Retire your debt sooner

  Let's say you have a department store credit card with a balance of $1000 and are making minimum monthly payments. Doing so would take you about 9 years to pay off this one card!** Your department store card, with a 29.90% annual interest rate, will give about $25 a month in interest at the start. Add to that the $10 minimum, which is added from the principal amount, and this sets your minimum monthly payment at $35, of which only $10 is going towards helping to pay off the credit card's balance. After all is paid, your $1000 items, with the added interest, ends up costing you $2893.82. You've just thrown away $1893.82. How would you have spent those wasted dollars otherwise?

   One solution for helping rid you of this credit card debt is more credit. That sounds like an odd solution, but lets look how a credit card with low interest and/or 0% introductory offer could help you pay off debt sooner. Keep in mind, this will only help if, after being approved for a low interest card, you stop using your high interest department store card (we suggest cutting it up, burning it and cancelling it... and just to be safe, repeat all 3 steps) We'll use the example from above to help demonstrate what we mean.

   You pay $35 monthly, of which $10 goes towards principal, at the end of 6 months you would have about $60 less debt to pay. Now if that $1000 balance was transferred to a lower interest credit card with a 6 month 0% introductory period, and you continued paying just $35 a month, at the end of 6 months you would have $210 paid. Almost a quarter of the original credit card debt is already gone and in 1/2 a year! Once the interest kicks in you, are now only subjected to interest on $790 instead of the full $1000 and at a rate of 8.00% instead of 29.9%. So, if you continued paying $35 a month, just $5.30 would be lost to interest while $29.70 would be going directly against the balance. And with each monthly payment made, more is going towards the credit card's principal instead of interest. Using this method, you could have this card paid in about 2.5 years instead of 9 years and without increasing your monthly payments. You've just put $1808.82 of the lost $1893.82 back in your pocket! So, how will you spend those saved dollars?

   Here's what to look for:

• 0% Introductory interest rate of at least 6 months

• An after intro period of 10% annual interest or less

• Place to safely burn your high interest department store cards

   So, while getting rid of credit card debt by getting other credit seems like an odd approach, if handled properly, it can actually help you retire your debt years sooner and without increasing your monthly payments.

See how long it will take to pay off your credit card - click here.

** This calculation takes into account that most retail store cards allow for reprieve from payment months, where every few months you are allowed to skip a payment but interest is still added. If these reprieve months were ignored, and minimum payments were continued to be made, the original debt would be expired in about 50 months.