There was a time in my life where I was really close to being debt free, and then life happened. A divorce tagged along with getting out of the military and figuring out a civilian income left me nearly $20,000 in debt (mostly credit card debt around a 15% interest rate.
So What Does a 15% Interest Actually Cost?
At first, I made the minimum payments not thinking about the math behind the principal and interest. A 15% APR, which is low for credit cards, works out to a 1.25% a month rate. On a $20,000 balance, that’s $250 of interest payment before principal is even touched.
I was paying about $400 a month at the time, and after six months my balance had only decreased by $900 yet I had paid a total of $2400. Realizing it would take approximately 12 years to payoff the debt, I began looking for other options.
The Idea: Use the Bank’s Own Offers Against Them
What I landed on was a pretty simple concept. Banks are constantly throwing 0$ interest offers at people to win new business. So instead of fighting my 15% card head on, I decided to use their own promotions to move my debt somewhere it wouldn’t grow while I paid it down.
Before I move on, I have to give a hard foot stomp here. This strategy only works if you’re disciplined about it. The second you start spending more than you’re paying off, you become further behind with more debt and accounts to juggle. If you know you’d struggle to track balances and due dates across a few cards, this probably isn’t the move for you. I highly recommend using a weekly tracker to monitor and pay cards using this strategy.
Step One: Open a New Card with a 12-18 month 0% Interest Rate Promotion
I signed up for a card offering 0% APR for 8 months and found one with a $300 sign-on bonus after spending $1200 in the first three months. This card became my home base for the whole plan.
Step Two: Move Debt over without paying a transfer fee
Most 0% card wills also offer a balance transfer promotion but still charge a 5% minimum fee. I didn’t want to hand over hundreds of dollars off the bat to move my debt so I found a workaround. I used my new card to pay my rent and living expenses, and then took the cash I would have used for rent and those expenses and immediately paid the old high interest card instead.
Same end result as a balance transfer, my old balance went down and the new balance went up, just without the fee eating into it.
Step Three: Match Every Dollar Spent
This is the part I foot-stomped earlier. Every single time I put a charge on the new card, I turned around and paid that exact amount to the old card right away. Not at the end of the month, right away. That kept the new card from creeping up, or from me going over budget, while the old card shrunk dollar by dollar.
Step Four: Throw Rewards and Minimums at it too
Any cash back rewards, or sign-up bonuses, I earned on the new card, I applied straight to the balance. I also kept up with minimum payments on the new card as well. Between rewards and minimums, that balance moved down rapidly.
Step Five: Rinse and Repeat
As each card got close to the end of its 0% window, I’d open another one and run the exact same process on whatever was left. Move the balance, match my spending, apply rewards, and repeat. Each new card brought me another 12-18 months of no interest on the remaining debt.
Wrapping Remarks
Being debt free has been lifechanging; however, this isn’t some clean hack with no downside. You need decent credit to keep getting approved for new 0% offers, and opening that many cards is going to affect your credit profile, average account age, and utilization.
More than anything, this strategy only works if you’re disciplined. The moment you spend more than you’re paying down, this whole thing stops helping you and begins to hurt you more.
Make sure to read the fine print and steer away from cards that charge an annual fee. Some cards only offer 0% interest on balance transfers, not purchases. This strategy requires 0% interest on new purchases.
I’m not a financial advisor and this isn’t financial advise, but something that worked for me in my situation. If you’re sitting on high interest debt and you know you can stay organized and disciplined about it, using the bank’s own offers against the interest they’d otherwise charge you is one of the strongest tools out there.
