A while back, I shared a couple of credit confessions with you, one of which was that I – a credit card writer – was carrying around a few thousand dollars in debt, divided between two credit cards. As I explained, this was partially by choice, since I did technically have the savings to pay off the cards, but am cautious about depleting that savings since I have the unsteady income of a freelance writer.
After coming into a lump sum of cash thanks to a few extra freelance writing projects this summer, however, I decided that enough was enough. It was time to say goodbye to my debt for good (well, almost). Here’s what I did:
- I paid off my highest interest card (hooray!). I probably shouldn’t admit this, but I was carrying a balance on a card with an interest rate above 20 percent. It happens to be a co-branded rewards card with a lot of perks, so that’s sort of typical, but it’s counterintuitive that I was paying interest on something designed to save me money. So, good riddance to that balance!
- But less than 24 hours after using my windfall to pay my creditor, my refrigerator died. I’d already fixed it once, so I knew it wouldn’t be worth it to call a repairman. For a second, I felt defeated. Here I am, finally paying off my credit card, and now I have to shell out hundreds for a new appliance. Luckily, because I’m a stickler about keeping my emergency fund intact, I was able to purchase a new refrigerator using cash.
- Because the payoff on card No. 1 and the unexpected refrigerator purchase wiped out my extra cash, I couldn’t put anything toward my remaining card balance. But I was determined to do something. Although card No. 2 has a less horrifying interest rate (13.99 percent), I’m really sick of wasting money on interest. I began shopping around to find a good balance transfer offer. Since I wanted to get a new card anyway (to replace that high-interest co-branded card I no longer want to use), the timing was perfect. As luck would have it, an offer came in the mail for 0 percent on balance transfers for 15 months; 12 months of 0 percent APR on regular purchases; and $250 cash back if I spend $1,000 in the first three months. After analyzing my spending habits, a card that rewards cash back on everyday purchases is the best way for me to really maximize my credit card usage since I’m not much of a traveler.
- So, I did it. I applied, was approved, and transferred my last remaining balance to the new card. This is not a decision I took lightly. I crunched some numbers to make sure I’d still save money even with the 3 percent balance transfer fee that was tacked on. If I pay off the transfer balance within the 0 percent interest rate period (I took the balance and divided by 15 to make sure it’s a number my budget can handle), it will be a good move for me. And, if I take advantage of the $250 cash back offer on the new card, it will more than cover the balance transfer fee. I can easily spend $1,000 in the first three months by using the card for groceries and gas. The key going forward, however, is that I intend to pay the balance in full each month on the new card (no more revolving balances for this girl!).
The result: I’m moving forward with my financial goal to be debt-free (just like the inspiring bloggers I recently wrote about) and for the rest of that journey, I won’t be paying any more interest on my remaining debt. I also have a new credit product in my arsenal that I plan to use strategically.
Yes, readers, I’m finally practicing what I preach about plastic, and it’s a great feeling.