I am huge debt-free advocate so I am sure the title of this post has you wondering if I am being a hypocrite or not. I promise you that is not what I am trying to be. You see, only in extreme circumstances should you ever even consider using this method to save your soul from the credit card devil.
When I was twenty, I decided that my hand-me-down couch and super cheap end table and coffee table had to go. I made the oh-so grown up decision that using the in-store financing offered with no payments for six months option was the way to go. Because let us be honest I did not have the cash to buy furniture, I just wanted it.
Well, the 6 months came and went, and here came the payments. The payments were not what surprised me it was the interest. I was paying a grand whooping total of forty-six percent interest on the living room and dining room set that I purchased! There was no way that I was ever going to be able to pay off that card with interest that high. In the six months before those payments were due, I had realized that I could not continue living my life the way I was. I was in huge financial trouble and had already made the commitment to save myself from debt.
While I tried to get rid of my other credit card debt using the snowball method…there sat this card. Collecting interesting and a minimum payment that was not going to make a dent in the card’s principle total before I hit 25. I was straight broke….like for real broke. The kind of dig-through-the-couch-cushions-for-spare-change-so-I-can-eat kind of broke.
After having to do that I had to give a serious consideration to filing for bankruptcy I was only 21 and I was in real money trouble. I called a lawyer because I was told by several people that the interest on the furniture card was illegal. The lawyer informed me that I signed in my credit agreement to the terms and conditions of the interest. Since I had failed to actually read those terms and conditions, I had committed myself to an extremely high interest rate. Lesson definitely learned – when you say yes to reading those terms and conditions make sure you actually read the darn thing.
I felt so stuck until I went to my mailbox and there was a credit card offer from Discover offering 0 percent APR on balance transfers. At this point, I was just throwing those offers away but a thought hit me that maybe I could save myself after all by using debt to pay debt. This is exactly what I did and I do not regret it. It saved me from financial ruin but I do caution anyone that decides to pay debt with debt:
- Learn as much about the credit company as possible
- Make sure that the APR is not going to go up in a few months (unless you know that you can pay off the balance before then)
- Read the terms & conditions
- Most importantly, close the card/account that you are transferring. Do not be tempted to shop now that the card has a zero balance.
- Stay committed and focused to your end goal of paying off and becoming completely ridding yourself of that debt.
This definitely is not the only way to quickly make a dent in a debt with an insane interest rate but it is one that worked well for me. Only use this option if you have the self-discipline not to get caught back up in the debt cycle.
What is the worst money mistake you have ever made? Not reading the terms of my credit agreement was definitely mine!
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