How the Pandemic Enabled Me to Pay Off $5,500 Worth of Credit Card Debt
As a kid, the prospect of having any kind of debt was terrifying. In high school, my microeconomics teacher, Mrs. Bennett, warned us about the perils of credit card debt. She said it is the worst possible thing we can get ourselves into.
Fast forward through college, a cross-country move, and settling into one of the most expensive cities, I managed to rack up $5,500 worth of credit card debt. Before you judge, let me explain: I’m not a compulsive shopper, and I don’t have any unhealthy ideas surrounding money.
For me, the balance was a result of working a low-paying job in an expensive city while trying to keep up with the brunch-filled, event-heavy existence that’s natural for anyone living in New York City.
Though I always paid the minimum every month, there wasn’t much money left after rent and groceries to clear out my debt.
FWIW, my personal debt is actually much more when you include my $30,000 student loan balance. That $35,500 debt led to deep-seated anxiety fed by a growing sense of helplessness.
Enter 2020. I vowed that this was my chance to refresh, to start anew. This was the year that I’d get closer to living a life that felt true to me—and financial empowerment was one big step in that direction. Every money expert will tell you to get rid of high-interest debt as soon as possible. So I decided that eliminating my credit card bill was my first goal. And, oddly enough, 2020 turned out to be the perfect time. Here’s how I did it.
I got a balance transfer credit card.
A balance transfer card allows you to move high-interest debt from one credit card to a new one with no interest for a set amount of time, allowing you to pay the balance off without acquiring more debt from interest. Once this time period ends, the new card’s high interest rate kicks in.
I decided that getting a balance transfer card would be my best option for tackling my goal. I settled on the BankAmericard through Bank of America. I already had a relationship with this bank and the sign-up deal included 15 months of no interest on my balance. I applied and was approved for the transfer of my debt from two older cards to the BankAmericard starting in January.
I got a side hustle.
With my pre-pandemic income ($1,650 to $1,750 per month) it was impossible to make substantial payments towards my debt, so I started working at the Union Square Farmers Market every Saturday, selling locally-made goat cheese. By early March, paid $900 from the farmers market job and $100 of my primary income towards my credit card debt, bringing my total debt to $4,500. It felt awesome!
I filed for unemployment.
A couple weeks later, the pandemic hit hard, and NYC shut down to slow the spread of COVID-19. Sadly, that meant my farmer’s market job didn’t exist anymore. On top of that, my primary employer substantially slashed my hours.
At that point, it seemed like my financial plans for the year would have to wait. But a friend said I might qualify for partial unemployment assistance. Then, I learned that the CARES act, which was signed into law later that month, meant I qualified for an extra $600 per week. I filed a claim and my monthly income went from about $1,700 a month (without the farmer’s market gig) to roughly $3,400.
I reduced costs.
When I received my balance transfer card back in January, I stopped using my credit cards altogether, relying solely on cash. With that habit in place, and COVID closing bars and restaurants, I was already saving so much money.
Then, in May, I moved to Georgia to live with my parents until the end of June. When I was living on my own, I spent about $400 a month on takeout and groceries. That meant, in addition to doubling my salary, I saved an extra $800 in two months on food. Shout out to the parentals! You’re the best!
Of course, I still had to pay my Brooklyn rent and bills, which cost just under $1,000 a month.
I celebrated.
By the end of May my credit card debt was totally paid off. I was so proud of myself and my mom also got a little teary eyed, knowing the emotional impact my debt had on me for so long. I’m a big believer in rewarding yourself (within reason) for doing well in all aspects of life, so I did a little retail therapy. I scored Lugged Converse, Doc Marten 1461’s, an Aerie swimsuit, some Madewell swag, and a jumpsuit from Warp + Weft. Altogether I spent a little under $500.
I set a new money goal.
My hours were still reduced, so I continued receiving assistance from the CARES Act. That meant, I still had a surplus of cash coming in. So, I decided building up an emergency fund was a good next step in my financial wellness journey. [Editor’s note: Most experts suggest saving eight month’s-worth of salary or expenses to supplement the loss of a job or a financial emergency] I didn’t have a specific savings goal in mind, so I put all of the extra money, after rent, utilities, and other needs, into savings.
Also, because of my salary, I received a $1,200 stimulus check in May. But because of my saving strategy and unemployment income, I never had to use it. By July 15, I stocked away $5,500 into my emergency fund.
I gave myself a reality check.
I fully acknowledge that it would have taken much longer to pay off my credit card debt if the pandemic never happened. It feels weird to have a silver-lining in such a devastating time, but I’m thankful that it worked out for me. Also, my immediate success wouldn’t be possible for someone without my financial privilege. I have no dependents, and I have a family to lean on for any extra support (like buying me food and letting me stay with them).
On July 31st, the extra $600 a week of unemployment assistance expired. And while another stimulus bill is stuck in Congress, it’s possible those benefits could be extended. Still, the future of that is foggy.
Luckily, the hours of my primary job were reinstated at the end of July. And since we’re still working remotely (another privilege, for sure) I’ve decided to move back to Georgia to live with my parents when my lease ends in August. While I’m living rent-free, I plan to tackle paying down my student debt while adding more to my emergency fund and saving up for my next move.
Now that I know how good it feels to achieve my money goals, I’m definitely done living paycheck to paycheck.
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