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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My worst mistake was deciding i wanted a new vehicle instead of the nice one i already had. My negative equity rolled into my new vehicle. At the time i didnt care … i liked my new car. But then it came time to grow up and move out of good ol’ mom and dad’s. I had to get rid of my car payment in order to take one a house payment … welp, in order to get rid of my car i ended up having to hand over my entire tax return that was $6000. All gone … just to get back to square one. May not be my worst mistake but its at the top of my list!!!!
46%!? That SHOULD be illegal! I’m glad you got it figured out in the end! I would say my worst mistake would be not saving more when hubby and I both worked and didn’t have kids. We weren’t ridiculous spenders, but we could have saved SO much more money during that time just by doing simple things like budgeting and not eating out. Now that we’re living on one income I think, “Where did all of that extra money GO?!” Lesson learned! Hope you’re having a great week, Jessi!
~Abby =)
I will say I have used this method. Again it’s not the greatest of ideas, but when you can get your interest down to zero it’s a lot easier to pay down the debt.
Yes ma’am it is! 🙂
Forty. Six. Percent?! Good golly that’s obscene. Nice work using the 0% card. Even with the balance transfer fees, it would be nearly impossible to end up with a rate as high as you had before.
Yes! It was so crazy – I literally felt like I was drowning in that debt!
My fiance used this strategy about a year ago, and it was an idea I would never have come up with on my own. You creative thinkers are doing the rest of us a favor when it comes to cleaning up the mess after bonehead money moves 😉 Thank You!
Hahahhaha! Thank you! 🙂
I always kind of play with the idea of using those offers and still haven’t felt that I really needed to. Ironically, my best friend and I got the same offer from Discover with the 0% she did it and I didn’t. She also had a discover credit card and when she thought she was paying extra and paying down her loan it was actually going completely to the credit card because it had the highest interest rate. So instead of paying down her credit card and reducing her principal balance on her loan (before it was no longer 0%) she was really just paying down her credit card. Its important to know how each of your payments is being applied. Fortunately she figured it out long before the 0% interest offer ended and was able to pay both off. But it definitely caused her a ton of stress.