charges. Your monthly payments will then go to the new charges and their interest rather than your transferred debt.
If your new card has 0% APR financing for the first 12-18 months, and then jumps to a higher interest than you're currently paying, you might end up paying more than you would before the balance transfer. It's very important to be proactive and aggressive with your payments in order to avoid this.
But, it's easy to do if you implement ways to earn, save, and cut spending in your life and use the extra money you're raking in to pay your credit card debt.
Show your credit card bill who's boss
Paying your credit cards while on minimum wage might be difficult, but with the steps above and using some of these strategies and tips, it's extremely doable. Financial tools and advice are at the touch of your fingertips.
Opening your eyes to your finances, cutting down on your spending, and looking for ways to earn extra money can be a total game changer.
And trust me, it also feels good to know the ins and outs of your own finances. I hated how much I owed, how little I made, and how lost I felt in my own mess. There were low moments when I thought the debt was insurmountable. But with the help of family and friends, I learned how to make a basic budget, save, and put my energy into trying to earn more money. It took awhile, years really, but I did it. Credit card debt is a distant blip on my timeline. No matter if you've tried before, I know with these steps you can make it the same.
By paying down your credit cards and spending within your means, which you can easily monitor thanks to your newfound budget apps, you are at the beginning of the journey toward debt-free-living and financial freedom.
Once your credit cards are paid, then you can have more money to save. Getting out of debt should be your number one goal when making minimum wage, and making adequate credit card payments each month will be your first steps in the right direction toward financial freedom.
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Are you paying off a credit card while only earning minimum wage? That's gotta be tough. We would love to hear from you. How do you do it? Please share your thoughts in the comments below.