Wednesday, January 04, 2006

Beat up by credit card debt? Here's how to beat back!

Happy New Year, and the Mudslinger is back after a long absence. Life has been beyond nuts lately and I apologize for the hiatus. Peace and prosperity to all reading this for 2006 and beyond.

Anyways, I wanted to share my dirty little secret about how to wipe out credit card debt methodically and with little extra interest that the CC companies don't deserve anyway. They desire to bury you in so much interest and finance charges that you never get around to reducing the cause of all that, the principal. This secret stops the avalanche and allows you to get out of the hole. It does require diligence, discipline, and patience, but it definitely works.

The trick is to get the cards with the introductory 0% rate, transfer the highest rate card balances over to them, pay off the rest of the higher-rate balances first while paying only the minimum or a fixed budgeted amount on the 0% cards.
  • Get a 0% card and max out the balance by transferring your highest-interest card balances to the 0% card.
  • DO NOT GET A PIN FOR CASH ACCESS! There is no faster way to blow this than that.
  • Set a budgeted amount for the total payments to all cards.
  • Pay off the highest-interst card balance remaining first.
  • Pay only the minimum on the 0% card and any other cards.
  • As each high-interest card is paid off, cancel and shred it, you don't want that raw deal anyway. Reroute that payment amount into the new highest-rate card, keeping the minimal payments on the rest.
  • When the 0% introductory rates expire, lather, rinse, and repeat.
  • Get a credit report regularly and make sure it is kept accurate, as bad info or unclosed accounts can come back and bite you, plus as the credit rating goes up, the interest rates go down, which also helps compound the situation to your advantage.
Over time you wind up paying minimal interest and much more principal and the debt whittles down. Getting the 0% interest rate is effectively buying time to work down the high-rate balances. I've been doing this for two years now and my principal has been cut by 75% over that time, and the latest on I got has a huge credit line (more than I need) and 0% interest for a year (I was at 8.5%). Three years ago I had a maxed card at 21% interest. It's a big difference, my credit card debt level is manageable, and it can be paid off by the end of the year, leaving more available cash for other, more important things.

The ironic thing is that by doing this you beat their system at their own game under their own rules!

The Mudslinger

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