How to Get Rid of Credit Card Debt and Other Loans

High interest rate credit card debt is a problem for many people in the world. You can break free from paying interest and owing thousands of dollars by following few steps. Let's assume you have $12000 on your credit cards: $6000 on Bank of America Card and $6000 on Citi Card.

Lower interest rates: You need to call each credit card company and ask them to lower your interest rate. You will be surprised at how many companies will actually lower your interest rate. If asked, tell me about the credit card with lower interest rate. For example if you have Citi Card with 9% interest rate and an Bank of America card with 11%, call Bank of America and ask for lower interest rate and tell them that you have 8% interest rate on your Citi Card.

Apply for 0% Credit Cards: Apply for credit card offering 0% APR on Purchases and balance Transfers for 12 month with no annual fee. Make sure to only apply for the one with NO annual fee. Last thing we want to do is owe more money to the credit card companies. Few companies offering 0% APR cards: Citi Card, American Express, Chase, Capital One and Discover.

What's the catch? Credit card companies aren't stupid. They are highly profitable corporations. They entice you with easy credit for the sole reason that if you don't pay off your balance in time, they will start charging you interest right away. So, make your monthly payment on time.

Let's assume you qualify for $7000 limit American Express card and $6500 limit Capital One Card with 0% APR.

Transfer Balance: When you apply for the credit card, make a balance transfer request from your high interest rate cards to the new 0% card. Balance transfer fee is usually 3% of the amount transferred. This means you will only incur 3% on your credit rather than the normal 8% to 15%. You can transfer $6000 to your American Express Card and $6000 to Capital One Card. Including the balance transfer fee, you will owe $6180 on each card and it will remain the same for the entire year, no more interest for the rest of the year. That's mean after 12 months, you will owe $12,360 rather than owing over $13,000 on your normal rate.

Pay Minimum Payment: Keep making the minimum payment on your new 0% APR cards. If you fail to make even one payment, your APR will jump to the normal rate.

Save Money: Open a Risk Free CD with Bank of America and keep saving money in that CD and earn interest on the CD. You can save the entire payment amount you use to make to Bank of America and Citi and keep contributing the CD. Since it is a risk free CD, you can withdraw money at any time without any penalties.

11 Months Later: After 12 months, your 0% APR will reset to normal rate. So before 12 months is over, pay off as much credit card debt as you can from your CDs and apply for another 0% APR credit card. Lets assume, you were able to save $6500 in your CDs. You can pay off one of your credit cards and transfer money from your second card to your new 0% Discover credit card.

1st Month on New Card: Again keep saving money in your CD and keep paying minimum payment to Discover and pay it off after 11 months. After another year, you are out of debt.

Sole principle of this process is to owe as little interest to credit card companies as possible, save money and pay off your debt. By having 0% APR cards, you would be saving the interest you would be otherwise paying on previous loans. On top of it, you will be actually making anywhere from 2% to 5% with your risk free CD.

Tips & Warnings:

Do not fall behind on your payments.
Do not spend the money you would have been paying to your previous high interest credit cards, otherwise you will be in a bigger debt than before, SAVE money!


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