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How To Save Money Without Cutting Up Your Credit Cards

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Many people are so fed up with their credit card companies these days, they’re ready to throw out the baby with the bath water. Cutting up your credit cards may be recommended by some experts, but in the real world, you need credit cards to make reservations, buy things online, and to have in case of emergencies. So how do you save money when your creditor is charging you 29.99% interest? Simple, use balance transfer credit cards to take advantage of lower interest rates while you pay off your credit card debt.

Most people are paying credit card interest in the mid to high teens these days. That means they’re paying nearly $200 a year for every $1000 worth of debt. When you consider that most households that have credit cards carry around $15,000 worth of credit card debt, that’s a lot of money – almost $3000 a year. It’s no small wonder so many people are struggling to get ahead.

To dig their way out of debt, people are taking out less credit these days. In particular, they’re not signing up for any additional revolving credit (a.k.a. credit cards). According to recent Federal Reserve Board surveys, they’re also not using their credit cards as much. Instead, they’re paying them off.

We applaud all those consumers who have cut up their credit cards and started working hard on getting out of debt, but we do think they could be overlooking a better option. Two-thirds of people surveyed said they’d change their primary card if they were offered a better deal. Balance transfer credit cards offer consumers that better deal, plus a way to get out of debt faster and pay less interest.

Here’s how it works:

Consumers take advantage of new credit card offers with low, introductory “teaser” rates (APRs). They transfer a balance from a card with high interest to the new card, and pay off the entire amount before the standard rate kicks in.

Tips:

  • There are as many bad balance transfer credit cards out there as there are good ones. Make sure you understand the process, and do the math before you open a new account.
  • Avoid racking up any more interest by paying off the entire balance before the teaser rate expires.
  • Go ahead and cut up your old credit card if you must, but keep the accounts open. This will help your credit, because it gives you a better debt-to-credit ratio.
  • Don’t charge purchases on your balance transfer credit cards. Understand how negative payment hierarchy works, and don’t fall into the trap.
  • Pay more than the minimum amount due. Better yet, pay as much as you have to each month to zero out your balance before the introductory period ends. If you don’t, you could get hit with retroactive interest charges.

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