Easy and Effective – How to Pay Off Your Credit Cards

aving credit cards can be a double edged sword. At first, the chance to be able to make regular payments to afford big ticket items that would otherwise be unattainable is very attractive. However, it’s very easy to make too many big purchases, or a lot of smaller purchases, while making minimum payments and racking up a significant amount of debt.

The United States runs on debt. Our country as a government is trillions in debt, and each of us operates our own little personal GDP in much the same way. Few of us have the cash to go out and purchase a car, a house, medical procedures, daycare, or sometimes even a TV and other things we need to actually live. We borrow money, just like the government, and if we aren’t careful the interest that accrues can wind up costing much more than the sum of the items we purchased.

If you’ve found yourself with significant credit card debt that you don’t know how you’ll pay it off, there is one very powerful tactic you can use to make significant progress on paying off your charges. Overcoming a mountain of debt can feel impossible, but if you commit yourself to paying it off and decide to grab your debt by the horns and show it who’s boss, you can ultimately win out without changing your current payoff amounts.

It’s important to remember that paying off your debt is often times more about having the right mindset than it is about changing the amount you’re paying each month. You need to look at your spending habits and ask yourself, “How did I get here?” What types of decisions were you making which allowed you to rack up so much debt without paying it off? There are always things that happen in life that we need to borrow money for, but it’s important to sit down and take note of the exact circumstances that happened to put you in so much debt. Make sure you understand both how you came to your present situation, and also why your credit cards are carrying such high balances. Paying off your current debt will do nothing to help your situation if you continue down the same path afterwords and begin to rack up even more debt.

Visualize what it will feel like at the end of your journey when you look down at your credit card bill and see that zero balance. Imagine how empowering it will be to understand that after you’ve paid your cards off, you can actually continue to use them in a way which will actually make you money instead of costing you. One way you can accomplish this once you bring your balances down is by charging all your expenses each month onto your cards, and then paying the balance off in full so you can cash in on your cash back or other rewards without paying interest.

The problem with racking up debt is that you enter into what is known as the debt spiral. In this all too common scenario, a consumer will have charged so much on their credit cards that they are only able to make the minimum payments. The catch is that when you are only making these small minimum payments, almost all of your payment is going towards interest and almost none of it is being applied to the principal. When this happens you are stuck in a never ending cycle of making payments that are not lowering the amount you owe, so they are not getting any smaller. When you are in a debt spiral, you aren’t paying off your balances at all, only the interest to the credit card company is being paid. This is their favorite scenario because they continue to make the maximum amount of money off of each individual consumer without having to extend any additional credit.

If you are close to being in this scenario, or maybe you already are, there are some strategies you can use to rescue yourself and take back your financial well-being. The following tactics are easy and effective.

• You can initiate a debt avalanche, whereby you will start by paying off the cards with the highest interest rate and then work your way down to the lower interest items.
• You can also utilize the debt snowball, where you will pay off small debts first to get them out of the way and make some initial progress followed by working your way up to the bigger balances.

Both of the above strategies are powerful and will quickly start to provide some relief. In order for them to be as effective as possible, it is important to re-structure the debt to provide you with the lowest possible interest rate – 0% if possible.

In order to understand what types of products are available for you to use to re-structure your debt, you will need to have a good picture of your overall credit situation and you will need to have an idea of your current credit score. If you are looking for a free way to get a good idea of what your credit scores are, go to two different websites and setup accounts. Liberty Credit Consulting is not affiliated with either of these companies.

Credit Karma – you will get free credit reports, free credit report monitoring and free estimated credit scores from TransUnion and Equifax – an outstanding service.

Credit.com – here you will receive some of your credit data and an estimated credit score from Experian. Also a great deal (you can’t beat free).

Remember that the credit scores you receive from the above sites are estimated. If you wish to receive your actual FICO score (the one most lenders use), you will need to purchase it or acquire it from your credit cards or bank. Some popular credit cards which provide you a free monthly FICO score are Discover, Chase and USAA.

You need to have a credit score of at least 600 to be able to take advantage of the following products. If you are unsure of your credit score or your report contains negative information, Liberty Credit Consulting has several different ways we can help you out.

If you already have a good idea of your credit score and you know it is at least a 600 or above, then it’s likely that you can get approved for a personal loan from one of several different online-based personal loan providers. These types of loan providers are new and different than traditional providers. Many times you can check to see if you qualify for their loan products without incurring a “hard” inquiry on your credit reports, as well as check your interest rates for free when you visit their websites. I’ve provided a list of loan providers at the bottom of this post for you to check out. We are not affiliated with these companies and do not get reimbursed in any way if you decide to use them for your personal loan needs. Typically those with good credit can qualify for personal loans with interest rates as low as 5.99% or lower. There are also similar loan providers for those with bad credit, however their interest rates will be much higher and may not provide much benefit in the debt pay-down tactic described in this post. For best results we want to make sure our interest rates are absolutely as low as possible, although anything less than your current interest rate is obviously better.

For those with an outstanding credit score of 700 or above, your best best will be to investigate online and locate a credit card that you qualify for which offers a 0% introductory interest rate. There are many such cards available, although a few are better than others by offering better rewards or lower balance transfer fees. If you qualify, the Chase Slate card is highly recommended as they provide both a 0% introductory interest rate for the first year and a 0% balance transfer fee. If you can qualify for this card and transfer all of your current balances onto it, you will be able to pay that debt off interest and fee free for an entire year. After the year is up, transfer the balance onto another card with a 0% introductory interest offer to continue paying down your debt interest free until it’s paid off

Consider the following scenario:

Let’s assume that your current credit card debt is $10,000 and you are currently paying an 18% APR.

Using a Personal Loan

By securing a personal loan with a 6% interest rate, you will save a whopping 12% in  interest over your current credit card rate. You’ll have one set monthly payment and will start down the path to being completely debt free in 3 to 5 years. Make sure your loan provider allows for early repayment with no penalties and then divide your regular monthly payments into weekly payments to pay this debt off even faster. Sometime called micropayments, the savings can be significant.

Utilizing 0% Balance Transfers

When paying down your debt a 0% interest rate can do amazing things for your ability to make progress. If you can qualify for the card mentioned above, you could well be looking at transferring your current high interest balance onto a 0% rate card with no balance transfer fees. Combine this with regular weekly payments and you will be amazed at the results you can achieve. Some credit cards will even let you transfer the balance of your personal loan and your credit cards to their 0% introductory period.

Most credit cards make the balance transfer part of your initial online application, meaning the new card would be issued to you with the balance already on it. You don’t need to call your current credit card providers or bank to initiate a a balance transfer, just apply for a new card and fill out the balance transfer portion and they will pay off your current card and add the balance to theirs. Make sure you are aware of the balance transfer fees before you proceed. Most are around 3% of the transfer amount.

By combining a lower interest rate with weekly payments and the mental attitude that you aren’t going to let yourself get back into the same type of situation again, you can overcome your current debt situation and begin to make major changes immediately.

Here’s a list of some of the best personal loan and balance transfer credit card providers available as of the date of this writing. Again, Liberty Credit Consulting is not affiliated with any of these companies in any way.

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Personal Loan Providers: Avant | Lending Club | Prosper | Lending Point | Payoff

Balance Transfer Credit Cards:

Chase Slate® – 0% Introductory APR for 15 months, $0 Introductory FEE

Alliant Credit Union Credit Cards – 0% APR for 12 months, NO FEE

Edward Jones World MasterCard – 0% APR for 12 months, NO FEE

Navy Federal Credit Union – 0% APR for 12 months, NO FEE

Logix Credit Union Credit Card – 0% APR for 12 months , NO FEE (AZ, CA, DC, MA, MD, ME, NH, NV, or VA only)

First Tennessee Bank Credit Card – 0% APR for 12 months, NO FEE

Capital One QuickSilver ONE – 0% APR for 9 months, NO FEE

Aspire Credit Union Credit Card – 0% APR for 6 months , NO FEE

Elements Financial Credit Card – 0% APR for 6 months, NO FEE

For residents of the Republic of Texas: RBFCU – 0% APR for 12 months, NO FEE