Blasting Away Our Consumer Debt

We e-filed our federal tax return on Wednesday, February 22 using the IRS’ Free Fillable Forms — and received our refund on March 1. We got back a nice chunk of change — although I know many of my fellow personal finance bloggers abhor the idea of getting a big tax refund.

There was no doubt about what to do with 1/3 of the tax refund: pay down our credit card debt, which has been lingering for a year following the arrival of Baby Frugalista. While initially the bulk of it was from the hospital bills from her birth, the rest came from the accrual of months of buying baby-related items and things we wanted for our home following our down-to-the-wire upstairs bedroom renovation around the time she was born. Coupled with an extended 6-month-long maternity leave, with less than 2/3 of my pay coming from disability/family leave insurance for 12 of those 24 weeks (the other 12 were unpaid), the debt started adding up.

We’ve been paying a good amount toward the debt each month, but by continually making purchases, we kept winding up back where we started. To remedy this, I put a moratorium on purchases and tossed $2,000 at the credit card debt, eliminating the balance on a credit card with a 6.24% interest rate on purchases. That leaves $2,300 in debt, split between two other credit cards, both at a 0% balance-transfer rate. One card’s 0% interest rate expires in June, and the other in December. The earlier one will be paid off next.

What about the other 2/3 of the tax refund, you ask? It’s in our savings account, and a portion of it will be used to fund our upstairs bathroom renovation. We’re doing one room at a time to minimize our cash outlay.

Paying off that credit card felt great. I can’t wait to get back to our pre-baby state of no consumer debt!