Debt is at the crux of this economic mess we’re in. But that doesn’t mean that all debt is bad. Carmen is fond of saying that there’s good debt – like mortgages and student loans – but it’s too often eclipsed by credit-card debt. Taming that debt should be everyone’s priority for 2009, Carmen says.

From 1997 to 2007, America’s credit-card balances increased 75%, according to Credit.com. That’s a staggering statistic, but one that is in our power to reverse. Too many people get fooled by a low APR, but, as John Ulzheimer says, even a credit card with 0% interest is still bad debt. That’s because credit-card debt, no matter what the interest, is hurtful to your credit score because it is not secured by an asset (as opposed to, say, a mortgage). And 0% APR can be taken away in an instant by the credit-card company, even if you’ve never been a day late in your payments.

By paying off credit-card debt, you are able to keep your money at home where it belongs, to be reallocated where you see fit. It puts you in control to grow your money.

Always pay the most you can toward the cards with the highest interest, Ulzheimer says. Then pay the minimums on the rest. Once you pay down a balance, it might be tempting to close the card completely to keep yourself from being tempted to use it. But this is a mistake. Keeping cards open, even if you don’t use them, is the way to increase your credit score. Ulzheimer recommends locking up or even shredding cards you don’t want to use, just don’t close them out, he says (and remember that the best credit scores have have debt utilization under 10%).

3 Things to Remember to Be Debt-Free:

1. Stick to a budget

2. Find the money

3. Have a system

Tools:

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