Electronic payments are wonderful. Whether you use a credit or debit card, your phone, Venmo, PayPal, or a host of other electronic options, the ease, convenience, and record keeping far surpass carrying around a wad of cash. While credit cards are part of this electronic payment universe they do possess potential pitfalls the consumer should be wary of. It’s easy to overspend and not have the funds to pay off your balance every month. Not paying off the balance exposes you to ridiculously high interest rates, some of which are over 20%. High credit card balances are a drag on your credit score. Some people use their credit card as their emergency fund. The refrigerator dies or your car’s transmission fails and you pull out the credit card. Maybe there is a large unexpected medical bill and again, out comes the credit card. After a while that credit card balance on your one card, or several, looks imposing and you wonder if you’ll ever get out of debt. If you are serious about getting out of this credit card debt it may be time to play the credit card shuffle.
The credit card shuffle is simply using the credit card industry to your advantage rather than your continual detriment. The first rule of the game is that you must stop putting new spending on credit cards. The credit card industry actually helps you with the next step, The Balance Transfer Offer. These offers may come in the mail, or you may see one on social media. You can check online and see if your credit card has a balance transfer offer. A credit card company offers to transfer a balance from another credit card company to their card. This offer will come with a low interest rate (sometimes even 0%), and a number of months at this rate (9-18 months are typical). There will often be a balance transfer fee (usually 3-5% of the transfer amount, but some offers have no transfer fee). They may transfer the balance to a card you already have or they may give you a new card. The industry wants to keep you in debt to their particular company as long as possible (that’s why minimum monthly payments are so low). If they can hook you into transferring a balance to their card, they are hoping you will not pay if off in the timeframe of the offer. Then you will continue to pay their high interest rate by making minimum payments.
Be aware that the better your credit score is, the better balance transfer offers you will receive. Take the best offer available to you to get started. Perhaps the offer is 0% interest for one year with a 3% transfer fee. You have now effectively lowered your interest rate on this debt from over 20% to 3% for the year. You now have a year to pay down, and hopefully, pay off this debt. But what happens if toward the end of the year you still have not paid off the debt. Here’s where the credit card shuffle continues. It’s time for another balance transfer, maybe even back to the credit card the original debt was on. You can continue this process until all the debt is paid off. Remember the balance transfer offer is the enticement to hook you. You’re just taking the bait but not setting the hook.
There are some additional rules you need to follow for the credit card shuffle to work successfully. Once you have transferred a balance you cannot put new debt on this card. If you do, your monthly payments will go toward the new debt first and not the transferred amount, defeating the purpose of the transfer. Also, the new debt will have the regular interest rate for that card. The only debt on this card should be the balance transfer. If the debt is not paid off yet, make the next balance transfer just before the time period expires. If your 0% interest is for one year, you should make the next balance transfer just before that year runs out.
Credit card debt can quickly spiral out of control and you begin to wonder how you got in this mess. But with some fiscal discipline, it’s a mess you can work your way out of over time. The credit card shuffle may be just the tool to help you eliminate your credit card debt.