Should you…
Surf your credit card balances from higher rate cards to lower rate cards.
YES! BUT, only if you intend to pay-off those surfed balances, and only if you plan to NEVER EVER use those higher rate cards again. DO NOT surf a balance to “card B” and then continue to use “card A”. Why? B/c you will end up with balances on BOTH cards.
Pay-off higher-rate cards or lower-balance cards? THIS is a tricky one. IF you are current with all of your debts, and you can make all of your minimum payments without being late, AND you do not mind having multiple credit accounts open, then by all means, pay off the higher-rate card. (This is the mathematical answer!) BUT, if you are behind, if you are struggling to make minimums, AND you like to see your credit accounts go bye bye faster, THEN you need to pay-off your lower-balance cards first. (This is the “I like to see those lower-balance cards go bye-bye because I get excited when I see them go… answer). There are tons of pf blogs and sites out there with calculators and mathematical answers aplenty. I ask you this question. Are they debt free? Well, I am, and I did it the second way, lowest balance FIRST. Why? I liked to see those credit accounts go bye-bye!
Use the equity in your home to pay-off credit cards? NO, NO, NO, NO, NO!!!!! Why? Because, if you do not change your behavior patterns, you will end up with a HELOC AND brand new credit card debt. PLEASE LISTEN TO ME! Do not use your home as a “bank”. You have to live there! Do you really want to use the home that your kids sleep in to finance that stupid pick-up truck in the back-yard? Get a backbone, find some discipline, and PAY your debts. Don’t just move them around and continue to add to them.
Use a credit card b/c you get rewards points and rebates? Nope. I know, I know, this goes against the grain of all of the “I’m responsible with my money” guys and gals out there. Sorry. No debt allowed. Not even temporary, I-promise-I-pay-it-off-every-month debt. Sure you do. And what about when YOU get sick, and YOU forget to send in your payment? Oh, that not enough? How about this? What about this? Your bank makes an “error” and your “on time” payment does not go through. No, that will never happen. The big nice bank just loves you. (Note, credit card companies do not “like” customers who make their payments on time and only use cc for rewards and rebates. I’m not saying that they have incentive to smack you around… but…) Be a big boy. Use cash.
Get out of debt? Yes, by all means. If you have hit upon my little corner of the blogosphere, then you are obviously interested in personal finance matters. Now, you will read a lot about interest rates, bank deals, saving money, retirement, and investing. But, do you know what the ONLY absolutely guaranteed “return” on you money is. DEBT RE-Payment. That’s right. For every dollar you pay towards your debt, you are absolutely guaranteed that it is going to do what you expect it to do. It is going to increase your networth by decreasing your liabilities. (You will be worth more because you owe less.) Dollar for dollar, guaranteed. Your investments could tank, your savings account rate could change, heck, the US gov’t could go bankrupt…BUT, when you pay-off your debt, you are getting a guaranteed return on your money. You are putting it to good use. And this is just the FINANCIAL side of the personal finance equation. Do you realize how AWESOME you are going to feel when you are debt free? How proud of yourself you are going to be? When you look into the mirror above your sink at night, you will be staring into the eyes of someone who OWNS their stuff. Do I want you to think about saving and investing and real estate and all of the other things that make up personal finance? Of course. BUT FIRST! I want you to free yourself from the anchor that is holding your back. DEBT.
If you like what you read hear, please consider checking out my podcast at No Credit Needed Podcast and joining us at the No Credit Needed Network. (The Network is a group of like minded bloggers who focus on getting out of debt and saving money.)