It may not sound very logical but using several credit cards at once can be the best way to clear your credit card debts.
There are two main reasons for this:
- Using more than one card means you can benefit from competitive interest rates on balance transfers and new purchases
- Very few people are on the cheapest possible credit cards for their circumstances
We’ll start with the assumption that you have an outstanding balance from purchases you have made on one or more credit cards. These are earning interest each month, and you are not paying off enough each month to clear them quickly.
Step 1: Balance Transfer
Your first task is to find a credit card offering a 0% interest balance transfer facility for as long as possible – but at least six months.
Apply for the new card and transfer your balances onto it. Once this is done, the clock has effectively stopped on your debts, as they are no longer earning interest.
You should now start paying off as much as possible on this card every month.
Do not use this card for regular purchases. This is your balance transfer card, and its only purpose is to provide you with an interest-free loan for as long as possible.
Step 2: Find a New Credit Card for Purchases
This step is strictly optional – if you can stop using a credit card completely while you clear your balance, you should do.
However, many people cannot manage without the convenience of a credit card – if this is you, then you need to find yourself the right one.
Ask yourself if you will be paying your bill for new purchases in full each month.
If you are absolutely certain you will do, look for a cashback card that will give you some of your money back each year.
If you may not be able to clear your balance each month, look for a card that offers a 0% interest rate on new purchases.
Be warned, this 0% rate will probably only be for an introductory period, but it should help prevent you from building up another monster balance while you are still clearing your balance transfer card.
Don’t use 0% interest as an excuse to allow your balance to build up again – pay off as much as possible every month. If the balance on your balance transfer card is much bigger than your expenditure on this second card, give priority to your balance transfer card.
Step 3: Review the Situation Monthly
Every month, you need to pay off as much as possible from your two cards. The faster you do it, the less you will pay in interest or fees, and the sooner you can free up your income from being used to service your credit card debts.
Monitor your progress each month and think about whether there are any other ways you could save money in the short term.
Remember to keep track of your cards’ interest rates. Most 0% offers are time-limited, and so both your 0% balance transfer card and your 0% new purchases card may have higher interest rates lurking in the background.
If you aren’t going to clear your balance before the 0% period ends, try looking for another 0% card to transfer the remainder of your balance onto.
If you can’t find one, consider a card with a low, lifetime balance transfer rate instead – this will give you a bit longer to clear the balance, although you will have to pay some interest.