Debt is the four letter word that plagues the lives of most people. From credit card bills to student loans, the bulk of monthly income earned by most people is used to pay the minimum amount due on their monthly obligations. The new American reality is a life filled with debt from the age of 18 until death. Life should not be lived this way and doesn’t have to be. Today, I am going to take a look at a few methods that you can use to eliminate debt from your life. This is the third part in the series on How To Get Out Of Debt.
The Average American Credit Card Debt
The average American household has credit card debt of nearly $14,750. The average interest rate on new credit is 14.7%. That means that $2,168.25 per year is accumulated on an annual basis. That does not even include the daily compounding of interest that credit card companies use. That is $180.69 in interest payments alone on a monthly basis and $5.94 of interest accrued every single day. Over the course of 10 years, you would easily pay over $20,000 in interest charges alone.
Credit card debts are wealth robbers and at Buy Like Buffett, we are always looking for ways to build wealth. The money that you are using to pay interest charges could be used to fund your retirement. If you want to hold onto more of your money, you need to use every resource at your disposal to get rid of debt.
Get Out Of Debt By Using A Zero Percent Balance Transfer Card
The steps that you can take to eliminate your debt is to get another credit card. That’s right! It may sound crazy but adding another credit card can help you get out of debt faster. Apply for a Zero Percent Balance Transfer Card. These are credit cards that charge you no interest on balances transferred from other credit cards. The 0% offers can last for anywhere from 6 months to 24 months.
Getting a 0% balance transfer card is pretty easy if you have a fairly decent to good credit score. If your credit score is 600 or above, you should be able to qualify for a 0% interest rate balance transfer. These transfers allow you to pay down your balance faster and not to worry about interest payments.
Look for 0% balance transfer cards that keep this low rate in place for at least 12 to 24 months. This way you can engage in a serious debt pay down. If you aggressively attack the principal that you owe, you could pay down your outstanding balance while not paying one red cent in interest.
How To Use Zero Percent Balance Transfer Credit Cards
The key to using a 0% balance transfer card is to see them as a tool for debt reduction and not a tool for debt accumulation. This means that you should not use them to run up additional charges. You should send in the maximum amount of money that you can each month so that you can pay down your outstanding balance.
Let’s assume that you do owe $10,000 on your existing credit card account that has an interest rate of 19%. You could transfer this balance to a 0% interest rate card and eliminate $3,600 in interest payments over a 2 year time period. You could make a monthly payment of $416.66 for 24 months and be debt free before the interest charges even kick in on your 0% APR credit card.
Watch out for fees when selecting a balance transfer credit card. You don’t want to pay a large percentage of your existing debt in fees just for the privilege of transferring your balance. Make sure that you make all of your payments on time. A late payment can make your interest rate default to the higher APR possible. Check your cardholder agreement for details. Here are 2 good 0% Balance Transfer Cards
IBERIABANK Visa® Select Card
- Introductory Rate of 0.00% or 7.50% based on creditworthiness for 12 months from date opened on Purchases. (If there is an interest charge, the charge will be no less then $1.00). This rate will not change during the introductory period.
- Low Introductory APR on Balance Transfers of 1.99% for the first 12 billing cycles, this rate will not change during the introductory period. Applies to balance transfers processed within three months of your account open date. After that, your APR will be the same as your assigned purchase rate, based on your creditworthiness. This APR will vary with the market based on the Prime Rate.
- Low Ongoing Variable Rate APR after introductory period of 7.50%, 9.50%, or 11.50% (Prime + 4.25%, Prime + 6.25%, and Prime + 8.25%) based on your creditworthiness. This APR will vary with the market based on the Prime Rate. (If there is an interest charge, the charge will be no less then $1.00).
- Online access to credit card account information
- Low Annual Fee of $35.00.