The Past, Present, And Future of Paying For Debts

Most of us know the standard trick of paying for debts by switching cards. We spend on one credit card and then find another card with a zero percent interest rate and transfer the previous debt to that card. We make payments and continue on an endless cycle of getting new cards and switching old ones.

If you are like most people then occasionally you stumble and make a purchase on the new card or miss the introductory rate deadline so you wind up paying interest anyway.

There is a better way to deal with debt. The first thing everyone should do is stop overspending. If you can not afford something do not buy it even if you have the credit to cover it. Get yourself on a budget and pay back you debt as quickly as possible. If that is not possible for you then you have to look into other ways of paying for debts. One thing to consider when you are swapping out cards is to try to find one that offers zero percent interest on both balance transfers and purchases. This way if you wind up spending on the card you will not wind up paying interest.

Credit cards operate under something called negative payment hierarchy. It is important to understand this when you are paying for debt on credit cards. What this means is that while you can transfer a balance of $5000 to a new card at zero percent your purchase rate is usually higher. If you purchase something with that card you will be charged interest on that charge. Even if you add extra to your monthly payment it will not offset the interest charges because all of your payments will go to the cheapest debt first. Until you have paid off the entire $5000 none of your bill payments will go to that purchase debt of $100 and you will continue to be charged interest on it. If you find a card that offers zero percent on purchases and balance transfers be sure that you know the date the rate runs out because it is typically not the same for both. Again, once the deal runs out on one your payments will go solely to the cheaper debt putting you back in a position of paying high interest rates.

For those who don’t think they can stop purchasing on a zero percent card and cannot find one that offers that rate on both balance transfers and purchases they should look into a personal loan or a lifetime balance transfer card. This is another way of paying for debts without being charged excessive interest. The rate on lifetime cards is low but steady and can be a good alternative if you think you will constantly need to revolve cards.

Related posts:

1. Paying Your Way Out of Debt
2. Avoid Paying Credit Card Fees
3. Remove Debt: Tips on Paying off your Credit Cards
4. How to Avoid Paying Credit Card Fees and Charges
5. Effective Bill Paying System
6. Benefits Of Paying Your Car Insurance On Your Credit Card
7. Smart Cards: Will There Be A Smart Card In Your Future?

Editor's Choice: Our Top Credit Cards

Credit Card	Card Details	Interest Rate (p.a.)	Cash Advance Rate (p.a.)	Balance Transfer Rate (p.a.)	Annual fee	Interest free days (up to)
St George Vertigo	Editor's Choice: Low Interest Low 2.99% for 6 months (reverts to 11.99%) p.a. interest rate and balance transfer rate, from one of Australia's most respected banks.	2.99% for 6 months (reverts to 11.99%)	20.74%	2.99% for 6 months	$55	55
Coles Group Source MasterCard	The Coles Group Source MasterCard has no annual fee, a 0% p.a. balance transfer offer for 6 months, with a rewards program including savings on fuel and FlyBuys Points	19.74%	21.99%	0% for 6 months	$0	62
Bankwest Zero Platinum MasterCard	Editor's Choice: No Annual Fee Excellent introductory offer with a $0 annual fee for the life of the credit card and a 1.99% p.a. for 9 months on balance transfers	16.99%	16.99%	1.99% for 9 months	$0	55