Tips & Tricks to Paying Off Credit Cards at 0% Interest Forever
Updated: Sep 23, 2020
Learn how this one legal trick can help you pay off your credit card debt and not have to pay the high interest rates.
Instead pay off your debt at 0% forever while raising your credit score!
"Knowledge is the new rich. Arm yourselves with it."
- Toni Payne
We've all accumulated debt.
Even the rich have debt, but they use debt to their advantage.
More on how to use debt to make you richer in another article. So be sure to subscribe here to this newsletter so you won't miss out on this really important FREE information.
But for now we'll focus on how to pay off your credit card debt at 0% interest forever and raise your credit score.
Without this first step, you can't get to the next steps of using debt to make you richer.
Bad Debt Vs Good Debt
Good debt is a loan that has a potential to increase your net worth. Bad debt involves borrowing money to purchase things that doesn't make you richer.
The fact that you're reading this article right now to learn how to pay off your debt is probably because you've accumulated bad debt.
That's okay. It's not the end of the world.
But there is some work to do to help you pay off this bad debt so you can have good debt to make you rich.
I've actually had credit cards at a young age because my parents knew the value of credit cards.
Unfortunately their knowledge of credit cards was also as limited as most people.
The only thing they told me was, "don't buy unless you can pay it off."
I was able to keep up that advice up until some unforeseen circumstances like most of us have gone through.
But that's basically the extent of my knowledge of credit cards. I had no idea the ins and outs of this business and what you could do with it.
A few years ago I was faced with debt up to my eyeballs.
I didn't have a steady job as a freelancer and contract worker. I barely made any income. I was faced with a living situation where I either had to move somewhere else or pay for an apartment I couldn't afford.
I couldn't afford either choices. But I chose to stay where I was already living in.
I paid for my rent and other necessities with my credit cards--my prized pride and joy.
I had worked so hard to keep my credit score angelic and didn't spend what I couldn't afford. But now rent had to be paid through it because I didn't have enough cash.
This now meant that my credit utilization ratio versus my available line of credit was now higher.
This tanked my score so low, my jaw dropped!
What you talkin' about, Willis? You just spoke a lot of gibberish!
I sympathize with you because I myself would have said the same thing a few years ago.
So I'll break it down in layman's terms for those who don't know. For those who do, keep scrolling.
When a credit card issuer gives you a credit card, they give you a line of credit, meaning how much available credit you can borrow on a specific card.
So let's say they gave you a $1,000 line of credit, this means that you can only spend $1,000 on that credit card.
Now if you've spent $900 on the credit card, you've used 90% of that credit card.
That my friend is a high utilization ratio--a NO, NO in the credit card world.
Unless you can pay off that $900 before the statement due date and before they report to credit report agencies, then you've just put yourself in a whole lot of doodoo.
And this will also bring your credit score down.
So, a good rule of thumb is to use 30% or less of your available line of credit. This means that at the $1,000 line of credit example, only spend $300 or less on your credit card and you'll look mighty fine to those all-too-watchful credit bureaus.
There's nothing like a good visual aid to break up the lines of monotony. So let's insert an infographic below:
I'm sure you're uber smart and I don't need to explain how to calculate percentages.
But in that off chance that you somehow managed to be one of the .000245 unfortunate people that walked down the street one day and a Pterodactyl snatched you up into the sky but then had accidentally ran into a blimp which caused the Pterodactyl to drop you into the icy gorges of the Himalayas where you had absolutely no recollection of how to do percentages--then this is for you!
On your calculator, place the amount of line of credit then multiply it by 30% and you'll get your spending limit.
In the $1,000 credit limit example, it would look like this:
$1,000 x 30% = $300
Now that we got that out of the way, the actual Tips and Tricks finally come into play.
But before we get to the goodies, it's important to understand debt and interest.
Debt & Interest
Debt is what you owe. And interest is what the credit card charges you extra for what you owe.
Let's say that you have that debt of $900 on your credit card with the $1,000 credit limit and you can't pay the $900 all at once.
And the rule of the credit card world is, if you can't pay the full debt amount each month, you have to pay the interest.
The problem is that it has a high interest rate of 16% (and I'm being generous because interest rates are actually way higher) that you have to pay on top of the $900 that you owe.
$900 x 16% = $144
This means you owe the credit card $1,044 because you have to pay interest too.
That's not a situation you want to be in because you'll keep racking up more debt every month for not paying it all off.
But the nightmare doesn't end there because your debt will rack up and you'll feel like you can never pay it off.
Here's how the life-sucking scenario looks like:
Let's say you can only pay $100 a month. The card issuer will charge you an additional 16% for every month you don't pay in full.
If you pay $100 this month because that's all you can afford, you would think that you should owe only $800, but no:
$800 x 16% = $128
$800 + $128 = $928 --> This is what you owe for next month
It's a vicious cycle because now you owe more than you should! You were supposed to owe only $900, but no matter how much you pay, the interest is killing you!
Infographics for your viewing pleasure:
This is how the bank or credit card companies make money.
But I'm sure you don't want to give them any more of your hard earned money.
Now that I've made you pee in your pants, let's get on how to solve this dilemma.
1. Transfer Your Balance
The trick to this is to transfer your balance over and over again at 0% indefinitely
Before I knew the ins and outs of this method, the only thing I knew about balance transfers was the word "balance transfer" from seeing it in the credit card ads I got in the mail.
I knew the word, I just didn't know what it meant.
So don't be like me, and actually learn and pay attention to how awesome Balance Transfers are and how it can help you.
In order for this to work you need a credit card that actually offers balance transfers. Ask your credit card if you do.
Make sure this card hasn't been used so much that you have nothing left on it.
What is a balance transfer?
You ask good questions, little grasshopper.
A balance transfer is transferring what you owe on one card to another card that can take on that debt.
So what's the benefit of transferring what you owe from one card to another card when you still owe the same thing? Makes no sense!
Don't get sassy with me or else I will give a map of your location to grasshopper-eating birds.
The benefit only happens if the credit card you will be transferring your debt to has 0% interest for a certain time period.
There are certain credit cards that offer 0% on balance transfers.
Take for instance (at the time of this writing), Citi Diamond Preferred is offering 18 months of 0% balance transfers.
This means that instead of paying 16% interest on your current card, you pay no interest at all for 18 months.
So you can pay that $100 per month in 9 months at 0% interest and still have 9 months left of 0%.
Disclaimer, credit cards typically charge around 3% - 5% for balance transfers. But it is worth it.
If you transfer your debt to this credit card with a 0% balance transfer at 3% balance transfer fee, you'll owe this new card $927.
You can pay for it as follows:
$927 divided by (/) 18 months = $51.50
$51.50 is what you should be paying per month to this credit card before your 18 months are up because after that it'll probably be 16% interest or more just like the other credit card.
But, what if you can't even afford to pay $51.50 per month?
What if you can only pay $25 per month?
This is where the beauty of having at least two credit cards that offer balance transfers come into play.
If you have at least two then you're all set.
If you don't, you need to get two.
Let's assume that your current credit card where your debt of $900 is CREDIT CARD #1 and it offers balance transfers.
And you have a second credit card, CREDIT CARD #2 that also offers balance transfers, and it has enough credit limit for you to transfer your $900 debt to.
Transfer your debt from Credit Card #1 to Credit Card #2
Pay off what you can monthly before the 0% ends
Right before the 0% ends on Credit Card #2, transfer what you owe from Credit Card #2 to Credit Card #1.
Pay off what you can monthly on Credit Card #1
Rinse and repeat
When you get what you owe down, your credit score will start going up.
You can apply for other credit cards so that you can increase your credit limit. And it will help you in more ways than one.
Credit card companies and credit card reporting bureaus look at how much your line of credit is with all your credit cards. So let's say you have two credit cards with $1,000 each. Then you have a $2,000 over all credit limit. So if you only have $500 you owe on both credit cards, then you have a good utilization ratio.
The more credit cards you have, the higher credit limit you have across all your credit cards. And if you use the 30% rule then your score goes up higher.
The better you are on managing your debt and finances, the more credit cards will offer you a higher credit limit.
Apply for different cards sparingly. Meaning apply only every 6 months when you have bad credit. And every 3 months when you have a good credit.
The more credit cards you have the better.
And now on to number 2 on the list...
Because with that one method, you can either pay your debt off quicker by paying more monthly or less if you just like to coast.
This is entirely up to you.
Whatever floats your boat.
But don't rack up debt you can't actually pay. It's extremely important to manage your finances well.
The question is, what are your goals?
If you want an extremely high score for the purpose of buying a house and getting lower rates for loans, then pay it off as much as you can, as quickly as you can.
The same thing goes if you want to start a business. You need to look amazing to creditors because they want to see if you can manage debt well.
Because why not?
Even though the title is about how to pay off credit cards--and because it's a good, good day and the birds are chirping, I thought I'd give a nice extra tip.
Call your credit card company and ask to increase your line of credit.
Depending on the company/bank they'll either say yes or no.
Make sure to ask if asking for an increase doesn't affect your credit score. Meaning they won't make a hard inquiry. A hard inquiry affects your credit score, not in a good way.
A soft inquiry is totally fine.
I once had an $18,000 line of credit for one of my credit cards and called the bank and asked for it to be increased to $50,000.
I seriously gave a random number. I just wanted to see how far I could go.
They gave me $34,600. Not too shabby!
Here are the reasons why anyone should be asking for a credit line increase:
It lowers your credit utilization ratio. So if you have a debt of $900 and you asked for an increase to $4,000, 30% of 4,000 is $1,200. Your $900 debt is now lower than 30%. This is a good thing!
Because you've lowered your utilization ratio, your credit score goes up.
Give it another 6 months before asking that same bank/credit card company for another increase.
There you have it. Paying off credit cards at 0% forever is super doable.
But there is more to the credit card game than meets the eye.
Because if you know how to use it wisely and to your advantage, you'll be making money off of it instead.
So stay tuned to that episode and subscribe here to our newsletter.