Tag: credit card

Pay off Credit Card Debt Saving Tips & Tricks – Be Debt Free Today

IMG_5273Paying Off Debt – Credit Card Debt Saving Tips & Tricks

Learn how you can save thousands on your credit card debt and how you can get credit card companies to actually pay you. In the last 5 years I saved over $20,000 on credit cards intrest and had them pay me around $1,000 of free money in a way. First of I will start writing about the credit card industry, than I will provide lots of ways and trick on saving money if you have Credit Card Debt. Lastly I will explain how you can get extra cash from the credit card companies
Credit Card industry made over 18 Billion dollars


In 2010 and most likely it will top 20 Billion for the year 2012. Majority of the profit comes from every transaction fee that online, gas station, and retail stores transaction.  The other share comes from you, the end user. This is why Credit card companies love you. You make them money when you swipe your card and when you decide to buy something that you don’t have the money to buy right now, but with a credit card you can. Every time you swipe your card there are fees associated  that the merchant pays, it’s usually $0.15-$2.00, most of the fee depends on the transaction value.  Most merchant use formula to calculate their fees, something like $0.19 for transaction and 1% of the amount. Bicycle $69.95 $0.19+$0.70 (1% of 69.95) = $0.89   That is not that bad right ? LCD TV $1,799 $0.19+$17.99 (1% of 1,799) = $18.18   Now we have almost $20 bucks on a single transaction. THIS IS NICE PROFIT!!! The rest of their income comes from you! Not to mention that credit card companies get there fees from merchants thanks to you too, because you were the one that decided to swipe the plastic card. This is how they make the Billions, and you are stuck  paying off credit card debt.

This is the fun part as we all would like to minimize are debt and pay off are credit cards as soon as possible. I will mention few tricks you might have heard over and over, I will list them here again, but what I am going to tell you may contradict some of those tips.
Here are few most common things you should try doing first.

1.      Call you credit card company and ask them if they can lower your interest rate, any percentage is a big plus. Try multiple time if you have too.
2.      Check all your credit cards for balance amounts and interest being charged to it.
3.      Try to pay off higher interest cards first.

And now for advance tips and tricks. Please read them all as there can be used together and there are some that may require that you do them separately.
One think to keep a eye out for is the letters from you credit card companies. Often they will send you blank check, whatever you do don’t throw them away. Blank checks from a credit card company are for balance transfers which usually have a lower interest. Another thing that is nice about it and that most credit cards will not tell you is that you can deposit them directly to your checking account and use them as you like. The checks can be used to lower your interest and can be used as cash advance but without the high cash advance interest rate and fees. Those checks will come in handy for to maximizing your savings when it comes to helping you pay off credit card debt.

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Things you need to do:

1.      Save the blank checks from credit cards companies.
2.      Check all your credit cards for outstanding balances and interest rates associated with them, write them down
3.      Call your credit card and try to lower your credit interest.
4.      Login to your credit card account and check if you have balance transfer option, and what are the terms and on which card. Compare the offers from all credit cards.

There are a lot of things you can do, there is also a lot of things you can’t do and things you need to watch out for. It all depends on how many credit cards you have and the balance that you carry.
Unlike the method above where I say to pay off credit card with the highest interest first, in this method we want to pay off credit card with the highest credit line and/or least debt on it. The reason for this is that we want to have a credit card that has 0 balance so that we can use that card to do balance transfer to lower interest rate. What you want to do is clear one credit card, do a balance transfer and then wait a month and do another balance transfer if you have more than 2 cards and so on and on. The trick here is to maintain lowest interest balance possible. $5000 balance with 19% interest equals $950 a year, for about 5 years it will take you to pay it off. That’s a total of around $4000 on a $5000 balance. Compare this if you do a balance transfers.
($200+1%) balance transfer fee + 5% (interest) = $$$ ($200+$50) + $250 = $500 a year (interest+fees) Verdict is $950-$500= $450 of savings a year. I had $50,000 of debt balance which given me savings of almost $5000 a year. You may need to do this process more than once so try to keep one credit card always empty if possible. Also try to find balance transfer offers that remain low interest till the balance is paid off.

Things you don’t want to do:

Credit card companies have few tricks under there sleeves as well, so avoid doing the following.
Lets say you have three credit cards with a credit line of ten thousand each.
Card 1: $6000 balance Card 2: $7000 balance Card 3: $8000 balance
Now lets say you won $5000 in lottery and you would want to use this money to pay off your cards. What most people or credit scoring agency will tell you to do the following to increase your credit score.
Card 1: $6000 -$1000 Card 2: $7000 -$2000 Card 3: $8000 -$2000
This is a process will increase your credit score because of the percentage that you owe vs. percentage that you can borrow. WATCH OUT!!!, here is what creditors do to stop you from helping your credit score. As soon as you make those payments, creditors will most likely evaluate your credit and drop your credit line from $30000 to $20000 which will bring your credit to balance ratio back up to the same thing. They say that this is to protect them self because your credit score dropt because you had a large percentage balance when what they are trying to do is make sure you don’t qualify for a reduced rate.
Here is what you want to do: Card 1: $6000 -$5000 Card 2: $7000 -$0 Card 3: $8000 -$0
This will bring one of your cards to $1000 balance and you can pay the rest off a lot sooner and use that empty card to do a balance transfer to lower the rates on the other 2 cards. This will also increase your credit score, maybe just not as much as the other way.
Another trick is to borrow money from a credit Union to pay off you balance or even one card so that you can lower your interest. You need to be a member or you may need to open a account with them, but they will most likely have the lowest rate available.
You can also borrow money from your 401K, since the interest is lower and you will be paying your self back.
If you don’t get offers for balance transfers from your credit cards and you don’t have more than 50%  of debt ratio, than try applying for a credit card that has that option, a lot of times they will try to attract you by saying 0% interest on balance transfers for one year.
I know 0% for a year sounds good, but try to use the ones that say 1%-5% for couple of years or till the balance is paid off,  The reason for that is that it takes more than a year to pay off a credit card debt, if you can do it sooner Great.
One Trick that you may have never heard off on a balance transfer. Lets assume that you have $30,000 credit line total on 3 cards and you have a balance of $29,000 on them. There is not much room to play with and chances are that the credit card companies will not offer you any deals on balance transfers. Here is what you can do. Find someone that you trust and they trust you, close friend, family member perhaps. Ask them if they would be willing to do a balance transfer for you. This means they will take the balance from your card and placed on there’s. This amount will most likely will have to stay on there account for 2-3 month but after that you should be able to do your own balance transfer and take ownership of the debt back, however at a lower interest rate now.
All balance transfers have fees associated with them but they are a lot cheaper then the interest credit cards charge.
So you ask, how can I have credit card companies to pay me? Today there are quite few credit card companies that offer Rewards points or cash back on purchases. Don’t do this if you already have a large balance on your credit cards. Look at your credit cards statement and see if there are any points rewords or cash back. Most credit cards like capital one or discover offer cash back on purchases from 1%-5% on a transaction. When normally you would buy something with cash, and credit card is accepted, then you should pay with credit card and put that cash on the side so that you can pay the balance off at the end of the month. If you go shopping for a new laptop with your friend and he wants to pay with cash. Offer to pay for it with your credit card and tell him to give you the cash. So try to use credit card whenever you can instead of cash, but be carful not to spend more than you can afford. Credit card interest is a lot greater than what you will be greater. There is no point of doing this if you have a balance sitting on your credit card and it is getting hit with interest, this is just bad idea.Those are few tricks you should consider. I will post more as times goes on. So subscribe, follow me. If you have any questions , please ask. If something is unclear, I will attempt to clarify it.
Happy savings.



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