We’ve been talking about New Year’s Resolutions a lot here this week. Today I want to talk about one of the big ones that many Americans set: pay off credit card debt.
I’ve been calculatingly fortunate that I’ve never had to deal with credit card debt that I’ve built up on my own. I use my cards for rewards points, but I only started opening them after I had firmly established that I could use them responsibly as an adult.
Last year, however, my husband was carrying a balance. It was leftover from the days when I didn’t hold a job, and he had been supporting our family solo. It wasn’t oppressive, but we still wanted it gone. For the first time ever, I carried a balance on a credit card in my name. I took ownership of the debt, and had it paid off in a few months. Why did I put it on my card?
The 0% Interest Transfer
We decided to put the debt on my card because I still had a 0% interest promotional period. If I was going to be paying off debt, I wanted all of my money to go to the actual amount owed, not interest and fees. I knew it would allow me to pay it off months sooner, and save me hundreds of dollars.
When you’re making this move, you’ll want to make sure you know the ins and outs beforehand. For example, the 12 or 18 months they offer you for 0% interest is no good if you miss a payment. If you’re late, that rate jumps right back up to ridiculous. You want to be on time. Every time. No matter what.
The second thing to know is that in almost all cases, you’ll have to pay a balance transfer fee. It’s usually an either or fee. For example, you have to pay $15 or 3%, whichever is greater, just to have the balance transferred from your old card to the new one. We found it to be worth the fee with the 0% interest, but it’s still a number worth calculating for your individual situation.
The last thing I’d put out there is that many of these cards come with an annual fee. The first year is typically waived, but when you roll around to year two, you may find yourself shelling out some money for the privilege of using the card. For me, my card is a rewards card, and I get far more out of it annually than I pay in annual fees.
The husband kept the original card that held the debt open. It’s the one he’s held onto the longest, and affects the age of his credit score. Closing it would most likely lower his credit score. He doesn’t keep a balance on it anymore, though. And we successfully paid that debt off months ahead of schedule after transferring it to a 0% interest card.
Another way to pay off credit card debt is to consolidate all of your balances into a Payoff Loan®. If you have debt on more than one card, this allows you to only have to keep track of one monthly payment instead of many. It also can give you an interest rate that is far lower than the one you’re currently paying in many cases. (Interest rates run from 8%-22% APR.) If you don’t trust yourself with another credit card, this line of credit may be for you.
Payoff’s genuine goal is to help you kiss that debt goodbye. On top of the lower interest rates, you get a dedicated Member Advocate who is there to guide you as you pay off your debt. There are only two fees you would ever pay: the Payoff Platform fee when you first get your loan, which ranges from 2.00%-5.00% depending on the length of your loan, and a $15 returned payment fee if your check bounces. Here are all the fees you never pay:
- Late fees
- Prepayment fees (pay off your credit card debt as quickly as possible!)
- Check processing fees
- Annual fees
- Application fees
The lack of fees gives you more freedom to pay down your debt instead of lining a lender’s pockets. You can currently get a Payoff Loan® if you have $5,000-$25,000 in credit card debt, and meet their approval standards. Because they do a soft pull on your credit report when you apply, filling out an application does not affect your credit score. This is not always true of banks when they pull your information to open a new credit card. They typically will do a hard pull, which has the potential to lower your score.
Pay Off Credit Card Debt: Make it a Priority
No matter which approach you take, make paying off your credit card debt a priority. It’s a debt that does not serve, and only eats away at your earnings. We managed to pay our debt off quickly because we did not keep it on a high interest card, and because we threw literally every spare penny we had at it. After our monthly expenses were met, we poured every last cent into our goal of debt payoff, unless we had to put some back into our emergency fund for maintenance.
I’ve said it before, but I’ll say it again: I have a good feeling about 2016. Make this your year to get debt free.
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*I have an affiliate relationship with Payoff. When you take out a loan after using my links, I will be compensated. You are not charged anything additional for using these links. Thank you for supporting this blog, and here’s to debt-freeness!*