This Simple Trick Can Save $1000s in Credit Card Interest
A Counterintuitive Way to Pay Off Your Credit Card Debt
Let’s face it, credit card debt sucks.
But there’s a simple way of making it suck less.
By opening up another credit card!
Now, before you jump in the comments and go all Will Smith vs. Chris Rock on me, just hear me out first.
Let’s start by answering this important question.
Why is it so hard to pay off credit cards?
Interest.
According to this lending tree article, the average APR for all existing credit card accounts is over 20%. If that sounds like a lot, it’s because it is.
Here’s a quick example:
Let’s say you and a couple friends are out drinking one night, and Anna (sorry for throwing you under the bus) has the brilliant idea that you should all go on a Caribbean cruise.
Given that you’re 4 drinks deep, this sounds like a fantastic idea, so you all grab a ticket for $1500 each.
Upon waking up the next morning, with a splitting headache that would make a lumberjack jealous, you check your phone to see the damage from last night’s tab.
To your surprise, your existing credit card bill of $1000 now suddenly has an extra $1500 charge which brings your total balance to $2500.
Unfortunately, this is a low point in your life and all you can afford to pay is $50 a month. Using the handy dandy Bankrate credit card payoff calculator, here’s the math on that.
Would you look at that. What was originally $2500 suddenly doubles and ends up costing over $5000 simply because of the interest!
I know what you’re thinking, how can taking out MORE debt possibly help this situation?
I’m glad you asked.
Reduce credit card interest using balance transfers
Many credit card companies offer “sign up bonuses” that offer you a benefit for opening an account with them.
A common bonus that is offered is a 0% intro APR on purchases and balance transfers.
The way this works is that you open a credit card account with Chase Bank for example, and then you pay off your existing credit card with the new one that you just opened.
And because you’re taking advantage of the sign up bonus, you won’t be charged any interest for 18 months*
Using this method while picking up some extra hours at work, you’re able to pay off that $2500 bill in 18 months and save yourself $2900 in interest!
Now that’s what I call a smart money move.
An important thing to
Once you’ve paid off your debts, you can take things a step further and start getting into the world of credit card rewards, where credit card companies pay you.
Here are a few of my favorites credit cards for rewards
*Most credit cards have a 3–5% one time charge on the amount that is being transferred
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