"Shuffling" from one zero interest credit card to another is a legitimate strategy for getting yourself out of credit card debt years sooner than simply making the same payments each month on a high interest credit card.
And of course, because you won't be paying any interest, you will save big in this department. And here's how it's done... you put your right foot in, you put your right foot out, you do the... OK poor attempt at humor. But seriously folks, there is a bit more to it than meets the eye.
Step 1: Before you start any debt elimination plan, I highly recommend that you take the time to sort out your finances and prepare a detailed budget. The key to paying down debt as fast as possible is to throw as much money at it each month that you possibly can. And preparing a detailed budget helps with this in two ways.
First, just the act of writing out a budget is going to identify ways that you can likely save yourself an additional 10% on your expenses each month. And that's 10% more each month that you can use to pay down your debt.
Second, preparing and following a budget will be the only way to keep yourself disciplined enough to stick with your credit card debt payment plan. This is important if you want to take full advantage of a zero interest credit card strategy.
Step 2: Let's say that you have a $15,000 credit card balance with an interest rate of 18%. Your minimum monthly payments are currently calculated at 2% of the outstanding balance on your card and you are only paying this amount each month. On $15,000, the minimum balance for the next month will be $300.
You have worked the numbers and you know that it will take you 53 years and just under $43,000 to get rid of that credit card debt at your current pace. (Yes, those are the real numbers.) Depending on your age, you may not live to see that day. I doubt I will, so don't bother emailing me when that day comes. The solution? Bring on the zero interest credit card.
Once you have your new zero interest credit card in your hot little hands, it's time to transfer your balance over. Now, let's assume that your minimum payment remains at 2%, and that you continue to pay the minimum balance each month. We'll also assume that the interest free period on the credit card is twelve months (some cards are only six months). Let's find out where you will be in 12 months...
Impressive results wouldn't you agree? But let's keep it going...
Let's assume that each time the introductory 0% interest rate on a credit card expired, you switched the balance over to a new zero interest credit card. And so on, and so on. How long would it take you to get out of debt if you continued to pay the 2% minimum balance each month? The answer...
219 months, or 18 1/4 years.
Much better than 53 years, but still too long. Plus, it is unlikely that you will be able to pull off the zero interest credit card shuffle 19 times! So what do you do?
Here's where preparing and sticking to a budget pays dividends. The more disciplined you are at sticking to your budget, and the more extra cash you can come up with each month to pay down your credit card balances, the faster you can get out of debt.
Having said that, the first goal you should shoot for is to at least continue to keep your monthly payments at a constant level going forward. In other words, if your minimum payment the first month you get your new zero interest credit card is $300, then stick to paying $300 going forward. Don't drop down to the new minimum balance that will show up on your next month's statement. Based on our example, at O percent interest, and paying $300 per month, you would retire that credit card debt in 4 years and 2 months. Is this sounding better now? Alright let's take the final step and get you...
We know that your debt is $15,000, so if we want to get that amount completely paid off in 24 months, we need to make payments each month going forward of $625 ($15,000 / 24). Is this possible? Well, it would require you to only perform the zero interest credit card shuffle 2 times, which is realistic. But it also requires you to more than double the payments you are currently making. And only you know if this is possible.
Actually, until you sit down, draw up a detailed budget, learn exactly where your money is going, and then look for ways to reduce your spending, even you won't know if it's possible. So get to work on that budget, and start "the dance". Who knows, in 24 months you may be dancing in the streets, credit card debt free!