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Lana always carries a balance on her credit card. In her 20s, when she lived in Washington, DC, her salary was usually just $1,000 a month. But when the total hit $16,397 in the fall of 2018, she knew something had to be given away.
As a project manager in the banking industry, Lana is not threatened by debt. She always makes her minimum payment, and the APR on her credit card is low, she said — around 11%. Paying small monthly interest payments is like a well-spent money.
“Even the $50 interest payment isn’t a big deal for me,” Lana, now 39 and living in Denver, told Select. “It’s easy to dismiss it because the price is about the same as a nice bottle of wine.”
Since she always pays her credit card minimums on time, she has a good credit score and is able to buy a home in DC with a mortgage payment she’s comfortable with. monthly payment. But she didn’t factor in the cost of the new sofas and rugs she bought to furnish it.
Before long, Lana’s debt began to grow to $5,000, then $10,000, and finally $16,000. As her debt piled up, she kept pondering how much interest she really had to pay. When she finally took a closer look at her credit card statement, she was shocked to realize her minimum payment had come to “about $350,” Lana recalls.
She knew it was time for a change. In December 2018, Lana opened a Twitter account to document the repayment journey she began in the fall.
She tweeted on December 20, 2018 about how she found herself in what she describes as “crushing” debt, which includes 5-figure credit card debt and over 100,000 student loans. dollars:
https://twitter.com/spendertosaver/status/1075791915805757440
As of fall 2018, Lana has paid off her credit card debt and most of her student loan debt. She still uses credit cards, and her credit score is now considered excellent. On March 9, 2020, her score was an impressive 809, according to her Mint account.
Along the way, she shared her journey on Twitter, which she says has helped keep her accountable to her goals. But how exactly did she do it? Select the steps Lana took to pay off her credit card debt.
Step 1: She calculates her budget
Lana is lucky to have enough income to be able to pay off her debt without having to work a second job. But she needs to reevaluate her budget. Before starting her debt repayment journey in the fall of 2018, she first made it a priority to build a savings account that would cover several months of living expenses.
When she felt more secure knowing she had a rainy day fund, she turned to focus on her debt.
“Considering my budget and understanding exactly how much I can put on my credit card each month really motivates me. I got it down to the dollar,” she told Select.
She then makes a plan to pay off the existing debt, and she begins by calculating how many months it will take to pay off that debt if she has a 0% interest credit card. To her surprise, she realized she could pay off in about 12 months if she could get rid of those sky-high interest payments.
So Lana looked for a 15-month balance transfer card to give herself a three-month “just in case” period to give her peace of mind.
Step 2: She is eligible for a free balance transfer card
Since Lana has a good credit score, she is eligible for Chase Slate®. This balance transfer credit card does not have the usual 3% transfer fee when transfers are made within the first 60 days. Avoiding this fee saved Lana about $492 in the first place.
Chase Slate offers 0% APR for the first 15 months. When Lana applied for the card, she said that the variable APR increased to about 26% after the rollout ended. (Currently, the APR on Chase Slate is 14.99% to 23.74% change after the 15-month referral period.) With such a volatile APR (more than double what she was paying on the old card.) her), she has an extra incentive to pay off her balance before the 15 months are up.
Step 3: She transferred part of her balance
Lana is surprised to learn that she can only transfer a portion of her available balance. She hadn’t anticipated this, even after researching How 0% APR credit card works.
“Chase only allows me to transfer between $9,000 and $10,000,” explains Lana, even though her total credit limit is about $14,000.
Overall, the transaction was simple, but the actual transfer took longer than Lana expected.
“It takes some time to transfer the balance,” she told Select. “It’s been almost a month or a month and a half.”
Her advice to people using this debt payment method is to plan to pay off your old credit card bill for at least a month while the transfer is in process, and don’t assume Your balance will disappear instantly.
Step 4: She pays off the old balance first
When the balance transfer was complete, Lana still had about $6,000 left on her old credit card. Since it’s still accumulating 11% APR, it’s her priority to pay it down now.
“After that, I focused on the second floor,” she told Select.
Step 5: She has paid off the 0% balance during the APR promotion period
Initially, Lana planned to pay off her credit card debt within 12 to 15 months. But once she saw her debt drop, she was inspired to pay it off faster by further cutting her budget. She even found a side hustle for a little extra “bonus,” as she puts it. And when her tax returns arrived, she decided to use it all to settle her debt faster.
In March 2019, just days before her birthday, Lana hit her goal of being free of credit card debt.
https://twitter.com/spendertosaver/status/1102968391407751168
“I paid off in five or six months instead of the 12 to 15 months I predicted,” Lana told Select. “By using a 0% balance transfer card, I easily saved over $1,000 in interest.”
And her score skyrocketed more than 50 points in just a few months.
https://twitter.com/spendertosaver/status/1107678066686472192
Step 6: She still uses her credit card for daily spending
Lana isn’t sure if she should trust it Use your credit card again after you’re out of debt.
https://twitter.com/spendertosaver/status/1098647817554460673
But in the end, the benefits of having a credit card prevailed, and she learned to trust herself again. Lana currently has three cards – her first credit card, a Chase Slate balance transfer card, and a Chase travel rewards card.
Chase offers two travel rewards credit cards, each with its own unique appeal depending on your travel preferences:
- The Chase Sapphire Reserve® card costs $550. You can earn 5X points for air travel and 10X points for hotels and car rentals when you buy travel through Chase Ultimate Rewards® (after earning it). $300 worth of travel credits), 3X points on other travel and dining, plus 1X points on all other purchases.
- The Chase Sapphire Preferred® card has a $95 annual fee. You can earn 5X points on travel purchases through Chase Ultimate Rewards, 3X points on dining and 2X points on all other travel purchases.
Lana doesn’t use her old credit card very often, but she doesn’t want to close her oldest credit line. So to keep it going, she uses it to pay for her monthly iCloud subscription (about $1, she said) and pays with automatic monthly payments.
She uses a travel rewards card as her daily card, but never keeps a balance and doesn’t pay a dime in interest.
Her secret? She pays her card every three days.
“I like to treat my credit card like a debit card,” she tells Select.
This helps her “feel the pain” as she means to say, which is a reminder to herself that money is real. That’s easier to do when you see your checking account balance drop.
https://twitter.com/spendertosaver/status/1237058735920447502
Step 7: She understands the benefits of using a credit card
Although going through so much credit card debt is stressful, Lana still uses credit cards for everyday expenses. And she did it very successfully.
https://twitter.com/spendertosaver/status/1190298357006098432
She knows there are people who cut their credit cards and never looked back, but she says her travel rewards card got her three vacations she otherwise wouldn’t be able to afford. paid for by mileage.
One of the biggest lessons for Lana was learning that her credit score isn’t the only indicator of financial health.
“I had a mortgage even though I had a lot of debt,” she told Select. She realized that she could still live comfortably while paying off her debt.
She also feels strongly that it’s important to build a strong emergency fund before dealing with your high-interest balance, despite advice from some financial experts that you should just keep 1,000 dollars.
While the $1,000 approach makes mathematical sense (because the longer you pay interest, the more you pay overall), Lana knows that it’s important to her feelings that she’s prepared for the worst. unexpected.
“I work in finance,” she told Select. “I know how quickly the economy can change.”
And with financial uncertainty due to the coronavirus, Lana, who has turned to paying off her student loans, is glad she prioritizes saving first.
https://twitter.com/spendertosaver/status/1238246651606769668
As for her credit score, it’s over 800 now, but it “still fluctuates within 3 to 15 points,” Lana said.
She doesn’t stress about aiming for the perfect 850, because at current rates she’s still eligible for the best deals on loan and credit card products.
Her next goal is to pay off the remaining $14,000 she owes in student loans and become debt-free, except for her mortgage.
Information about Chase Slate® credit cards have been independently collected by Select and have not been reviewed or provided by the card issuer prior to publication.
Editing notes: The opinions, analysis, evaluation or recommendations presented in this article are the sole opinions of the Select editor and have not been reviewed, approved or endorsed by any third party.
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