To use a 0% APR credit card to pay off your debts, follow these steps:
1.) Transfer your existing credit card balances to a new 0% APR credit card.
2.) Continue to pay down your balance as usual. But instead of paying only the minimum each month, also pay the amount of interest you would have paid with your other card. This will reduce your debt even quicker!
3.) Watch your introductory period. When it's about to expire, shop around for a new 0% APR credit card and transfer your balances again.
4.) Continue this cycle until you become debt free.
0% APR Credit Cards vs. Debt Consolidation
So you're considering a debt consolidation loan instead of a 0% APR credit card. Let's see how much you could save and how much quicker you could pay off your debt using the method shown above. Here's an example:
Assume you have an existing credit card debt of $15,000. You would 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 Number of Payments: 70
Now let's compare paying off this same debt using 0% APR 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 Interest Paid $ 0 Total Amount Paid $15,000 TOTAL # Payments Made: 50
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 before you planned!
A Word of Advice
Although using 0% credit cards to pay down your debt is a great option, try not to switch credit cards too frequently. Doing so can negatively impact your credit report. Shop around for 0% APR credit cards that have the longest introductory periods and the lowest APRs (after the intro period) to buy you a little breathing room. Also, don't fall into the trap of spending again on your old credit cards. Either close them or deactivate them so that you don't get yourself into further debt. And don't overspend with your new 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.
