Your plan to be To Debt Free is going great. You have made a budget, and you are paying off your high interest debts first. In fact, you have already completely paid off one of your credit cards. Great! That frees up cash each month to pay off other debts, and you are savings hundreds of dollars in interest each year. Now for the next step:
Cancel the credit card you paid off. Canceling credit cards is the only way to avoid the biggest debt pay down trap: using your zero balance credit card to incur more debt!
It’s tempting, isn’t it. You had a $5,000 credit card and you paid it off in full. That means you could borrow $5,000 again! You really want a vacation, or to do some house or car repairs, or to buy some new clothes. Why not use your credit card to do it?
Don’t be tempted. You worked hard to pay off that balance. Don’t fall back into the debt trap. Call the credit card company and cancel your credit card. Then cut it up. That guarantees that you won’t fall back into the debt trap.
I’m not suggesting that you should cancel all of your credit cards. If you want to keep one credit card for business travel purposes, or for emergencies, or to purchase products on-line, that’s your decision. But do you really need five credit cards? No, you don’t. Keep one card if you must, but cancel all the rest, so that you won’t be tempted to borrow again.