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Credit cards are fast becoming a blight on the American economy, but they also help stimulate growth. The problem comes when users are forced to (or voluntarily) overspend and begin the never ending cycle of paying less than the full balance on the credit card. At this point you officially have credit card debt.
When we got married we had over $34,000 in outstanding debts, much of it on credit cards. After sitting down to have a good cry I got things into perspective. With a solid plan and the determination to stick with it, we could have those debts completely paid off within a couple of years.
The time it takes to clear those debts depends on your income and ability to trim other expenses in order to funnel as much money as possible toward those debts. It does NOT mean that you will have no life and no fun. You will have to make tough choices so your life should be different, but you can always make it fun.
There are several ways to play the credit card game and win. You can consolidate your balances into a lower interest loan, you could refinance your mortgage and roll those debts into your home loan, or you could play the game of transferring higher interest balances to low or zero interest credit cards. I chose the latter option, you will need to consider which option is best for you based on your own credit rating, your ability to secure low interest loans, your ability to repay and most importantly, your level of discipline.
If you have no discipline when it comes to money, then the process of transferring balances could be hard for you, as it requires you to pay attention to when your zero interest credit card offer expires and move that balance to the next card at the right time. If this is too time consuming for you, then you'll definitely want to look into refinancing your mortgage or getting a consolidation loan to cover all your credit cards.
I love numbers, I love math, and playing with money like this is a game for me not a chore. So transferring balances to new credit cards every few months was fun. Watching those balances shrink as I paid ZERO interest the entire time was a thrill. I felt victorious over the credit card companies… and over my debt. As a result we paid off over $34,000 in debts in about 18 months. When you're not paying any interest and you don't stray from the plan it can work. It really can. You don't have to love the game in order to win it. You just have to keep playing and don't lose sight of the goal. Pay off the debt.
In this article I'm going to show you how you can get the most out those pesky credit card offers you keep receiving. Even if you're not about to switch cards you may lean a thing or to so sit tight, but first, let me set the stage: You're the proud owner of a credit card or two, never really use them but pay them off in full each month. Then comes a few must have purchases and perhaps your employer downsizes and you're sent packing. Before you know it you're in the hole for $5000. You still get the statements in the mail but never really read them and like a robot, just pay the minimum amount. Then one day, perhaps because you're bored or it's raining outside, you actually read one of the statements and realize you're paying an exorbitant amount in interest charges and by a rough calculation you'll be "pushing up the daisies" by the time you have to make the last payment!
You've often heard you ex co-workers brag about their low credit card interest rate and you now realize those credit card offers collecting dust in your top drawer are starting to look more attractive by the second. Upon delving into the mile high stack or unopened offers you get the same sickly overwhelmed feeling, the same one you get when shopping for toothpaste in a narrow, crowded grocery store isle, ugh, too many choices! You end of tossing the applications into the recycle bin along with any hopes of saving money.
Does the above sounds all too familiar? The credit card companies don't call it the fine print for nothing, and who has a micro-fiche reader anyway - I swear that's a 2 point font they use! You'll either end up applying for for a new credit card without really knowing what you're getting into or you'll do nothing at all. Well now, let's not get too carried away with this silly little story but I'd like to add some more coals to the fire by quoting some alarming credit card facts:
Fact Number One: Paying the minimum payment on a balance of $2000 with an interest rate of 15.04% will take you 169 months (yes that's 14 years) to pay it off in full! And, you will of paid a total of $2205.63 in interest
charges (that does not inlclude the $2000 of debt)!
Fact Number Two: Switching to an 8% APR card from a 16% APR card will save you aprox. $500 per year in interest charges on a $5000 balance.
Ok, ok sign me up I hear you cry. Well hang on there Tigger, one moment before you jump into the credit card labyrinth and promise me your firstborn. Using a small amount of your gray matter (AKA your noggin/brain) you can avoid most of the pitfalls of the credit card game. I use the word game because it really is a game and you've gotta play by the credit card rules or they'll put you in the cooler which normally means ponying up more of your hard earned lolly(cash) or at worst getting a higher interest rate than you had with your old card.
So credit card guy, impart to me your bountiful knowledge. I'm gonna make this a 3 step process so here goes:
Step 1: Read the fine print.
You want a 0% Apr card but is it for purchases or balance transfers or both? Most people will want to transfer a balance and do not care about the 0% Apr on purchases but make sure you understand what the 0% Apr is related to. If you're unsure then call up the credit card company and ask them.
Step 2: Pay your bill on time
Sounds logical but really, buried in the fine print on page 1000 of the terms and conditions is a clause that states: If you are late making a payment, any introductory/special rates terminate and the standard purchase APR will apply to purchases and balance transfers. If you fail twice to make a required payment or if you exceed your account credit limit twice, your purchase APR will be 19.99%. If you fail 3 times to make a required payment or if you exceed your account credit limit 3 times, your purchase APR and cash advance APR will be 24.99%.
Yikes! This is straight from Discover's website. You normally have to allow 5 to 10 business days for the credit card company to get the payment so I suggest you sign up with your bank for on line bill paying or get an electronic debit order for them to automatically take out a certain amount each month. If they do hit you with a late fee and you have a good payment record with them you might try calling them up and asking them to waive the fee with the threat that you'll cancel your account if they don't. I have use this on one occasion and it worked so it never hurts to ask right.
Step 3: Keep an eye on your balance
So your limit is $2000 but the nice credit companies will gladly let you go over it and slap you with a $25 fee for the pleasure (in some cases even if you go over by a dollar) If you are making purchases with your new card check you account on-line weekly .
That's it, and remember that I'm as much a fan of credit card companies as you are but in some cases they are a necessary evil and sometimes a lifeline in time of financial trouble so let's ride them hard, to our advantage not theirs and hopefully one day we can cut up those little piece of plastic.