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How to use low APR credit cards to become debt free

If you carry a balance, shop hard for a low interest rate card

By Ben Woolsey

Are you in credit card debt and perpetually stuck in a cycle struggling to make minimum payments on your outstanding credit card balance? You can take some degree of comfort in the fact that you're not alone. Nearly 70 percent of Americans revolve a balance on at least one credit card and 45 percent of those with credit card debt only make minimum payments on their account each month. Credit card balances can literally take decades to pay down when only making the minimum payments.

It may seem unusual to think about credit being used as a tool to become debt free but it's all in how you play your cards. The extremely competitive nature of the credit card industry has given rise to the low interest introductory rate and even the 0 percent intro rate.
Low interest credit cards are not inherently evil, but if used irresponsibly can lead to tremendous financial hardship. Self discipline is the key -- first by living within your means and, when in debt, developing a plan to get debt free.

Finding a low APR credit card could be important to giving yourself breathing room if you have existing credit card balances revolving on other high interest rate credit cards. Once you are approved for a low APR credit card. you can usually transfer balances and begin saving right away. The difference in monthly outlay for a $9,000 balance at 19.99 percent APR versus a 1.9 percent introductory APR, for example, would be over $1,600. And this is where the discipline comes in – it is imperative that you don't use the slack created by your new low APR credit card to get into more financial trouble by piling onto your existing debt or spending the savings somewhere else. Begin paying down the principal with the money you were spending on interest and that debt will begin to slowly but surely disappear.

A low APR credit card is not the only answer -- to truly get out of debt and stay debt free requires that you cut all unnecessary expenses and live within a reasonable budget -- could be a great first step.

Published: July 18, 2005


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