Using Credit Cards to Lower Debt

How many ways have you looked at your debt in an attempt to come up with a master plan to pay it all off? Many people see those monthly statements and pay only what's asked of them, thinking that paying just the minimum due will help them eventually get out of debt. It's time to take a closer look at that reasoning.

Unfortunately, the fact is that most credit card companies want to keep you in debt. The longer you owe money, the more interest you'll pay on it, and the more profit the creditor will make. It’s nothing personal; it's simply smart business strategy. But, from the point of view of your own personal finances, paying the monthly minimum on your credit card statement is a losing proposition. While you may be paying off the interest from last month, that payment is barely touching the principal you owe, which means that you'll get hit with another round of interest next month. It's a perpetual cycle that keeps you paying the lender, but not paying off your debt.

So, how do you get around this? You need a method that will allow you to get past the interest and start paying down the principal. One way to do that is with a debt consolidation credit card. While you may be thinking the last thing you need is to have another credit card in your hands, a debt consolidation credit card is slightly different. These cards typically offer no interest for an introductory period of time after you transfer debt from other sources. That means you can use the new card to pay off your bank loan and high-interest credit cards. Then when you make your monthly payment for the debt consolidation card, you'll be paying only principal, since no interest will be charged. This can have a major impact on your overall debt. Think of how quickly you could bring that debt down if you didn’t have to pay any interest.

When searching for the best debt consolidation credit card, look for the term of the 0% interest. While many only offer six months interest-free, others may offer nine, twelve or even fifteen months with no interest charges. That's a considerable length of time you can use (for free!) to pay down your debt. But keep in mind that there are fees you may have to pay to transfer your old debt to your new card. Be sure to factor in those costs when you're considering the overall benefits of any credit card.

Once you make the switch to a debt consolidation card you need to remember that you're now on the clock. You have six, nine, twelve or fifteen months to get as much of your debt paid down as you can. That means you should be paying considerably more than the card's minimum monthly payment. You need to put as much toward the debt as you can comfortably handle for the entire duration of the introductory period. Just keep your eyes focused on your goal of being debt-free.

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