 By ASAP Credit Card - Copyright © 2008
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APR credit cards can save you a ton of money! Not only can you save on new purchases,
but you can avoid interest on your existing credit card balance for 12 months
or more. While many people make the mistake of overspending and creating even
more debt with these offers - if used correctly, zero apr credit cards can free
you from credit card debt altogether. Here's how:
Pay Off Debt w/ 0% Credit Cards:
Normally,
you have two options when trying to consolidate your credit card debt: ONE,
get a debt consolidation loan -or- TWO, apply for a home equity line of credit.
Most people never consider a 0% APR credit card - but it may be a better option.
Using a 0% APR credit card will allow you spend more money paying off your balance,
and less money on interest. If your credit is in good shape, a 0% credit card
will allow you to payoff your credit card debt even quicker than a consolidation or home equity loan.
How
to use a 0% APR to become debt-free:
- Transfer
your existing credit card balances to a 0% APR credit card.
- Continue
to pay down your balance as usual. But instead of paying just the minimum each
month, add the amount of interest you saved and pay it as well.
- Watch
your introductory period. When it's about to expire, shop around for a new 0%
APR credit card and transfer your balance again.*
- Continue
this cycle until you're debt free.
* Transferring
credit cards on a regular basis can have a slightly negative impact on your
credit score (in the short-term). But this will repair itself over time. You can
limit the amount
of transfers you make by finding the longest intro rate
possible.
0% APR Credit Cards vs. Debt Consolidation:
If
you're still considering a debt consolidation loan instead of a 0% APR credit
card, you may be in for a surprise. Let's examine the details to see how much
you can save, and how much quicker you can pay off your debt using the method
shown above:
Assume you have
an existing credit card debt of $15,000. You'd like to pay $250
per month
until the debt is paid off. Your debt consolidation loan was approved at 7% (much
lower than your original 12% credit card!).
Beginning
Balance |
$15,000 |
Total Principal Year 1 |
$2,014 |
Total Principal Year 2 |
$2,160 |
Total Principal Year 3 |
$2,316 |
Total Principal Year 4 |
$2,483 |
Total Principal Year 5 |
$2,662 |
Total Principal Year 6 |
$2,855 |
Total Interest Paid |
$3,516 |
Total Amount Paid: |
$18,516 |
Total Payments Made: |
75 |
Now
let’s compare paying off this same debt using 0% APR credit cards.
Beginning
Balance |
$15,000 |
Total Principal Year 1 |
$3,600 |
Total Principal Year 2 |
$3,600 |
Total Principal Year 3 |
$3,600 |
Total Principal Year 4 |
$3,600 |
Total Principal Year 5 |
$600 |
Total Principal Year 6 |
$0 |
Total Interest Paid |
$0 |
Total Amount Paid: |
$15,000 |
Total Payments Made: |
60 |
You
save $3516 over a six year period! Plus you'll be done with your payments 15 months
sooner. Imagine being debt free over a year ahead of schedule.
Words
of Advice:
Paying down credit card debt with 0%
APR credit cards is a smart move. But try not to switch credit cards too frequently.
Doing so can negatively impact your credit report (in the short-term). Shop around
for 0% APR credit cards that have the longest intro periods and the lowest APRs
(after the intro) to buy you a little breathing room. Also, don't fall into the
trap of reusing your old credit cards. Either close them or deactivate them so
you don't get yourself further into debt. And don't overspend with your new credit
card either (even if it is 0%)! Finally, make sure you apply the money you saved
on interest to your new payments to help eliminate your debt faster.
*
See our complete list of 0% APR Credit Cards >
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