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5 Steps For After You Use a Balance Transfer Card

You’ve been approved for a 0% balance transfer card and have just completed the transfer! Congratulations! You’ve taken a very important first step to rid yourself of credit card debt.

However, it’s no time to rest. Although you may save hundreds or even thousands of dollars in interest, the work is not yet over. If you stop now and don’t take other important steps into consideration, you may find yourself in a far worse situation by the time your new credit card’s introductory 0% APR period ends.

balance transfer card

Here are those 5 more steps that you must take:

Stop using credit cards

The process of becoming debt free gets much easier if you don’t have to pay any interest on your existing debt. However, things can quickly go out of hand and the task can become impossible if you don’t stop using your credit cards. If you’ve taken a balance transfer card specifically for making inroads into your long pending debt, the only way you can succeed at it is by quitting using your credit cards completely.

Many such cards, such as the Chase Slate card, come with the 0% introductory APR applicable on purchases. Hence, you may be easily tempted to buy more. However, you must keep in mind that the normal APR will become applicable the moment the introductory period is over. And for some cards, this time period may not be very long.

The ideal way to go about the balance transfer process is to transfer all of your existing credit card balance to one single card with a reasonably long introductory APR period. After that is complete, put your cards away in a safe place where you can’t reach them easily. Don’t refrain from cutting them up if the temptation gets too strong. The card issuer can always send you a replacement card once you’re done dealing with your debt.

Plan for when the balance transfer card introductory APR offer ends

In the event that you’re unable to completely get out of your credit card debt by the time your new card’s introductory 0% APR offer is over, you may require a backup or a contingency plan.

If the introductory APR period lasts for 18 months and there’s still a considerable balance on the card to be paid off, you may want to start looking around for a new card with a similar type of offer. Please keep in mind there isn’t a rule that prevents you from transferring a balance from an existing balance transfer card to another one.

Know that you are well within your rights to opt for such a strategy as long as you’ve stopped using your credit cards completely and are working on a realistic plan to overcome your card debt.

Ensure that all old balances have been zeroed out

Whenever you opt for a balance transfer facility from one credit card or loan to a new credit card, you must ensure that all old balances have been zeroed out. It’s not uncommon to notice some small part or rogue interest left over on the old card, which if left non-transferred can quietly incur penalties and late fees while you’re focused on clearing away your new card’s balance.

Although it may seem tempting to close all your old credit card accounts, it may be a wiser move to let them be, as long as you’re not asked to pay an annual fee on them. This is because the FICO scoring model gives weight to the length of your credit history in the calculation of your credit score. Hence, keeping your old credit card accounts open can have a positive impact on your credit score.

Make a reasonable estimate of the amount of debt you can actually pay off

Once you’re able to control your income and expenses, you’ll find it much easier to figure out the extent of debt you can possibly pay off during your new credit card’s 0% APR period. To give you an example, if you owe $10,000 on your credit card and transfer it to the Chase Slate balance transfer card, you’ll get 15 months introductory 0% APR time period to pay off that balance. Additionally, you won’t be charged a balance transfer fee if you make the transfer inside the first 60 days of opening the Chase Slate account.

Now, divide the $10,000 balance into 15 months and you’ll arrive at a $667 monthly payment to become debt free by the end of the introductory offer period. If you won’t be able to pay that much every month, you can pay as much as your pocket allows and bring your balance down as much as possible during these 15 months. Thereafter, you can carry over the remaining balance to another balance transfer credit card.

Create a monthly budget

Your intent to become debt free is extremely important for any balance transfer strategy to bear any results. At the same time, you must also analyze the factors that brought you into this position. Figuring out your habits and understanding what led to the debts can help you strategize for the future.

A majority of people can gain control by creating a budget and writing down each one of their monthly expenses. You will be able to fully understand your budget and make the necessary positive changes when you figure out where your money is being spent.

Pull up your bank statements from the last few months and figure out where your money has been going. It may be tedious, but it will be beneficial. You may even find things that have been erroneously charged or items that are draining your account for no reason. You can plan accordingly once you’ve figured out the problem areas. You’ll have a properly written budget and be on your way to financial stability and management.

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5 Steps to Getting Out of Debt

If you are like many Americans, you may be finding yourself over your head in debt. With many losing jobs yet having rising expenses, people are not only becoming more accustomed to living on credit, but also becoming less likely to be able to pay all of their bills.

Once you start riding the slippery slope of skipping payments, you begin accruing various penalty charges, higher interest rates and more. Soon, your debt load will be impossible to pay. For some, bankruptcy may be inevitable. But, long before that, you are hopefully taking some significant steps toward getting out of debt and learning how to live as a financially responsible person!

Here are five steps to take that will help you get out of debt:

1. Assess Your Income and Your Spending

This means writing down exactly how much money you make each week or month, and exactly where every dollar is spent. Once you document where every dollar comes from and goes to, you will start to see some distinct patterns. Analyze the information carefully. Some guidelines to consider are spending no more than 25% of your total net income on housing (rent or mortgage), and no more than 60% of your total income on all of your loans (mortgage, auto, personal, student, etc.) and credit card minimum payments each month. These guidelines may seem tight, but they come from the basic qualifications that banks look for in a potential homeowner, making them fairly solid guidelines to follow for good financial health.

2. Get a Comprehensive Credit Report

Find out what your credit score is, and what factors are affecting it. Make sure that everything listed in the credit report actually belongs to you—you would be shocked to realize how many credit reports contain serious errors. As you get out of debt and watch your credit score rise, you want to ensure that all of the information is accurate.

3. Make a Budget

Of course, if you are like most people, after step #1, you will be horrified to discover that you are nowhere near these guidelines. So, where are you spending your money? Start out by listing the things that you cannot avoid paying for (housing, transportation, food, utilities, student loans), then list your other monthly expenses and the exact amount you can allot for each. Be sure to include some sort of savings, experts recommend that you put away at least 10% of your net income to save for unexpected expenses or your future.

4. Cut Out Unnecessary Expenses

Are there things that you can live without? Do you really need to have 600 channels on your cable service? Can you make your coffee at home in the morning instead of spending several dollars on the way to work each day? How about a bag lunch a few days a week? Are you using your gym membership (although you should be, if you are not then you should cancel and get out of the monthly fee). Watch your utility usage—turn your heat or air conditioning down and replace your light bulbs with energy efficient versions. Each of the costs that you cut will leave more money in your budget that can be put toward getting out of debt.

5. Start Paying Off Your Debt!

There are two functional ways to do this—one helps you get out of debt, and the other may help you set smaller, interim goals that will help keep you on track. The fastest way to get out of debt is certainly to put as much money as you can toward paying off your highest interest loans and credit cards. The faster you pay these off, the more you are going to save. But, if these accounts have large balances, this may seem like a very daunting task. This leaves another option, paying off the smallest debts first, so that you can essentially “cross them off of the list.”

When you start seeing the list of people or companies that you owe money to start getting smaller, you can see your progress—which can be highly motivating. Plus, even though these might be smaller amounts, you can then take the money that you put toward each of these monthly payments and put it toward the next largest bills. As you pay off smaller debts, you will start to have more money per month to put toward the larger bills.

Conclusion

If you follow these guidelines, you will find that your debt slowly but surely will go down. If you are finding it difficult to make ends meet, consider finding a second job to get some extra income, and then be sure to put that extra income toward paying off your debt! You may never be completely debt-free, but you will find that you are much more comfortable!