How I paid off $10,000 in 8 months and 'transformed from a financial hot mess into a confident credit card user'

"When you learn from them, those setbacks can lead you to something better."

Scarlett McCarthy is the founder of Literally Broke and a co-host of the "Bachelornomics" podcast.
Courtesy Scarlett McCarthy

Three years ago, I realized that my total debt had reached the same level as my annual salary. I am a writer and at the time, I was working at an entry-level job that lacked any real growth potential. Like 54% of Americans, I carried a debt balance from month to month on my credit card, and that debt loomed large for me. 

The loans I took out to get my BFA were one thing: That had been intentional with an educational goal in mind. But the more than $10,000 worth of credit card debt I had accumulated was something else. When I thought about how much I owed for purchases that I couldn't remember — iced oat lattes, eyelash extensions, faux leather jackets — I felt a pressure on my chest that I couldn't blame on my acid reflux.

So, I made a plan to pay off my credit card debt once and for all. I stuck to it and eight months later, I was credit card debt-free. But then I had a new conundrum. I wanted to use my credit cards responsibly and not fall back into my old habits of overspending and living paycheck to paycheck.

Since I paid off my debt, I've learned everything about how to use credit cards to my advantage. Here's how I transformed from a financial hot mess into a confident credit card user. 

I found a budget system that worked for me 

I paid off $10,486 of credit card debt in eight months by adjusting my lifestyle and using some key methods that helped me stay on track.

First, I started budgeting. When I became serious about getting out of debt, I turned to the internet for help and learned about different kinds of budgets. While many of my early budgets were mostly trial and error, I realized that breaking down my biweekly paycheck into percentages inspired by the 50/30/20 budget worked best for me. 

With the 50/30/20 budget, 50% of your income goes to necessities, 30% to your lifestyle costs, and 20% to your financial goals. Tweaking this percentage to budget 30% of my income for my financial goals and only 20% for fun spending allowed me to prioritize paying off my debt.

I stuck to cash

While I was budgeting, I began paying for things with cash. As someone prone to overspending, I knew the only way I would learn to stick with a budget was by watching money physically leave my hands. 

Each time my direct deposit hit, I headed to the bank to pull out my spending money for the next two weeks. I separated each category (groceries, dining out, home supplies) in my wallet with a paper clip and a Post-it note label. 

The system wasn't high-tech, but paying with cash for eight months forced me to see how small purchases add up to big totals. 

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I looked for ways to boost my income

At my 9-to-5, I started raising my hand a lot for the overtime opportunities that came my way. This meant temporarily sacrificing some nights and weekends, although I actually ended up spending less during this period because I was working so much. 

All the while, I budgeted as if I hadn't earned any of the extra money I made working overtime. Whatever I made working overtime went straight to my credit card debt. 

And I side hustled. In addition to my freelance work as a social media manager and writer, I took on several odd jobs to make extra money. I bartended, answered emails for a start-up, babysat, and cat-sat. Just like with my overtime money, whatever I made from side hustling was immediately rerouted to my credit card debt, minus taxes, of course.

Another benefit was that the savings I amassed during this time enabled me to increase my income and turn my copywriting side hustle into a full-time job.

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I looked for credit card offers with sign-up bonuses 

Once I had paid off my debt, I started learning about how I could use my credit cards to my benefit. Like how some credit card companies will actually reward you for signing up for their cards and spending a certain amount of money within a given time frame. These points can add up to thousands of dollars in savings on travel, dining, and more. 

When used responsibly, these perks can help you enjoy experiences you might not be able to afford otherwise. I've booked flights to Hawaii and Mexico and paid for entire Airbnb stays by using credit card bonuses. It's important to note that all sign-up bonuses were not created equal, so do your due diligence to ensure you'll get the maximum value from each offer. I've found that sites like The Points Guy are great places to start.

Although I only use two credit cards regularly, I have five open cards. I manage them all by tracking my balances and due dates in the notes section of my phone. There are also platforms like AwardWallet and TravelFreely that you can use to track things like rewards and upcoming annual fees.

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I started paying for everyday expenses with a card 

While I was paying off my credit card debt, I spent a lot of time reading up on personal finance and how credit card points worked. Using cash was never a part of my permanent strategy, so once I paid off my credit card debt, I went back to using credit cards almost immediately. The only difference was that now, I had a budget and an understanding of what I could afford. 

I had learned that sign-up bonuses weren't the only way to earn credit card rewards. I could continue earning points each month just by paying for my everyday expenses with a card. Many credit cards offer extra rewards on things like dining, groceries, and entertainment, which means that you can turn the money you've spent into something else of value in the future. 

It's possible to downgrade or close credit cards you don't plan on using long term after taking advantage of a sign-up bonus. The practice is known as credit card churning, and it is somewhat divisive. So like anything finance-related, do your research and make a plan before opening or closing any accounts. 

I began taking advantage of offered safety benefits

My best advice is to always read through your statements each month in case any unexpected charges pop up, and to review card benefits to double-check what kind of fraud protection you have. Many major credit card issuers offer protections with zero liability, for example, meaning you won't have to pay for unauthorized charges if your card gets lost or stolen.

Purchase protection is another option that may be available to you. It covers you if an item you bought breaks or malfunctions within three months of purchase. Once you file a claim, you will likely be able to replace, repair, or get reimbursed for the item. Like all benefits, purchase protections vary by card. 

Many credit card issuers automatically offer travel and rental car insurance when you pay using one of their cards. That said, make sure you read the fine print before deciding to use any kind of insurance.

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I took steps to boost my credit score

While this might be a surprise, my credit score has been "good" to "very good" for most of my adult life. Opening up my first credit card at 18 and making on-time payments, even while I was in debt, all factored into the FICO score I have today.

Since paying off my credit card debt and becoming somewhat of a personal finance nerd, I pay off my credit card balance in full each month and keep my credit card utilization rate (the percentage of credit you're using out of what's available to you) below 30%. These measures are not just for improving my credit score — they're to keep my spending on track, too. 

Through my journey, I've learned that just because you've been in credit card debt doesn't mean you should fear credit cards, any more than someone who went to the hospital the last time they baked (that someone is me) should fear looking up recipes on Pinterest. 

Ultimately, money mistakes can and do happen. But remember that they don't define you. When you learn from them, those setbacks can lead you to something better. 

Scarlett McCarthy (she/her) is a Brooklyn-based writer, screenwriter, and playwright. She's also the creator of Literally Broke and a co-host of the "Bachelornomics" podcast.

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