Paying Off Credit Card Debt Pt. 2

Let’s dive right in with three more tips to get rid of your credit card debt faster.

1. Balance Transfer
   • This is when you open a new credit card that has a 0% interest rate for a set time period, usually around 12-21 months, and you transfer the balance of one or all of your credit cards.
   • You then aggressively pay off this card during the 0% interest period.
   • This only works if you have already laid out a plan ahead of time and can definitely commit to paying it all off within that time.
   • For example, let’s say these are your cards again:
   • Card 1: $1,500, minimum payment: $150, interest rate: 29.9%
   • Card 2: $1,200, minimum payment: $120, interest rate: 25.4%
   • Card 3: $500, minimum payment: $50, interest rate: 21.2%
   • You add up all the balances, which totals to $3200.
   • Then you figure out what the balance transfer fee is. Usually it’s from 3% to 5%. 3200 x .05 = 160
   • Add up the fee, plus the previous total. 3200 + 160 = 3360.
   • Now divide that number by the number of months you have with no interest. 3360 / 18 = 186.68
   • If you can commit to paying that number every month for the period of time that you’ll have 0% interest, you will save a lot of money! (Depending on how much you owe.)
2. Debt Consolidation
   • This is where you combine all or at least several of your credit cards into a single loan with a lower interest rate. This allows you to make one payment and could result in paying less interest.
   • The loans could come from online lenders, credit unions, or banks.
   • Look at the interest rate you are being offered and compare it with the interest rate you are currently paying on each of your credit cards.
   • There are also non-profit organizations that will help you either obtain loans or create plans for paying off the debt. They can also help you negotiate lower rates with your creditors.
3. Negotiating Lower Rates
   • With this one you would call each credit card company and and ask them to lower your interest rates.
   • I have never tried this, and didn’t even know it was possible until a few books ago, but if you don’t ask the answer will always be no. It doesn’t hurt to try!
   • Remember to be polite and remind them of how long you’ve been a customer and that you would love to continue having a positive relationship with them, but you are going through some hard times and would like a bit of help. Ask them whether they have any 0% interest promotions that they could set you up with. If that doesn’t work then ask whether they could lower your interest rate to something more manageable.

Final Thoughts

The balance transfer can be a slippery slope if you didn’t already address the root cause for the debt. This is personally what I did to crawl out from under my debt, which was a hell of a lot more than $3.3k! I know first hand that it works, but you do have to be diligent in paying it every month and stay on top of when that last payment needs to be made so that you don’t accidentally miss it and get charged interest! I was always paranoid about not having it paid off on time, so I actually divided it by 1 month less than the number of months I was given with 0% interest. You can set your automatic payment to be whatever payment you calculated and then you don’t have to worry about anything other than having the funds in the bank on the day it will be debited.

I’ve found that it helps you get out of debt if you have a clear reason why you want to accomplish this goal. It’s not enough to say: so I don’t have debt.

Make sure you have a S.M.A.R.T. goal that you want to achieve once your credit card debt isn’t standing in the way so that you can use that to fuel your desire to pay off the debt.