As promised in 
my last post introducing a series on credit cards, here is a post explaining how to get out of credit card debt if you have any. To reiterate what I said there: “The first rule of the credit card game is that if you ever carry a balance, no matter how small, for a single month – stop. Take all of the cards out of your wallet, put them in a drawer, and do not continue playing until you are not paying a penny in monthly interest payments.”
I say this as credit card interest rates are insanely high, and thus paying them off is incredibly challenging. So, this guide is a hack to help those that need it, and it’s required before I can get into explaining all the parts of the game. So, if you’re not ready to start playing, or if something happens mid-game and you need help with credit card debt: this post is for you!
So, you’ve already taken all of your credit cards out of your wallet as per the first rule of the credit card game, right? Next, add up all of your credit card debt across all accounts. Simple. Now you know how much you need to tackle.
Done that? Great. Now, you’re going to flip the script on credit cards, like an Uno reverse card:
Google search “0% promotional interest credit cards” and see what the current best offers are right now. These tend to vary over time, but sites like NerdWallet share multiple options that they update monthly. I recommend finding the one that has the longest promotional period with no annual fee – they usually vary between 12 and 24 months. Personally, I like Chase card options like the Freedom Flex and Freedom Unlimited, as you’re going to want them later when you play the game anyway 😅.1
Then, divide your total debt by the number of months in promotional period to get a monthly payment to payoff your debt in full with no interest. Can you afford that out-of-pocket every month, without taking on any more credit card debt? If yes, great! Apply for that card – 🤞 that you are approved – and go through the steps to transfer your balance(s) to this new card while signing up or immediately upon approval (the bank should provide such instructions). There is usually a fee with such a transfer in the 3-5% range. Fees aren’t great, but it is far better than the 20%+ interest you’re paying (and this fee is a one-time fee rather than compound interest).
Then, setup the monthly payment you already computed, and voila! End the promotional period debt free. And do not even think about taking on more credit card debt during this process!
What if the single card isn’t enough?
The process isn’t always as simple as above. Perhaps the credit limit approved on the card you applied for isn’t high enough for your entire balance to be transferred. Or you can’t afford the monthly payment to pay it all off by the end of the promotional interest period. Or you have a mix of both scenarios! Do not fear; this is honestly the situation I was in years ago. You can overcome it! But in either scenario, we now need multiple cards.
To choose a second card, I recommend you simply go down the list of cards you found above and find the next-longest promotional period. Ideally, this period matches that of the first card, although this is not required. You are going to apply for this card as well immediately after the first but before you do a balance transfer. Assuming you are approved, you now have two cards, with potentially different promotional periods of 0% interest and different credit limits. I recommend that you take the following balance transfer approach:
- Transfer as much as you can afford to payoff in the entire promotional period to the card with the shorter introductory interest period. You will then setup monthly payments to make the balance $0 by the end of the introductory period.
- Transfer the rest to the card with the longer introductory interest period. You can either payoff as much as you can afford to from this card as well in addition to the first card, or it can be left untouched while you payoff the first card. Either way, this debt will not generate interest while you are doing so.
- When the first card is paid off, start paying off the second card with the added monthly payment that used to go to the first card.
- If there is still credit card debt on the second card by the time the introductory period is over, find another card from the list of cards with 0% promotional interest and transfer this balance to it in order to prevent interest from accruing.
- Repeat this process as much as is needed until all credit card debt is $0.
Note that while you can do this with more than two new cards at a time, the likelihood of each subsequent card approval is diminished.
What if I am not approved for the credit card?
If you are not approved for a single credit card, do not keep applying to others – this will only harm your credit for no reason. Instead, you need to look into a loan of some sort.
Like what sort? There are many such loans, and it can be overwhelming if you start to research these. A Home Equity Line of Credit (HELOC) is a common recommendation, but one that I believe is over-recommended. Opening HELOC’s come with high fees which do not exist with other options like personal or portfolio loans.
Portfolio loans? Portfolio loans are loans given where underlying equity in the stock market are used as the asset to borrow against. This can be a nice alternative to the taxable event of selling the stock; heck, I used a portfolio loan to pay my taxes last year. I like M1 Finance for how easy they make this process, and because in my research, they offer the best rates (albeit the rate is variable and will adjust with interest rate changes).2
And what about personal loans? While there are many providers out there you can research, I’m going to make this easy and recommend just one: SoFi. All you need to do is apply for a personal loan here. If you are approved, all should be said and done automatically in less than a week. Like M1, I recommend SoFi due to my own use of them: fifteen minutes saved me fifteen years off of my student loan repayment plan!3
So I got a loan – now what? Pay off your credit card debt with the loan, and instead payoff the loan as fast as you can. While the loan will still have interest payments, these rates will be far lower than that of credit card(s).
Footnotes
- Note that this is a referral link. I make this recommendation free from sponsorship, and I could also include referral links for American Express and Capital One cards as well; I do not because I meant when I said I believe the Chase cards are top options for promotional 0% interest. ↩︎
- Another referral link, this time for M1. Again, this is only because it is the best option I know of, and one I recently used! ↩︎
- Third and final referral link. I explained the why behind the referral in the text above. ↩︎
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