Today I paid off approximately $9,800 in credit card debt, and boy does that ever feel good.

According to the debt reduction plan I set up in Aug. 2007, I had intended to pay down approximately $9,200 of my then-current debt amount, which was about $10,000, by the end of this year. That would have left me with approximately $800 in debt, that I was hoping I could either pay off immediately or refinance.

Since then, the actual balances on my credit cards have fluctuated wildly – from between about $6,000 and $18,000 – as I have taken advantage of some balance transfer arbitrage opportunities. Basically, by getting 0% money from credit cards, I boosted the amounts I had set aside to pay off the debt while increasing my interest-earning capabilities. All of the interest was cycled back into my balance transfer payoff account, which grew a little faster than it would have otherwise. In July 2008, I was able to refinance all of my then-outstanding debt at 0% again with only minimal fees, while actually adding to the amount I could put into my balance transfer account reserves to earn interest.

So, you might wonder, why then did I decide to pay off all of this amount now? That's a great question, and here are my main reasons.

• Simplicity – There are a number of changes taking place in my life right now, and having to manage and/or monitor payments to multiple credit cards per month so I can earn a few extra dollars in interest has become a bit too cumbersome to continue. I also am able to close a couple bank accounts that were dedicated mostly to earning higher interest on my balance transfer funds, but which now are pretty much useless (not to mention that the rates suck now).
• Risk – For various anomalous reasons I have missed a payment on a couple different cards. Although I was able to have the fees refunded and 0% rates restored in all cases, if I miss even one more payment on one of several cards, I will wipe out the benefit of several months' worth of interest that I've earned with that money. That would really piss me off.
• Score – My card with the largest balance also had a very high utiliation (>95%), which was affecting my credit score. Also, the amount of debt I was carrying probably affected other factors in credit decisions. Paying down my debt will improve my score.
• Psychology – As the headline to this post suggests, there's a huge rush associated with paying off a massive majority of my debt.
• Refocusing – My primary financial goal for the last couple years has been the same: Pay down credit card debt. Now that I am so close to accomplishing that goal, I am starting to plan for the next stage of my financial recovery: Increase my worth. The huge balance in my balance transfer account was simply a reminder to me of how much debt I have been carrying, and paying it off (mostly) lets me look past that previously impending mountain to gentler and more pleasant hills.

The final push

Not including some short-term credit card debt (I use a couple rewards cards to manage my day-to-day purchases), which I always pay off monthly, I still have about $2,800 in credit card debt. The good news is that I also have about $2,300 tied up in various accounts that I can throw at that debt, if I need to. Doing some simple math, you'll see that I have only about $500 in credit card debt left to save for. Since I have been adding about $500 per month to my balance transfer fund, that means I have only about one more month left before I have enough cash to pay off all of my credit card debt. (The actual final payoff probably is still about six months away – there's no reason to rush things, since it's still all at 0%.)

The second part of my August 2007 goal was to half my student loan debt. I have not done that, though I have decreased it by about 17% overall to approximately $3,886. The good news is that the entire amount is financed at 0% for the life of the loan, so long as I make the minimum payment of $10 per month. I feel no urgency to pay this off in the near future, though I likely will increase the amount of the payments once I have paid off my credit card debt. And for the record, it would take about 32 years to finish paying it off if I continue at the $10 per month level.

All in all, I am pretty happy with the state of my debt in the new year. There is still some there, but it's definitely manageable.

2009 goals

I plan to write a post outlining my 2009 financial goals (what kind of personal finance blogger would I be if I didn't?), but here are some of my goals related specifically to credit and debt in the new year.

• Pay off the rest of my credit card debt (~$2,800)
• Reduce my student loan amount by 25%
• Pay enough on my mortgage to stop the $50 per month PMI payments (not sure exactly how much this needs to be)

These are definitely all realistic for me. What are some of your credit and debt-related goals?