There are a lot of strategies for reducing debt. My goal, which I hope to achieve in the next 6 months, is to have paid off all my credit card outstanding balances. Once that is paid off, I will start working on paying off my small mortgage of undergrad and grad student loans.

My current credit card debt is tied up on 3 cards: 2 personal and 1 business. Since I started reducing my credit debt in Dec 2005, I’ve managed to shave off a little more than half.

Let me be clear that I consider business debt to be my personal debt since I’m spending the money to sustain my business and right now, I’m the only full time employee. The money I make either goes back into the business or I keep as earnings. Legally, it’s a little different - business expenses are deducted from net profits for tax purposes. Personal expenses come out of my wages.

Obviously, the more purchases you can deduct as business expenses (travel, computers, books, training, client luncheons, office supplies, etc), the better your personal taxes look.

That said, I don’t believe credit cards are evil. In fact, I think they are critical to running a successful business. Sometimes you just have to purchase business expenses now - whether it be because something crucial breaks or because you need the funds for a client account. The ideal goal would (and should) be to pay the balances off monthly, but I can’t imagine cutting up all my cards and tossing them in the trash.

To me, the major benefits of having credit cards are:

1. Cash Flow - Sometimes it’s better to have cash on hand now and pay the credit card later - particularly when you’re expecting a major client payment to come in within the next few days.
2. Tracking Expenses - Credit card companies are excellent ways of keeping track of purchases - just download statements to Microsoft Money or Quicken
3. Establishing Credit - It’s much easier to get a business loan or mortgage if you have an excellent credit rating.
4. Rewards - Yeah, interest rates suck, but it’s nice to get rewards points, cash back and other perks for using your card.
5. Security - If the card is lost or stolen, most credit card companies have great fraud detection and replacement services. I’ve gotten calls from Capital One within a day of making a few purchases that they’ve flagged as suspicious. I’ve never gotten that from my bank.