so let's say for example you have right now a $5,000 credit card okay that's the balance on this card you're paying 25% interest annually and that's about a $100 minimum payment every single month you're actually responsible for paying now all of a sudden by Magic you actually get an offer in the mail from a balance transfer credit card and you're like yo it must have been my luck it's not luck it's marketing your information has been sold thus the company knows about it and thus now they're sending you offers Direct offers to you now the offer says this we're going to give you 21 months to transfer your debt over to us and you get to pay it off in 21 months and we won't charge you any interest whatsoever for those first 21 months and you might say well this sounds like a great deal over here I'm paying for example a 100 bucks per month in interest but over here I'm going to be paying Z in interest for the first 21 months this saves me a bunch of money and the only catch is you have to pay a 3% fee for the entire balance transfer now that's not a big deal because right now you're paying $100 as a minimum payment and when you take 3% of 5,000 that's only about $150 or so so it's really not a big deal so why is this attractive what is the problem with it and what exactly is a balance transfer credit card I'm going to go into all the details in this video now do me a favor guys and ask you smash the like button I appreciate it a ton now the first thing is this guys okay a balance transfer credit card I'm not going to complicated it's basically just a credit card that is designed to actually get people that are in debt in some way to transfer their debt over to this credit card and potentially that company be the one that's actually going to get all that interest from you going further it's kind of like a long-term investment okay they're actually betting that you're not going to to pay it off in that introductory period and the TR going to keep the balance and you're going to continue to pay them and pay them and pay them and yes it could actually turn against them if you actually pay but for the most part they get 3% outright and if you don't pay them well you might become a customer for something else you might get another credit card with them or another product or a loan or a mortgage whatever it is okay they have a customer a prospect to get other things that is what a balance transfer is actually good for it now what is the problem here Tommy I still don't understand okay they're giving me an offer if I'm smart and I take advantage of it I walk away without paying any interest isn't that great well the answer is this okay you might think that you're actually going to walk away dilly dally free okay but what happens is usually this what's actually going on when you actually open up a Balan transfer credit card whether it's an offer whether you've been pre-approve approval whatever you just basically you basically just opened up another line of credit that is what's actually going on so let's say for example you have credit card a you owe $5,000 a year and now you actually get pre-approved for a balance for a credit card and then you basically apply and then say hey we're actually going to give you a balance of or a credit line of $7,000 and you say well that's awesome that's more than I had over here so now you say I want to transfer the balance from credit CR card a over to credit card B your new card the balance transer card and by the way it doesn't have to be a credit card it could also be for example Hospital loans it could be any debt overall even Collections and they could actually just basically pay that off by sending them a check and basically now you're in here and the debt is over here that's the whole idea okay so what happens is this okay you say I want to transfer balance from this card over to here they say okay just pay us a 3% fee you pay the 3% fee that's $150 they sent over a check to your credit card okay now that's fully paid off the balance on credit card a is basically zero the balance on your new balance crit card is basically um $5,000 or whatever the balance here basically was that's the idea now what actually happened here okay you went from having a credit line of $5,000 to having a credit line of basically $122,000 remember so if you got in value so far I'm going to ask for a favor subscribe to the channel because only like 20% of the people that watch or actually subscrib so go ahead and subscribe right now cuz I have a lot more content and having a credit line of basically $112,000 remember they actually gave you $7,000 and you have 21 months to pay that off okay without any interest and you might think this is awesome okay what I'm going to do is basically pay this off and never look back but what usually happens is this and I'm sad to say this okay but what usually happens is this okay you have credit card a now which is basically empty and you have credit card B all right and what happens is basically you say well this one is free you start using it again okay and before you know it this goes right back up to 5,000 or 3,000 or 4,000 and this one you're barely making any real payments or any Dent to it remember they gave you 5,000 the balance transfer credit card is still a credit card you can still use it to buy stuff and it still gave you $2,000 extra dollars and you actually need it so now you might use that for some things else okay and before you know it the 21 months have gone by and now you owe over $110,000 overall you owe credit card a you also go owe credit card B credit card B is saying yep we got them now we're actually collecting interest payments every single month from you and credit card a is saying well he paid it off but now he's back to pay now so I guess we win also so what is the right way to go about this and Tommy how have you ever done this the answer is I owed about wait for it $133,000 in credit card debt and I actually used balance transfer credit cards to actually help me clear all the debt now I was not one of the people that actually went ahead and basically clear credit card a transfer to credit card B and then build up a balance back in credit card a what I did was this I follow this three step system okay the first step is you want to set for yourself some really real istic goals based on how long they're actually going to give you interest free so overall let's say I actually owe $5,000 right that's how much I actually owe I'm going to divide this number by how many months you're actually going to give me so divided by 21 in this in this case by the way what credit card am I actually talking about I'm actually talking about the city Simplicity balance transfer credit card that offer 21 months to pay interest free 0% APR and even 12 12 months to actually buy things and not get charged any interest obviously they're doing this for a reason you transfer the balance over you get 21 months to pay it off but you also get 12 months to buy other crap and actually build up even a bigger balance don't be stupid don't fall for that okay so now I know that per month I need to pay about $240 to be debt free in21 months okay that's the idea and that's how I would actually do it now for me personally I would say well if if this is actually very doable I would stick to it if it's actually a little bit less than I can basically do I would actually lower it and basically even if I end with the balance okay at least I was actually realistic okay now for me personally I actually paid more towards it to be able to pay it off a lot faster I actually paid off $133,000 in credit card debt in 12 months okay because I actually fell for that trap where discover sent me a credit card and they were like Hey we're going to give you I think 18 months of purchase free interest and I went crazy okay I went crazy and what happened is I maxed out everything then it was like um I think it was 18 months right so I spent like 6 months doing some crazy stuff and then I had 12 months and I was like yo I need to pay all this in 12 months and I basically was able to cover everything in 12 months I think at a point I to transfer balance over to the balance transer card but I was actually able to do it which actually saved me a ton of money but it was only because I was smart so step number two is basically once you transfer the balance well close credit card a all right close it because you don't want to be at risk at rebuilding this actual um credit line and to actually get into double the debt you actually want to clear that and then lastly all right the balance CH credit card don't use it to get into more debt only use it to actually pay off the debt fast and be done with it and once you're done with all the debt my advice would be a 100% just close to to credit cards overall and don't get back into those problems okay ever since I became debt free and I don't have any credit cards I have no method no way of getting into debt anymore so it's not something I worry about but as long as you have that possibility that availability to watch you say I'm going to use this credit card for this or that for this emergency or that emergency you're always going to be going back into debt and going right back into where you landed I think the Bible says a dog is always going to return to his vomit and that's just disgusting okay so if debt is actually getting you into trouble over and over again and you're going back to it well that's just stupid and nonsense okay you actually want to avoid that so yes okay understand what they're trying to do they're trying to get you to bring your balance over to hopefully spend more money to be trapped with them and to pay them a bunch of interest but if you're smart what you're actually going to do is say I'm going to use you and I'm going to take advantage fully I'm going to close credit card a and once I'm done with you I'm also going to close you and I'm going to be done with it so set for yourself achievable goals so you're actually able to do this as fast as possible guys thanks for watching as always like subscribe hit the Bell sh notified there are obviously other balance of credit cards out there so if you know a few of them comment them down below if you want a full video on the offers out there let me know and I'll actually get to work up here is another video and this video is actually made possible by the supporters over at patreon here is a list of their names I appreciate it a ton if you actually want to join us on patreon support the channel the link is going to be down below thanks for watching as always like subscribe hit the Bell so you get notified peace
so let's say for example you have right now a $5,000 credit card okay that's the balance on this card you're paying 25% interest annually and that's about a $100 minimum payment every single month you're actually responsible for paying now all of a sudden by Magic you actually get an offer in the mail from a balance transfer credit card and you're like yo it must have been my luck it's not luck it's marketing your information has been sold thus the company knows about it and thus now they're sending you offers Direct offers to you now the offer says this we're going to give you 21 months to transfer your debt over to us and you get to pay it off in 21 months and we won't charge you any interest whatsoever for those first 21 months and you might say well this sounds like a great deal over here I'm paying for example a 100 bucks per month in interest but over here I'm going to be paying Z in interest for the first 21 months this saves me a bunch of money and the only catch is you have to pay a 3% fee for the entire balance transfer now that's not a big deal because right now you're paying $100 as a minimum payment and when you take 3% of 5,000 that's only about $150 or so so it's really not a big deal so why is this attractive what is the problem with it and what exactly is a balance transfer credit card I'm going to go into all the details in this video now do me a favor guys and ask you smash the like button I appreciate it a ton now the first thing is this guys okay a balance transfer credit card I'm not going to complicated it's basically just a credit card that is designed to actually get people that are in debt in some way to transfer their debt over to this credit card and potentially that company be the one that's actually going to get all that interest from you going further it's kind of like a long-term investment okay they're actually betting that you're not going to to pay it off in that introductory period and the TR going to keep the balance and you're going to continue to pay them and pay them and pay them and yes it could actually turn against them if you actually pay but for the most part they get 3% outright and if you don't pay them well you might become a customer for something else you might get another credit card with them or another product or a loan or a mortgage whatever it is okay they have a customer a prospect to get other things that is what a balance transfer is actually good for it now what is the problem here Tommy I still don't understand okay they're giving me an offer if I'm smart and I take advantage of it I walk away without paying any interest isn't that great well the answer is this okay you might think that you're actually going to walk away dilly dally free okay but what happens is usually this what's actually going on when you actually open up a Balan transfer credit card whether it's an offer whether you've been pre-approve approval whatever you just basically you basically just opened up another line of credit that is what's actually going on so let's say for example you have credit card a you owe $5,000 a year and now you actually get pre-approved for a balance for a credit card and then you basically apply and then say hey we're actually going to give you a balance of or a credit line of $7,000 and you say well that's awesome that's more than I had over here so now you say I want to transfer the balance from credit CR card a over to credit card B your new card the balance transer card and by the way it doesn't have to be a credit card it could also be for example Hospital loans it could be any debt overall even Collections and they could actually just basically pay that off by sending them a check and basically now you're in here and the debt is over here that's the whole idea okay so what happens is this okay you say I want to transfer balance from this card over to here they say okay just pay us a 3% fee you pay the 3% fee that's $150 they sent over a check to your credit card okay now that's fully paid off the balance on credit card a is basically zero the balance on your new balance crit card is basically um $5,000 or whatever the balance here basically was that's the idea now what actually happened here okay you went from having a credit line of $5,000 to having a credit line of basically $122,000 remember so if you got in value so far I'm going to ask for a favor subscribe to the channel because only like 20% of the people that watch or actually subscrib so go ahead and subscribe right now cuz I have a lot more content and having a credit line of basically $112,000 remember they actually gave you $7,000 and you have 21 months to pay that off okay without any interest and you might think this is awesome okay what I'm going to do is basically pay this off and never look back but what usually happens is this and I'm sad to say this okay but what usually happens is this okay you have credit card a now which is basically empty and you have credit card B all right and what happens is basically you say well this one is free you start using it again okay and before you know it this goes right back up to 5,000 or 3,000 or 4,000 and this one you're barely making any real payments or any Dent to it remember they gave you 5,000 the balance transfer credit card is still a credit card you can still use it to buy stuff and it still gave you $2,000 extra dollars and you actually need it so now you might use that for some things else okay and before you know it the 21 months have gone by and now you owe over $110,000 overall you owe credit card a you also go owe credit card B credit card B is saying yep we got them now we're actually collecting interest payments every single month from you and credit card a is saying well he paid it off but now he's back to pay now so I guess we win also so what is the right way to go about this and Tommy how have you ever done this the answer is I owed about wait for it $133,000 in credit card debt and I actually used balance transfer credit cards to actually help me clear all the debt now I was not one of the people that actually went ahead and basically clear credit card a transfer to credit card B and then build up a balance back in credit card a what I did was this I follow this three step system okay the first step is you want to set for yourself some really real istic goals based on how long they're actually going to give you interest free so overall let's say I actually owe $5,000 right that's how much I actually owe I'm going to divide this number by how many months you're actually going to give me so divided by 21 in this in this case by the way what credit card am I actually talking about I'm actually talking about the city Simplicity balance transfer credit card that offer 21 months to pay interest free 0% APR and even 12 12 months to actually buy things and not get charged any interest obviously they're doing this for a reason you transfer the balance over you get 21 months to pay it off but you also get 12 months to buy other crap and actually build up even a bigger balance don't be stupid don't fall for that okay so now I know that per month I need to pay about $240 to be debt free in21 months okay that's the idea and that's how I would actually do it now for me personally I would say well if if this is actually very doable I would stick to it if it's actually a little bit less than I can basically do I would actually lower it and basically even if I end with the balance okay at least I was actually realistic okay now for me personally I actually paid more towards it to be able to pay it off a lot faster I actually paid off $133,000 in credit card debt in 12 months okay because I actually fell for that trap where discover sent me a credit card and they were like Hey we're going to give you I think 18 months of purchase free interest and I went crazy okay I went crazy and what happened is I maxed out everything then it was like um I think it was 18 months right so I spent like 6 months doing some crazy stuff and then I had 12 months and I was like yo I need to pay all this in 12 months and I basically was able to cover everything in 12 months I think at a point I to transfer balance over to the balance transer card but I was actually able to do it which actually saved me a ton of money but it was only because I was smart so step number two is basically once you transfer the balance well close credit card a all right close it because you don't want to be at risk at rebuilding this actual um credit line and to actually get into double the debt you actually want to clear that and then lastly all right the balance CH credit card don't use it to get into more debt only use it to actually pay off the debt fast and be done with it and once you're done with all the debt my advice would be a 100% just close to to credit cards overall and don't get back into those problems okay ever since I became debt free and I don't have any credit cards I have no method no way of getting into debt anymore so it's not something I worry about but as long as you have that possibility that availability to watch you say I'm going to use this credit card for this or that for this emergency or that emergency you're always going to be going back into debt and going right back into where you landed I think the Bible says a dog is always going to return to his vomit and that's just disgusting okay so if debt is actually getting you into trouble over and over again and you're going back to it well that's just stupid and nonsense okay you actually want to avoid that so yes okay understand what they're trying to do they're trying to get you to bring your balance over to hopefully spend more money to be trapped with them and to pay them a bunch of interest but if you're smart what you're actually going to do is say I'm going to use you and I'm going to take advantage fully I'm going to close credit card a and once I'm done with you I'm also going to close you and I'm going to be done with it so set for yourself achievable goals so you're actually able to do this as fast as possible guys thanks for watching as always like subscribe hit the Bell sh notified there are obviously other balance of credit cards out there so if you know a few of them comment them down below if you want a full video on the offers out there let me know and I'll actually get to work up here is another video and this video is actually made possible by the supporters over at patreon here is a list of their names I appreciate it a ton if you actually want to join us on patreon support the channel the link is going to be down below thanks for watching as always like subscribe hit the Bell so you get notified peace
in 2023 the total credit card balances in the US reached an all-time high of over $1 trillion with the average American's credit card debt now being over $6,000 fueled by prices that have been increasing over time along with increased interest rates now make it much more expensive to carry that balance as well as it makes it harder to pay that balance down and for this reason I wanted to talk about some strategies and tips that people can start to do to start paying down that credit card debt so you can reach that goal of becoming debt-free when it comes to trying to get out a credit card debt one of the first steps that's simple to do is to have a clear understanding of your credit card debt often times people who are overwhelmed with credit card debt don't realize how much debt they have or how much the interest from their credit cards are costing them and in order to do this you first need to make a list of all that credit card debt which includes a list of all your credit card balances the due dates what the minimum payments are for each one and then last the APR s or interest rates for each one of those balances now once you have this information together you should now have a better understanding of the full scope of your debt and you can now start to look into some methods and different options and strategies that we'll be going through to work on paying off that debt getting into the first strategy to tackling your debt we have the snowball method the strategy for this method is to focus on paying off your credit card debt with the smallest balances first and slowly working your way up to getting that largest balance paid off so to get it started let's say you had three card balances one for $1,500 with a 177% APR or interest rate then $7,000 and 26% and then $3,000 and 22% you're first going to list your credit card balances out and order from the smallest to the largest balance then you want to make the minimum payments for all your credit card balances except for the smallest balance as the smallest balance is the one where you'll want to put as much money as you can every single month to towards paying it off and once that lowest debt is paid you'll take the money you use to pay it off and then start to pay down the next lowest balance and repeat the cycle now it's extremely important to be sure that you're making those minimum payments towards those other balances as you don't want to be paying late fees or Worse hurting your credit score and if you don't know when it comes to your credit score payment history is one of the most important factors since it makes up 35% of your total credit score so those ontime payments play a big role in determining your score all right so jumping back to the car balances you might have been wondering why I only focused on the balances and I didn't mention anything about the interest rates and that's because the snowball method ignores interest rates and while a higher interest rate would make that debt worse because it's more costly it also makes more sense mathematically to go after the balance with the higher rate but we'll talk more about that shortly the purpose of the snowball method is more of a behavioral and psychological strategy to keep you motivated and consistent towards paying off your debt because you're able to see the progress quicker by getting those small wins lowering your total amount of balances as well as building that momentum towards becoming debt free okay so for the next strategy to tackle your debt we have the Avalanche method and unlike the snowball method where you target the lowest balance with the Avalanche method the focus is on the interest rate coming back to the three card balances from before we want to take these balances and a PRS and organize them in order from the highest interest rate to the lowest and since the interest rate is the only thing that we care about the balance can be ignored similar to the previous method you want to be sure that you're paying the minimum payments for all your balances to avoid any additional fees and late payments as for the payment with the highest interest rate you're going to try and pay down as much as you can every single month and once it's paid off you move down to the next highest interest rate now since this approach is is focused on interest rates the benefit of the Avalanche method is that you're saving money on those interest payments over time if you're targeting a credit card balance that may have an interest rate of 24% first even if that balance is your largest then ignoring a card with a smaller rate of like 17 or 18% and paying that down later on by staying consistent throughout the process the Avalanche method could end up being your cheapest way to get out of debt but if that 24% interest rate balance is massive it could take a while or a few years to pay off then that can make it really tough as working to pay down for a long time the first balance out of your other credit card debts could be a demotivator since you aren't getting the faster wins to help you feel more accomplished ultimately when it comes to deciding whether to go with the snowball method or Avalanche method it'll come down to your particular situation and whichever method makes sense for you personally I believe if you're someone with credit card balances that aren't High because maybe there was an unexpected expense that popped up where you temporarily needed to get yourself back on your feet and you're back to normal financially then it could be possibly better to go with the Avalanche method as your payments could be more manageable since the balance is lower and your timeline for paying off your debt likely won't be as long but on the other hand if you have just had problems financially for some time have had some big setbacks or you're just learning more about personal finance then it could make more sense to go with the snowball method in reality it's unfortunate that we aren't taught about personal finance and Credit in school while in most cases we have to learn on our own with the majority of it being through our own mistakes but that's okay for this reason I think for most people the snowball method approach would be the best because of the psychological benefits from seeing that progress quicker But whichever road that you decide to take the most important part is that you're making progress towards paying off your credit card debt and becoming free of that debt so next let's get into some other options and tips to be aware of and to understand to help with handling credit card debt this one here I think is more of a short-term solution but I don't believe a lot of people are even aware of it and that's taking advantage of getting a credit card with a 0% introductory APR offer that also includes 0% balance transfers depending on how much debt you have doing this could potentially save you a few hundred to a couple thousand by simply moving over your debt to a credit card that has a 0% introductory APR and balance transfer will allow you to pay off your credit card debt without any interest this is a form of what you call debt consolidation and the way debt consolidation works is that you be taking the debt that you have which could be from multiple accounts with your different interest rates and different balances and then you're combining it or also called consolidating it into one single loan or credit card in this case and it would have its own single interest rate to keep it simp simple just imagine in the case where you have two cards with a balance of $3,500 each so that's $7,000 in total and they both have an interest rate of 25% that balance in a year would be costing you around $1,750 by moving that balance over to a 0% APR card so for as long as the term offer is for that card that balance will be interest free during that period so not only are you able to save a good chunk of change but that also allows you to really start to work towards knocking that balance down without worrying about fighting against those interest fees every single month all right so while this does sound great there are a few things you need to be aware of and one is that depending on the card these 0% APR and balance offers can range from 6 to 18 months depending on the card and once that period's over the interest rate will jump right back up to a higher rate also it's extremely important to know that with 0% APR cards is that if you manage to have a late payment some issuers will take away that 0% rate and charge you a penalty rate which can sometimes be as high as 30% so you really have to be on top of your payments as this could derail your whole debt payoff Journey also consider when doing a balance transfer you'll have to pay a balance transfer fee which in most cases will be between 2 to 5% of the amount that's transferred and lastly while this can create a great opportunity for you to be able to hammer down those payments towards your debt it can be more harmful for some people what you don't want to do during this 0% interest time period is slack off on paying your debt just because you feel like you gained some more time to push out your debt payments as this can push you down into a debt spiral this next option which isn't talked about much it can help you with getting control of your debt and that's reaching out to your credit card provider to lower your interest rate surprisingly enough by getting in touch with your credit card issuer and explaining your current situation they could could be willing to negotiate some type of payment terms with you or what's called a credit card hardship program and for this type of hardship program the card issuer could wave the fees as well as lower your interest rates over a specific time period typically shorter term like 3 to 12 months now these terms will vary depending on the issuer and your individual circumstances but there are many issuers that offer some type of program like Chase MX Capital One and many others which you can usually find information on their websites about this as well as calling them for more detail and since the hardship program is approached on a caseby Case basis some examples of situations that could qualify you include things like unemployment a cut to your income some type of serious illness or medical emergency you have natural disasters and a variety of other stuff so there are some things that you do need to consider when it comes to hardship and first is that there may be some requirements depending on the issuer with things like providing documentation for your proof of hardship meeting with a credit counselor setting up Auto withdrawals from your bank account and even signing an agreement as well as the issuer could have terms that freeze your credit card account lower your credit limit and even close your credit card account but if used properly this option can help you from missing future payments and most importantly preventing you from defaulting in your credit card so this next one here is something that should be done regardless of your situation but once you've determined all your debt one important step and Habit to get into is budgeting unfortunately most people have no clue how much money that they spend every month or even where that money is going without giving it a second thought while the source of the debt usually comes from continuously spending more money than you actually have in your account there are also many times where people fall into credit card debt because of unexpected emergency or medical expenses but regardless of how it started by by budgeting you can really get insight into how much money is coming in and how much money you're spending and what exactly you're spending that money on so first you'd want to list out how much money you're making each month then for expenses you want to do the same by putting together a list of your monthly expenses which are things like mortgage and rent utilities like electricity and water your phone bill subscriptions that you may have groceries eating out traveling entertainment and all those type of things from there you can group those expenses into categories so you can identify which expenses are really necessary and those that aren't you know like the Bare Bones Necessities like your rent mortgage utilities insurances and things that are Central for you to live then you have the other side which are things like going out to events taking trips going to the movies or buying some new clothes or any other type of shopping and this is what you'd consider as your wants so things that you want and you do do not need to get by this separation is important because this will allow you to see how much of your money is going towards the things that are essential in your life and then you can really work to cut down that spending in the unnecessary areas for the time being while you focus towards paying off that credit card debt and if you'd be interested in seeing a video going into more detail on budgeting let me know in the comments as this could be something I can make in the near future now when it comes to creating your budget you do have some tools available to use to help you track your spending while you can do this with a pen and paper if that works for you you can create a spreadsheet or there's plenty of spreadsheet templates that you can find online as well as there are a variety of budgeting apps that can be free or paid to use like y andab you need a budget every dollar quick and simplify Monarch money and others while depending on the app some Full Features you may need to pay for but I think if you're really serious about tracking your expenses this is something that could help to better align you with your budgeting and help you knock out that debt even though there's quite a few ways to go about approaching your debt in the end when it comes to paying off your credit card debt there aren't really any shortcuts or ways around it except for actually paying it down while I do like to talk about the benefits and perks that come with a variety of different credit cards I do know there's a darker side to them that many people are struggling to deal with and if you're interested in having a better understanding of how credit works as well as some key factors to avoid when it comes to credit cards I recommend you to check out these videos on the screen if you got some value from this video please be sure to hit the Thumbs Up And subscribe for more videos like this thanks for watching and I'll see you in the next one
