If you are confused about balance transfer credit cards it’s likely because you’ve heard some of the myths about them.
Believe me, I get it. I’ve been there.
There are so many myths about balance transfer credit cards, it can be hard to distinguish the truth from the fantasy.
Well, good news.
Today we’re covering all the myths of balance transfer credit cards and breaking them down one-by-one. Keep reading to discover the truth so that you can make better financial decisions.
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Chase Slate offers 0% interest on balance transfers for 15 months and does not charge a transfer fee on balances transferred within the first 90 days.
City Simplicity charges a 3% transfer fee, but they offer an incredible 0% interest for 21 months which is six months longer than Slate. Depending on your individual situation, you may find it’s worth it to pay the transfer fee, as it gives you an additional six months with 0% interest to pay off your balance.
Myth 3: Balance Transfer Credit Cards Are the Key to Getting out of Debt
You’ll need more than just a balance transfer to get out of debt.
On one hand, transfer cards can be a very valuable tool to help you take control of your debt. They include obvious benefits such as the potential to pay considerably less in interest charges and the convenience of combining all your debt accounts into one payment each month.
But the foundation for getting out of debt is responsible spending, consistent payments and adherence to a solid debt reduction plan.
Myth 4: You Don’t Have to Make Payments Until After the Introductory Period
This is simply not true. All credit cards require you to make a minimum payment each month. If you don’t pay, you’ll be assessed penalties in fees and higher interest rates.
Remember, the whole point of balance transfers is to take advantage of lower interest rates so you can pay down the principal balance faster. It is counter-productive to get a balance transfer account and not make payments until the interest rate spikes up.
Try to pay as much as you can afford with the goal of paying the principal in full within the introductory period.
Myth 5: You Don’t Have to Pay Back the Balance as Long as You Keep Transferring the Money
This is a risky game that has the potential to end catastrophically. Banks notice when you are consistently transferring your money and you run the risk your credit card application will be rejected or offered with less than attractive terms.
Then you may be stuck with the balance paying a considerably higher rate than if you had just made your payments during the introductory period.
Myth 6: Closing Old Cards After a Balance Transfer Will Improve Your Credit Score
Closing an account may lower your average account age, and reduce the amount of your available credit. These factors can negatively impact your credit score. Many financial experts advise keeping your old cards open for those reasons.
But if you are concerned about annual fees, or worried you will rack up more debt on the card, then closing the card may be worth it to you.
A third option is to keep the old card open, but remove it from your wallet to control impulse spending. Cut up your old card or store it someplace safe in your home and only use it for emergencies.
Myth 7: Balance Transfers Have No Effect on Your Credit Score
This is a related credit score myth that needs to be dispelled.
A balance transfer can have either a positive or a negative effect on your credit score, depending on how many times you have transferred your balance in the past.
Your score can be negatively impacted if you are simply moving money from card to card without making progress to pay down the debt.
Instead, improve your credit score by keeping your money in your balance transfer account and making consistent payments to pay down your debt.
Myth 8: Anyone Can Qualify for a Balance Transfer Credit Card
Not all people qualify for balance transfers. Potential lenders will run your credit before approving a balance transfer. As with most credit cards, the best interest rates and promotional deals go to people with good or excellent credit.
Myth 9: Balance Transfers Can Only Include Credit Card Balances
While many lenders only allow credit card balances to be transferred, other lenders are more generous. Many will allow you to transfer debts from electronics, appliances and other personal loans. In this case, the credit card company gives you checks which you use to transfer your other debts to your credit card.
Myth 10: Once You Apply, or Once You Are Approved for a Balance Transfer, You Do Not Have to Make Payments on Your Old Credit Card
Transfers can take up to two weeks to complete. Avoid incurring any missed payment fees or late fees by making continued payments on your old card. Keep up with payments until you receive confirmation that the transfer has been approved and the balance transfer has been completed.
If you’re confused at all, here are some simple steps to transfer your credit card balance the smart way.
Myth 11: Balance Transfers Credit Cards Are the Only Way to Transfer High-Interest Credit Cards to a 0% or Low-Interest Account
Balance transfers credit cards are usually the only way to get a 0% account. But you can transfer your high-interest cards to a low-interest personal loan if you have good credit.
One of the main advantages of a personal loan is that you have a defined period of repayment, so you know you’ll be done with the debt in 3 years, 5 years, or whatever term you sign up for.
As with anything financially related, run the numbers to see if a personal loan makes sense for you.
You can find your best options for free at Even Financial and apply to borrow up to $100,000. You type in your information, and their tool will compare interest rates from several lenders and let you know which option is the best for you. Rates start at 3.83% with repayment terms from 24-84 months.
The Bottom Line: Are Balance Transfer Credit Cards Worth It?
Consider how transferring your balance to a new credit card will affect your finances in the long-term. Run the numbers and evaluate the drawbacks. Only get a balance transfer credit card if you can resist the temptation to rack up more credit card debt.
Once you’ve considered these factors and know the pros and cons of balance transfer credit cards, you can make an informed decision.
Ultimately, if you determine you’ll save money and pay off your credit card faster, then transferring the balance is worth it.
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Are you struggling to pay your credit card debt? Perhaps you’re considering a balance transfer credit card to help you pay off your debt faster?
If so, you’re not alone. In fact, the average American household owes $6,194 in credit card debt and many are seeking strategies to reduce that number.
It may be tempting to transfer the balance on your credit cards to a no-interest balance transfer credit card. But should you?
Before you sign up for a new credit card, make sure you understand the ins-and-outs of these balance transfer cards so you can make an informed decision.
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Lending Tree to find the best rates, and they do a soft credit pull so your credit score won’t get dinged.
Anyone who struggles to stick to a budget
Balance transfer cards are a good idea if you can pay off most or all of your debt during the introductory period. Those who have success typically adhere to a budget to achieve their goals. If you find budgets too restricting, you might want to think twice before getting a balance transfer credit card.
5 Smart Steps to Transfer Your Credit Card Balance
Follow the following steps to transfer your debt responsibly:
1. Read the Fine Print
Before you accept an offer, read the fine print and determine how much this card will cost you in the long run. The key figures you need to consider are the:
Introductory interest rate
Preferably it’s 0%. If you don’t qualify for 0%, it should at least be significantly less than your current interest rate. Federal law requires all teaser rates to last for at least six months. You should have no problem finding introductory rates for 12 months to 18 months or more. Can you pay off your debt before the introductory period is over?
Annual percentage rate (APR)
What is the APR after the introductory period? Is it higher than your current rate? If so, will it put you right back at square one, struggling to make your monthly payment?
Balance transfer fee
Transfer fees are typically 0%-3% of the balance. If you don’t pay off your debt during the introductory period, does the bank calculate your transfer fee based on the amount of the original debt transfer? That’s something you’ll need to know as you figure out the total cost of the balance transfer card.
Minimum monthly payment
You need to find out exactly what the minimum payment will be so you can determine how much you are saving each month and how much you can direct towards the principal.
Check the fine print for a cap on the balance transfer amount. The last thing you want is to open a new account and discover the new credit card won’t be able to transfer all of your debt. Then you’ll be stuck with two credit cards to pay off.
It’s important to understand the terms before you sign. Make sure you are familiar with common balance transfer credit card myths so you know the truth. Once you know all the pros and cons of a balance transfer, you can make an educated decision.
2. Run the Numbers
Use a credit card balance transfer calculator to determine if you can pay off the balance in full during the introductory period. Ideally, you do not want to pay the higher interest rate on your credit balance after the promotional period expires.
Create a monthly budget and make sure you’ll have enough each month to pay the payment plus extra towards the principal.
Your budget doesn’t have to be anything fancy. Just get started. Write down all your income in one category, and all your expenses in the other. In your expenses category, write down all your debts but also make note of every purchase you’ve made in the past month.
Then look for opportunities for improvement. For example, if you see 20 trips to Starbucks in the last month, maybe you can make your coffee at home and save money.
Set up your account to automatically set aside all the money you need to pay your bills plus extra towards the principal. You’ll learn to adjust your lifestyle to live with the money that is leftover.
3. Make Sure You Qualify Before You Apply for a Balance Transfer Credit Card.
Once you’re sure the numbers make sense for you to get a balance transfer card, check your FICO credit score to make sure you qualify.
You can get a free Experian FICO 8 score at FreeCreditScore.com. Although this is for Experian only and not TransUnion or Equifax, it should give you a good idea of where you stand. Refer to this article if you want to see your FICO score and Vantage score for free.
If you have outstanding credit (740 or above) you will most likely qualify for the best introductory interest rates. If your credit isn’t quite that high, your teaser rate may be higher, but still lower than your current credit cards.
Obviously, the key is to make sure the new interest rate, plus the balance transfer fee, makes it worthwhile to transfer your credit cards and pay down your debt.
4. Consider Your Options
We’re partial to zero interest credit cards, but depending on your situation, you may want to consider other options, such as:
Debt consolidation loan
This is a personal loan to pay off your high-interest credit cards. You likely won’t find any 0% interest loans, but they typically come with a lower interest rate — useful for paying off your high-interest cards. You make regular payments to your lender for a period of time, usually 3-5 years until your debt is paid. If you make your payments on time, it’s a good way to improve your credit and pay off your debt.
Balance transfer credit cards
As we’ve been discussing, these zero or low-interest cards are a great place to transfer your high-interest credit card debt and pay it down aggressively.
Depending on the amount of your loan, you can take out a personal loan and pay off the debts yourself. You just have to be sure to use the money for what it’s intended for – paying off your debt.
You can find your best options for free at Even Financial and apply to borrow up to $100,000. Just type in your information, and their tool will compare interest rates from several lenders and let you know which option is the best for you. Rates start at 3.83% with repayment terms from 24-84 months.
5. Living With Your Debt Consolidation
Once you have a balance transfer credit card or debt consolidation loan, take advantage of the opportunity to pay down your debt.
Stop using the card for any purchases while you are paying off the balance. Pay as much as you can towards the principal and watch your credit card balance go down each month until it is paid off. Follow your budget and save for purchases. No more impulse buying with the card.
Remember, people who don’t change their debt behavior end up in the debt cycle again. But if you’re focused and consistent with your budget, your consolidation will be a useful tool to eliminate your debt.
Have you consolidated your debt with a balance transfer credit card or loan? Tell us about your experience in the comments below.
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according to Fair Isaac, 90% of the major U.S. lenders use FICO scores to make lending decisions.
Even if you’re not looking for a loan, your FICO credit score can impact you. A strong FICO score gets you the best discounts on your home and auto insurance. And employers, especially those in the financial and government sectors, are increasingly using FICO scores to help determine an applicant’s trustworthiness.
Whether you are applying for a loan, cleaning up your credit, or concerned about identity theft, it’s always a good idea to know what your credit score is.
Here are the top ways to get your FICO credit score for free from all three bureaus.
Each source usually only offers access to a credit score from one of the 3 major credit bureaus: Experian, Equifax, and TransUnion. You’ll need to access a few different sources to get all 3 scores – definitely worth the effort.
1. Discover Card
Discover Card now offers free access to your official FICO score through their Discover Credit Scorecard. You don’t have to have a Discover account so you can get your score for free in a matter of minutes. The score is from Experian credit bureau.
This website delivers your FICO score and credit report for free, both from Experian.
3. Banks and credit card companies
Earlier this year, the U.S. Consumer Financial Protection Bureau released a list of 19 credit card companies and banking institutions which now offer their customers free access to their credit score on an ongoing basis.
If you have an account with one of these companies, you can see your credit score anytime you log on to the company’s website, or by checking your monthly account statements.
The 19 companies on the CFPB list are:
- 1st United Credit Union
- American Express Travel Related Services Co. Inc.
- Bank of America
- Capital One
- Chase Bank USA
- Commerce Bancshares, Inc.
- Discover Financial Services
- First Commonwealth Bank
- First National Bank of Omaha
- First Premier Bank
- Harvard University Employees Credit Union
- Polish & Slavic Federal Credit Union
- Premier America Credit Union
- Star One Credit Union
- Synchrony Bank
- US Bank
- Wells Fargo
4. Credit Unions
Here are a few credit unions now offering access to free credit scores:
- Digital Federal Credit Union
- North Carolina State Employees’ Credit Union
- Pentagon Federal Credit Union
- Pennsylvania State Employees Credit Union
Many credit unions with a limited membership offer free FICO credit scores. Check with your credit union to see if it is provided with your account.
5. Auto Loans
If you financed your vehicle through these companies, you can access to your FICO score
- Ally Financial – Ongoing access.
- Hyundai Capital America (includes Hyundai Motors Finance and Kia Motors Finance) – Quarterly access for new buyers who are recent college grads (must bring diploma to the dealer at time of purchase).
6. Student Loans
Sallie Mae offers free FICO scores to borrowers and co-signers of the Sallie Mae Smart Option Student Loan (from the 2014-2015 academic year or later).
7. Credit Applications
When applying for credit in person or over the phone, ask the person pulling your credit score to share it with you. You have as much of a right to see your credit score as they do.
In fact, it’s your legal right to learn your credit score from a lender who denies your application, or who approves your loan at a rate less than their very best.
According to the Dodd-Frank Wall Street Reform and Consumer Protection Act:
A creditor must disclose a consumer’s credit score and information relating to a credit score on a risk-based pricing notice when the score of the consumer to whom the creditor extends credit or whose extension of credit is under review is used in setting the material terms of credit – Dodd Frank Act as reported in Consumer Compliance Outlook
8. Credit Counseling
A new change in FICO policy, allows you to get your credit score from non-profit credit or financial counselors.
According to their website, the FICO® Score Open Access for Credit and Financial Counseling Program“ was designed specifically for credit and financial counselors to increase consumer understanding of FICO® Scores and their importance in everyday financial decisions.
FICO doesn’t reveal the names of participating counseling services, so make sure to check with any counseling agency you work with if they provide free FICO scores.
Here are a few well-known financial counseling services which may be helpful to you.
Additional FICO Information
MyFico does not offer a free credit score, but you can use their FICO Scores Estimator to discover the general range where your score lies. The tool asks you 10 questions and subsequently delivers an estimated range for your FICO score for free.
Alternatives to FICO Scores
You may be confused by all the companies offering free credit scores which are not FICO scores.
They are not fake scores, as some claim. They are just scores based on their own proprietary model.
What is VantageScore?
We’ve focused on the FICO scoring system because it’s the most widely used. As we’ve noted before, FICO claims 90% of the top U.S. lending institutions use FICO.
The 3 major credit reporting agencies, Equifax, Experian, and TransUnion are taking aim at that number. In a joint effort, they’ve developed VantageScore, with the goal or cutting into FICO’s market share.
Many lenders have begun to use the score as a basis for their lending decisions. The U.S. News and World Report states that “from 2014 to 2015, VantageScore credit scores were used more than 6 billion times, double the amount used from 2013 to 2014.“
There are 5 reasons why it’s worth it to obtain your VantageScore number.
- The number gives you a good idea of where your credit stands. If you’re getting an overall picture of your credit, it’s a good addition to your FICO score.
- Although their market share is considerably less, many lenders now use VantageScore.
- The services offering VantageScore usually provide helpful reports, outlining what is helping your score, and what is hurting it.
- They are totally free and usually come with free credit monitoring.
If you’re interested in learning your VantageScore number, it is available for free through CreditKarma, CreditSesame, and Credit.com.
Access Your Credit Report
Once you know your credit scores, check your credit reports as well. The information on your credit reports is what determines the basis for your credit scores. Reviewing your credit reports annually is the best way to verify the reported data is accurate and error-free.
The major credit-reporting agencies are required by law to provide you with one free copy of your credit report each year. You can obtain your reports at AnnualCreditReport.com.
Once you get your credit reports, comb through each one looking for errors, such as late payments that aren’t late, and debts that are not yours.
Mistakes happen but it’s up to you to fix them. Contact each bureau to dispute the errors and have them removed from your report.
The Bottom Line
When it comes to your credit, it’s important to protect and improve your score. The key is making payments on time, keeping your credit utilization low, and applying for new credit only when absolutely necessary. Knowing your credit score lets you know where you stand and where you can improve.
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How’s your credit score? Have you used any of these services to discover your credit for free? Let us know in the comments or on our Facebook page.
Transferring your debt to 0% interest balance transfer credit cards seems like a no-brainer right?
You’ll pay no interest for a promotional period of time so 100% of your payment will go to the principal.
Sounds like a win to me. And quite often it is a win.
But not always.
When you know all the pros and cons, you can accurately determine if transferring your debt to a balance transfer card makes sense for you.
With that in mind, I’ve put together this complete list of pros and cons to help you decide if you should transfer your balance.
Do your due diligence and weigh all the pros and cons of a balance transfer credit card to make sure it will really help you save money while paying off your debt faster.
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how you transfer your debt to a balance transfer credit card the right way.
A 0% balance transfer card can save you money
Clearly paying less interest on your credit card debt will save you money.
Just remember to run the numbers, taking into account the balance transfer fee and the promotional and standard interest rates. I recommend using a good credit card payoff calculator.
Here’s an example of good balance transfer numbers:
Say you have $5000 in credit card debt which requires you to pay 30% interest.
If you pay $300 a month, you will pay off that card in 22 months. It’ll cost you $1,549 in interest for a total of $6,549.
On the other hand, if you transfer that balance to an 18-month, 0% interest credit card your numbers would look like this:
You would pay the same $300 a month for only 17 months, paying $0 in interest for a total cost of $5,000.
Most credit card companies charge a 3% balance transfer fee, which in this example works out to $150.
That means you would save $1,549 dollars minus the $150 balance transfer fee for a total savings of 1,399 with the added benefit of paying off your debt 5 months sooner.
In the interest of balance, we’ll run the numbers on a balance transfer that doesn’t add up to such an obvious benefit once we take a look at the cons.
You can enjoy better terms and even get rewards
The credit card landscape is extremely competitive, and companies are trying harder than ever to capture your business.
Why does this matter?
If you have lousy terms with your current credit card, such as high fees or a short grace period, you can dump that credit card and enjoy better terms with someone else.
Shop for not only the best introductory interest rate but also for a better interest rate once the promotion period ends. Also look for credit card rewards on new purchases.
Here’s the thing:
If you’re going to go through with a balance transfer, make sure the new company treats you better than your current one.
Consolidate your credit card debt to make your finances simpler
Consolidating your credit card debt makes budgeting a little easier and more convenient. Just having all your debt in one place makes it easier to manage and pay down your debt. What’s more, transferring your balance to a 0% card can create space in your budget, which is ideal if you’re trying to stop living paycheck to paycheck.
The Cons of Balance Transfer Credit Cards You Need To Know
The APR is only temporary
Never forget, the banks are making a bet on you.
They are willing to give you an attractive promotional rate and they are counting on you not paying off your balance on time.
If you don’t pay off your debt before the promotional rate expires, you’ll be hit with the considerably higher revert rate. Don’t be surprised if this rate is in the 25%-30% range.
But you don’t have to get stuck with this rate. Instead, do your homework ahead of time and make sure the revert rate is not excessive.
Even better, only get a balance transfer rate if you know you can pay off the balance during the promotional period.
Balance transfer accounts can be very expensive
Typically banks charge a balance transfer fee of 1% to 3% as well as the annual service fee.
In the “Pros” section above, we showed you an example of a balance transfer credit card which saved you money.
Now let’s take a look at a balance transfer that’s not quite a slam dunk like before.
Let’s say you have a credit card with a $3,000 balance in which you are paying 20% interest.
If you are paying $140 per month, you will pay off the debt in 27 months, including $742 in interest. In total, you will pay $3,780 in this scenario.
But what if you found a balance transfer credit card offering a 12-month promotional period with 0% interest and a standard 3% balance transfer fee.
You could transfer your balance for $90 and pay down $1,680 of your debt in the first 12 months.
Your balance (initial $3,000 plus the $90 transfer fee) of $3090 would be $1,320.
Now the bad news:
The promotional period ends and the bank pumps the interest up to 30%.
If you continued paying $140 per month, you would pay off the debt in a total of 23 months. Your total out-of-pocket expenses would be $3,320, including only $204 in interest fees.
To recap this scenario:
Current credit card: You would pay a total of $3,780 over 27 months with your current credit card at 20% interest.
Balance transfer credit card: Including the balance transfer fee, you would pay $3,320 over 23 months. You would save 4 months payments and save $460 dollars.
Don’t get me wrong, $460 is a nice sum and at first glance, and it may seem worth it to do the transfer.
But when you consider all the potential cons we’ve mentioned, $460 may not be enough of a benefit to outweigh the other factors.
The point is, run the numbers and make sure the risk/reward ratio works in your favor.
Balance transfers are not always included.
Don’t assume every 0% APR offer is good for balance transfers. Nearly all of these offers are good for new purchases made on the card. But the same is not always true for balance transfers.
In other words, sometimes the 0% APR offer applies to balance transfers, sometimes it doesn’t.
I can’t emphasize this enough;
Before you consolidate your debt on a new card, check the terms and conditions carefully to ensure balance transfers are also eligible for the promotional rate.
Balance transfers can potentially hurt your credit score
Your credit score can take a hit when you open a new card. Your score will drop if the balance of the new card is over 30% of the card’s limit. Not to worry, making your payments on time will negate this penalty soon enough.
Here is another credit score consideration:
In order to minimize the risk of running up debt, many people close their old account after the balance transfer is completed.
This is wise and it is what we usually recommend.
But there is one exception:
If you’re going to be applying for a home loan in the near future, it’s probably smarter to keep the old account open because closing accounts usually hurt your credit score.
Final credit score consideration:
Closing accounts with zero balance will actually raise your credit utilization percentage, the amount of balance you carry versus the amount of credit you have available to you.
The truth is, the lower your credit utilization – the better your credit score will be. So, closing your old card could hurt your credit score.
That’s not all.
Closing an old account may hurt your length of credit history, which can also negatively affect your score.
In other words, closing your first credit card account may hurt the length of credit history and, consequently, your score. Conversely, closing a more recent account would not affect your score in this way.
If you’re not getting a mortgage anytime soon, you probably shouldn’t worry about the credit hit too much.
Paying off debt, and staying out of debt, are the bigger, more important goals here.
Late payments can kill your APR
Sadly, that enticing 0% promotional interest rate can be lost in the blink of an eye. All it takes is one late payment.
Read the disclosures carefully to make sure you understand the terms of a credit card offer. The card issuers often have the sright, to not only end the introductory period but also to hit you with a hefty penalty APR, usually in the staggering neighborhood of 30%.
You are exposing yourself to potentially more debt
As I mentioned before, the banks are betting that you won’t be able to resist making more purchases and racking up more debt.
So if you’re going to do a balance transfer, vow to yourself that you are doing so strictly to help you pay off your debt.
Cut up your cards, or hide them in a safe place, so you won’t be tempted to use them for impulse buys.
Should you get a balance transfer credit card?
Transferring your debt to a 0% interest credit card only makes sense if the purpose is to pay down debt.
Even then, there are pros and cons to consider when deciding if you should or should not get a balance transfer credit card.
The Bottom Line About Balance Transfer Pros and Cons
The truth is, if you’re considering transferring a credit card balance for any other reasons besides saving money and getting out of debt faster, you probably should not do it.
Don’t fall into the trap of thinking the balance transfer is all that needs to be done to get your finances back on track. If you don’t have a plan to pay down debt and stay out of debt, a balance transfer card will probably be counter-productive and lead to more debt.
But the bottom line is this:
When it’s done the right way as part of a debt reduction plan, and only after you have run the numbers and read the terms and disclosures, a balance transfer credit card can be a very effective tool to save money and pay off debt faster.
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Related: Busted! The Myths of Balance Transfer Credit Cards
Pay Off Credit Cards Sooner With Bi-Weekly Payments (Saves $1000’s)
Many people overspend on their loved ones during the holidays, even going into “holiday debt” to do so.
If that sounds like you, don’t worry – you’re not alone.
In fact, a recent survey found Americans racked up an average of $1,054 in debt this past holiday season.
We want to help, so here are seven detailed tips to eliminate your holiday debt fast.
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CardKangaroo and Raise come in, offering to buy your unused cards at a discounted rate.
How much of your balance can you get? Your mileage may vary, but in general, expect to get roughly 75% – 85% of your gift card balance. For example, I ran a few cards through CardKangaroo’s system and this is what it returned:
Of course, nothing is better than using the full amount. So in this case, $50 would be better spent at Target buying something I already have to spend money on, such as groceries or hygiene products. That’s a smarter financial choice over taking the 86% offered by CardKangaroo.
But sometime’s you just need the cash or the store card doesn’t offer anything you need. In those instances, a cash-for-card site could come in handy.
2. Do a Quick Search For Unclaimed Money
Searching for unclaimed money is so fun it’s borderline addictive. What can be more fun than finding out how much money you are owed and then claiming it?
With an estimated $42 billion in unclaimed funds, there’s a decent chance you will discover some money in your name.
How to search for Unclaimed Money:
Check out MissingMoney.com and Unclaimed.org and do a search. You just enter your name and the state where you live. Be sure to search for your name using all the states you’ve lived in.
Here’s what happened when I ran a search for myself on Unclaimed.org:
Admittedly, the dollar amount owed is not too impressive in my case. But I’ll be receiving a check soon for very little effort.
Side note: It’s also fun to find money for family members. It’s exciting to call them and tell them the good news.
A friend of mine even searches for her favorite celebrities just for fun (Psst, Luke Perry if you’re reading this, you’ve got a check waiting for you).
3. Exchange Your Frequent Flyer Miles and Reward Points for Cash
I’ admit this isn’t the most exciting way to use your points, but it makes a lot of sense.
Many credit card companies let you take your reward points and turn them into cash to pay down the debt on those cards. Some of the more popular cards with this debt saving feature are:
Keep in mind, creditors usually have their own formula outlining how many points equal a dollar.
- Chase Ultimate Rewards: 100,000 points = $1,000
- AMEX Membership Rewards: 100,000 points = $600.
It’s a great idea to log in to your account or talk with a representative about taking advantage of this option.
Even if you had plans for using the points for a vacation, it’s still wise to use the points to pay down the debt because the interest charges are expensive and really add up over time.
4. Sell Your Stuff
You’d be surprised how easily you can sell your unused items online.
Some of the more popular items which sell fast and garner a nice price are unused tech, luxury clothes, and furniture.
For example, a new or refurbished iPhone 6 is worth about $250 on eBay while the used model is grabbing around $150-$180.
Look around your home and see what you can part with to pay down your holiday debt.
Here are some marketplaces to help you get rid of your stuff for cash.
- Unused Tech: Sell at eBay, Decluttr, and Gazelle
- Luxury Clothes: Sell at TheRealReal, Poshmark
- Furniture and more: Sell at LetGo (App), OfferUp (App), Facebook Marketplace
5. Take Advantage of Insurance Dividends, Discounts, and Perks
Many insurance companies are mutual companies owned by shareholders, so they are required to give out a check or dividend at the end of the year.
These checks average $100 to $200 which could go a long way towards paying off your holiday debt.
Check your policies and see if you’re eligible for other discounts or rewards. For example, most insurance companies offer discounts. For example, good driver discounts average about 5% of the cost of your premium. The discount applies to every driver on the policy and you can receive the reward twice a year.
Health insurance companies also offer rewards for staying active.
United Healthcare offers $20 per month in reimbursements for your gym membership fees.
Even better, Oscar gives up to $400 towards gym dues for its members and up to $200 for a covered spouse.
Oscar even offers $1 a day for every day you do your 10,000 steps, up to $20 per month. That’s $240 for the year — a significant amount of money to throw at your holiday debt.
6. Make a Budget
Creating a budget sounds about as fun as going to the dentist. But just like the dentist helps to give you healthy teeth, a solid budget helps to give you financial fitness.
A detailed monthly budget is a great first step to eliminating debt and creating financial security.
Just keep it simple to start. Grab a piece of paper, or create a spreadsheet if you’d rather, and write down your income and all of your expenses. When you see what you spend you can identify the right places to trim.
While it’s popular to cut back on smaller items like your daily coffee, look for bigger opportunities if you really want to make a positive impact on your holiday debt.
How to trim your spending:
Get insurance quotes and see if you can save money with another company.
Call your credit card companies and see if they will lower your rates. If not, consider moving your high-interest cards to a 0% interest balance transfer credit card or a lower interest personal loan. Even Financial can help you consolidate up to $100,000. You type in your info, and they compare the interest rates from several lenders and let you know your best option. The information is free. Rates start at 4.99% and repayment terms are two to four years.
Unplug appliances to save money on your utility bill. This is especially true for older appliances which aren’t as energy efficient as newer models.
7. Make a Plan to Get Out of Debt
Combine your budget with a logical strategy to get out of debt.
Unbury.Me is a helpful resource to get you headed in the right direction. You type in your debt amount, your cards, and your interest rates and they’ll give you a free plan to get out of debt.
You can choose between the debt avalanche or debt snowball methods.
Economists usually recommend the avalanche method because it means paying off the credit card debt with the highest interest rates first. This method saves a little money and pays off debt quicker for those who are disciplined.
With the snowball method, you pay off the debt accounts with the lowest balance first. Once that account is paid off, take the previous monthly payment and apply it to the account with the next-lowest debt.
The snowball method has a higher success rate than the avalanche method. Like losing weight, most people are more motivated when they quickly see progress.
Whatsthecost.com is a similar free resource offering snowball method plans to become debt free.
Whichever method you choose, be consistent with your payments and celebrate milestones every time you pay off an account. Remember, getting rid of debt should be fun.
Conclusion: How to Get Rid of Holiday Debt Fast
We applaud your kind spirit if you have holiday debt after giving to your loved ones. While your generosity is admirable, take steps this year to avoid repeating the debt cycle. Consider opening a holiday savings account and saving incrementally throughout the year to achieve your goal. Your future self will thank you.
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One of the biggest frustrations that come with paying down your credit cards, is that a large amount of your money goes towards the interest on the account.
With so much money tied up in interest, it’s very difficult to make headway and ultimately pay off your cards.
And if you aren’t able to pay more than the minimum payment, paying off your debt is next to impossible.
Enter bi-weekly credit card payments.
By using a bi-weekly payment strategy, you can direct more money towards the principal debt, and less money towards the interest, all while paying the minimum payment each month.
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daily periodic rate – a daily interest rate which is then added to the previous day’s balance.
This means interest is compounding on a daily basis. As a result, your total balance rises each day as well.
If you make your payment at the end of the billing period, you’re paying interest on the full balance for the entire billing period.
On the other hand, if you pay more often, you lower your daily balance and therefore you pay less interest each month.
“When you make a payment early in the billing cycle, the average daily balance goes down which means you pay less in interest,” says financial advisor Teri Adams.
What are the benefits of bi-weekly credit card payments?
The benefits of bi-weekly payments are striking,
1. Pay less
With micropayments, you pay less interest and cut your repayment time considerably.
2. Pay off faster
Because more money is going to the principal, you pay off your debt much faster than if you strictly made a single minimum payment each month.
3. 13 annual payments instead of 12
If you make half payments every two weeks, you end up paying 26 half payments, or 13 full payments a year. That’s one additional payment each year over the traditional monthly billing schedule.
Financial advisors have long recommended this trick to homeowners as a way to eliminate some of the interest paid, cutting a 30-year mortgage down to a 23-year mortgage.
If this trick works for homeowners, why not use it to pay down credit card debt as well?
You can spread out your debt each month and not have to stress about coming up with the money as the due date nears.
4. Potentially improve credit score
Most credit card issuers report your outstanding balance to the credit bureaus every month. If your credit card company reports on the 1st, but you usually pay your balance on the 15th, your account would show a higher balance on your credit report.
Making bi-weekly payments keeps the balance lower which could, in turn, improve your credit score.
5. Reduces financial stress and keeps you motivated.
Nothing is as motivating as progress. Seeing your debt balance consistently getting smaller improves your confidence and keeps you focused on your ultimate goal of eliminating your debt completely.
Will bi-weekly payments work for everyone to pay down credit card debt?
A bi-weekly payment strategy is most effective with large balances that carry a high-interest rate. If your balance is small, bi-weekly payments won’t make much of a difference for you.
How much can you save?
How much you save really depends on when you submit your payment.
For example, a balance of $10,000 with an 18% interest rate calculates out as a $5 periodic daily rate on the first day of the billing schedule. Then, every day thereafter, the interest compounds. So you could be paying $150 or more in a given month.
If you made two bi-weekly payments, each for half of the minimum payment, you could cut that interest in half, with the rest going to the balance.
Of course, this strategy works even better if you make more than the minimum payment each month.
“I made a mini-payment every payday,” says Gina Alvarez, who recently paid off nearly $14,000 in credit card debt. “I tried to add a little extra each time, even if it was only $5 or $10. It may not sound like much but it adds up and it was fun seeing the balance get smaller each time.”
What you need to know
Before you start, check with your credit card issuers to make sure they allow for multiple payments each month.
This is becoming less of an issue as nearly all the major banks allow for multiple payments each month.
Terms vary from bank to bank though, so it’s still wise to make sure there are no limitations with your credit card companies.
No sign-up necessary. If you bank online, you can easily select which account you are paying and verify that it’s applied correctly.
You won’t receive a statement each time you make a payment, so it’s best to pay the bill online to track your payments and your updated balance.
Decide how often you want to pay.
Many people find it easiest to pay on payday so they don’t have to worry about paying the entire amount on the due date.
So let’s say you have a $200 minimum payment. If you get paid bi-weekly, send $100 to your credit card issuer every two weeks on payday. If you get paid weekly, submit $50 every week on the day you get your paycheck.
If your bank allows it, you could even make payments every three days, or even daily. It all depends on your comfort level and what works best for you.
Make sure the bi-weekly payments will add up to, at the very least, the minimum payment required each month.
For an additional benefit, continue to make the same payment each month, even as your balance, and minimum payment, goes down. That ensures even more of your money goes towards the principal balance and saves you more in the long run.
The beauty is you are paying the same amount each month, but you’re reducing your debt much quicker because more of your money is going towards the principal debt, not the interest.
Other ways to cut down interest
Pay more than the minimum payment.
Paying more than the minimum is the best way to cut down credit card interest. Combining that with bi-weekly payments slashes your interest even more and reduces the time needed to pay off your debt.
Pay on the first day.
If you can afford it, pay at least the minimum payment on the first day of the billing cycle to eliminate as much interest as possible.
If that’s not possible, then make micropayments according to a schedule that works best for you. Just make sure you pay at least the minimum payment each month.
Apply windfalls to your principal.
Anytime you get a windfall, such as a bonus check from your employer or an IRS refund, apply it to your balance for a huge impact on your debt reduction results.
One way to create savings is to use Trim, which automatically finds where you’ve overpaid on utility bills get that money back for you. They then contact those companies on your behalf, secure the overpayment, and deposit it into your savings account. (Trim review)
Stop using the credit card.
It doesn’t make much sense to apply the micropayment strategy if you continue adding charges to the card.
Cut all the cards, or put them in a safe place in your home, so you’re not tempted to use them for impulse buys.
Consolidate your credit card debt.
If you have a large amount of high-interest debt, and you don’t think you can make progress with your monthly payment, you may want to consider consolidating your debt.
See if a balance transfer card with 0% APR offer works for you. Here is an article about who should, and who should not get a balance transfer credit card.
A personal loan is another option for consolidating your debt, as they typically have lower interest rates than those of credit cards.
The Bottom Line
Utilizing a bi-weekly payment schedule is a great way to minimize the credit card interest you pay.
If you have multiple cards with balances, continue paying the minimums for each card, but choose one card you want to pay off first. You can pay off either the card with the highest interest rate, which saves more money, or the card with the lowest balance and pay it off faster.
Then make your bi-weekly payments each month, making sure to pay at least your minimum payment by the due date.
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