9 Money Moves to Make the Moment Your Credit Cards Are Paid Off


It may have taken years. It may have required an unprecedented level of discipline and patience. But you finally have your credit cards paid off.

Congratulations! Now, what do you do?

With a good chunk of your high-interest debt no longer weighing you down, you can truly start to work your way toward financial freedom. Here are some key financial moves you can make immediately.

1. Tackle Any Other High-Interest Debt

Okay, so you crushed the credit card debt. What else do you owe? Take a look at things like auto loans, student loans, and your mortgage, and begin chipping away at that debt, as well. Go after the debt with the highest interest rate first. It's one thing to free of credit card debt, but to be totally, 100% debt free? That's an amazing feeling.

2. Assess Your Emergency Fund

When you're in debt, there's a good chance you don't have a lot of liquid savings. But now that those credit cards are paid off, you can start building up funds in case of a major unexpected expense or loss of income. By maintaining an account with at least three months of income, you can handle any financial crisis and know that you won't go back into debt.

3. Open a Retirement Account

It's impossible to think about retirement when you're huddled under a mountain of debt. But now that you've shed that high interest debt, you can start thinking about your long-term financial goals, including your retirement. If your employer offers a 401K plan, begin contributing now and seek to maximize the company match. (Usually, this is somewhere in the neighborhood of 5% of your income, though you can always contribute more.) Also consider opening an individual retirement account, or IRA. Opening a Roth IRA, which allows your money to grow tax free, is perfect for people who are self-employed, but is also a great complement to a 401K.

4. Find a Good Online Budgeting Tool

If you haven't already done so, consider using a service such as Mint or Empower, which allows you to view all of your account information in one place and track your spending — even set up budgets and goals. Using one of these services will allow you to see exactly where your money is going, so you can adjust your spending, if needed.

5. Stop Using Your Cards for a While (But Don't Close Them)

Credit cards got you into trouble, so it might be good to just put them on ice for a while. But don't start canceling all your cards. If you close credit cards, you may actually hurt your credit score. You'll no longer have accounts with a long history, and your credit utilization ratio will go up because you'll have less available credit. If you feel the need to get rid of cards, shed the one with the lowest credit limit. (See also: Best 0% Balance Transfer Credit Cards)

6. Develop a New Charging Philosophy

If you successfully transitioned from carrying a credit card balance to being debt-free, you probably made an adjustment to how you use your cards. Now it's time to evaluate again how you use credit to ensure you stay out of the red. Do some research to find credit cards with favorable interest rates (and maybe even some good cash back rewards). Set up automatic transfers to pay off balances in full each month, and come up with rules to guide which purchases will be made with credit and which will be made with cash. It takes discipline to get out of debt, but it's just as much work to stay out. So set up a plan and do your best to stick to it.

7. Begin Saving for Big, Important Things

You may be out of debt, but you know that it could come right back if you don't save responsibly for the big ticket items. Whether it's a new house, car, or home appliance, it's best to try and pay for these things without taking on a lot of new debt. Consider taking whatever you were paying in credit card interest and setting it aside into a savings account, or even an index fund. Being able to pay cash for the pricey purchases will keep you from falling into the abyss of debt again.

8. Review Your Credit Reports

Looking at your credit report can be depressing when you're in debt. Who needs another reminder of how much they owe? But now that the debt is gone, it might be a good time to examine your credit reports to see if there are any errors, or even old debts you may have forgotten about. Your goal now is to improve your FICO credit score, and cleaning up your reports can play a big role in that. Each of the three major credit bureaus (TransUnion, Experian, Equifax) provide a copy of your credit report once a year at no charge.

9. If You Have a Mortgage, Think About Refinancing

Your credit score may not improve right away after paying off your credit card debt, but if you keep yourself debt-free, it will rise over time. And that means that you'll be in a better position to negotiate with lenders for a better interest rate on your home loan. Mortgage rates are still historically low, so you might save thousands of dollars over the long-term by reducing your rate even slightly. And you could have enormous savings by reducing your loan term, as well.

Have you paid off your credit card debt? What money moves did you make?

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