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Credit Card Payoff
Program |
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| If you're like most people you have
several credit cards and are carrying a balance
on each one. You make the minimum required
payment every month but it seems every time you
get one card paid down an emergency occurs. You
end up with a maxed out card and no credit left
until the process repeats. Endlessly repeats! But
you've already made the first step toward finally
getting a handle on this endless cycle by reading
this report. Congratulations. Now let's get
started. |
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| Let's say you have a card with a
$300.00 limit. Your balance is 284.00 with a
24.00 minimum payment and the card issuer charges
you 18% per annum (year) with a $35.00 per year
membership fee. Your card has a online payment
feature where you can pay your bill anytime and
there is no charge for making the online payment
which can be deducted from your checking account. |
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| If you make no charges and continue
paying the minimum payment for 4 months you'll
have close to $100.00 in credit due to the
interest charged. In other words you'll still owe
$200.00. |
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| And you'll most likely either need
that $100.00 credit for some emergency or a life
event (birthday, wedding, graduation, etc.) or
holiday purchase. Or else you'll make the minimum
payment each month then need gas or lunch and use
the card for that purchase. |
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| So instead let's be smart about this.
The trick to this method is extremely simple.
Every charge, every fee, and every item added to
your account is rounded up to the next highest
$5.00 and immediately paid. Before we had the
card or cards we paid cash or did without. Now
that we have the card we can purchase beyond our
present cash. But to get the card paid off we
absolutely must pay more than we spend. |
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| We use the figure of $5.00 to round
up to since $5.00 isn't a prohibitive amount yet
will pay down the credit card fairly quickly. We
strongly suggest you use that figure unless you
just can't afford it but do wish to use this
program. In that case, rounding up to the next
even dollar will work but will take a lot longer.
Remember that you're rounding up to the next
$5.00 not adding $5.00 to each charge against the
card so the round up will almost always be less
that $5.00 and could be as little as 1 cent.
Using a larger figure might accelerate the payoff
but may tax your ability to pay so the $5.00
figure is our suggestion. |
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| Now let's say you have made the
minimum payment giving you $40.00 in credit and
you need a tank of gas. You fill up being careful
not to exceed your available credit and the sale
comes out to $36.00. When you get home, you go
online to your credit card account and
immediately pay them but you round up to the next
$5.00. In this case you pay the card company
$40.00. Since you paid the charge you just made
and a extra $4.00, you now have $44.00 in credit.
At the end of the month you are charged a not so
slight interest charge. Say $1.18 so you again
round up to the next $5.00 (which is $5.00 in
this case), go online and pay on your bill. Now
you have almost $48.00 in credit. |
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| You realize you need something from
the grocery store and a can of paint from the
hardware store. The groceries total $17.63 and
the paint is 21.45. Two purchases! $17.63 rounded
up to the next $5.00 is $20.00 and $21.45 rounded
up is $25.00. You go online that evening and send
the credit card company $45.00. You're now
approaching $55.00 in available credit. |
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| Toward the end of the month you
receive a phone or small utility bill of $51.18
and use you card to pay that bill. Now you go
right back on line and pay the card company
$51.18 rounded up to $55.00. And at the end of
the month you are charged the interest fee again
of $1.14 this month which you immediately round
up and pay the card company $5.00. |
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| Let's look at this in depth.
Everytime something is charged to your card you
round it up to the next higher $5.00 and
immediately pay that amount. Purchases? Round up
and pay up. Interest charges? Round up and pay
up. The annual fee? Round up and pay up. Keep
this up for a couple more months and you'll have
that card paid off. |
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| I mentioned earlier that when we have
a credit card we can purchase beyond our present
cash. Or else why have the credit card? A debit
card would make more sense except the credit line
is a feature (until you max out the card anyway)
and that's why you have the card. And pay the
fees and interest. A credit card that's always
maxed out just doesn't make sense when you think
about it. |
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| So let's say you have reached the
credit availability of $55.00 and that utility
bill arrives as above in our last example.
Further more , the utility bill is due before
your next payday but the credit card bill isn't
due until after that next paycheck arrives. You
don't have the cash to pay the utility bill until
after the due date but you do have enough credit
available to pay it with your card which the
utility does accept. |
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| This is the perfect place to use that
credit then. You almost have to anyway. And you
only need the credit for a day or two. So you
call the utility and/or go online and pay it
using your credit card. You then go online to
your credit card company and look to see if you
can schedule a future payment. If you can
schedule the payment, you do so for payday or the
day after and make the payment to cover the
$51.18 utility charge rounded up to $55.00 again. |
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| What if you can't schedule in advance
on line? You have two choices depending on how
disciplined you feel you are. You can write a
check to the card company and send it on payday
(if that will help you remember) or else you can
wait a few days and pay it online on payday or
the day after. Either way remember to round up
and get that payment in before the end of the
credit card billing cycle. |
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Frequently Asked
Questions |
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| Q. How can this possibly work? A.
Three reasons. One.... By using the card,
rounding up the charge and paying back
immediately it forces you to spend only when you
have the cash. Two.... You are slowly but always
paying down your debt. Three.... As you pay down
the debt the interest charges will go down
further reducing your debt.
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| Q. Shouldn't I keep records? A.
Yeah, you'll want Some kind of records or you'll
forget what was charged and what was paid. A
three columnar pad or plain paper with three
columns ruled with a pen will work.
Put charges in the first column, drop
down a line and put the payments in the second
column then total every thing in the third
column. In the description line put what the item
or charge was for. You can double check this
against your statement to help find charges you
didn't make and any charges you may have
forgotten. You'll also get your fees and interest
charges from your statement if you didn't already
get them online.
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| Q. What about the monthly minimum
payment? A. You'll need to
watch this one. You can pay the minimum itself by
the due date. You can round up and pay it when
you first see the bill. Either of these will
accelerate the payoff time. Or you can make sure
you have made enough purchases, rounded up and
then paid to cover the minimum. The big thing is
to cover the minimum somehow and to always round
up and pay every charge. No mater how big or
small they are.
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| Q. Doesn't the card company expect
the minimum to be paid in one payment? A.
Most likely not. You could ask but you'll
probably see the minimum reduced online as you
make payments even if the payment only covers a
part of the minimum. Over the years I've payed
the minimums on my cards in two or more parts
over the month and never had a problem. There is
some slight advantage, credit score wise, to
paying the minimum due as soon as your new
statement is available.
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| Q. What if I have a big charge and
can't pay it immediately? A.
That's what credit is for. But now that you have
a method for paying you can be smarter about your
charges.
Say it's a $100.00 charge. Rounded up
is $105.00. You don't have the $105.00 so divide
that figure by how many months you plan to take
to pay it. Pay that amount every month on or
about the same day until it's fully covered.
Don't worry about rounding up each payment
(though you can but why make this complicated).
Of course you'll continue using the card and
rounding up and paying all other charges.
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| Q. What about the interest charges
for the $100.00 I used in the above example? A.
Don't worry about the interest when figuring out
your payments in the example scenario. That's
taken care of when you see the monthly interest
charge. You'll then round up the interest and pay
that charge as you find it charged to your
account.
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| Q. I'm a little nervous about not
having my cash handy. A. I
wouldn't worry too much about that but you do
need some ready cash available. How much have you
been keeping as ready cash? Nothing? Thought so!
For the most part you can use the card
for most any purchase. If you absolutely have to,
you could take a cash advance from the card. Even
at night using a ATM. Remember the cash advance
is a charge and the fee is either part of that
charge or a separate charge.
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| Q. I have several cards. A.
I'd concentrate on the worst one as far as fees
and interest rate first. Just pay the minimums on
the others. But if you find you use one of the
other cards you'll then need to atleast pay the
charges while also paying the minumums each
month. Else you'll wind up with the other cards
maxed out even though you'll be paying down the
card you have targeted to pay off. The ideal
solution would be to round up these other charges
as you pay them, too.
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| Q. Are you saying I should forget the
minimum payments? A.
Absolutely not. You need to cover the minimum
somehow by the due date. Either with purchases
and the resultant rounded up payments or else by
paying the minimum itself by the due date. The
card company will charge you a late fee if you
miss this. Missing the minimum payment can also
hurt your credit score.
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| Q. Will you guarantee this program? A.
There's no guarantee here. If you think about it
there isn't any need for one. Just work the idea
out on paper and you'll see it works. It has,
too.
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| Q. What about refinancing? Or balance
transfers? A. Those are good
tools for getting one card or several paid off.
They are also good for getting a better rate or
deal with your current indebtedness. A refinance
or balance transfer can also hurt you if you
don't have a plan and then run up the card(s) you
just paid off. For the most part, if you transfer
the balance or refinance, I'd recommend
cancelling the paid off card.
If you really have the discipline to
follow the plan on both cards, you could then use
the program to pay off the balance transfer and
keep your newly paid off card current. If you
take out a loan make sure the rate is really
better over the full term of the loan. You'll
really need to think about this. Don't stop
following the program until you've done the
transfer or obtained the loan. And have paid off
all your cards.
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| Q. My card company charges $6.95 each
time I make a online payment. A.
And you still deal with them? You could pay by
check but I'd find a better card.
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| Q. What happens when I get the card
paid off. A. You'll probably
want to continue paying off the charges as above
but rounding up will no longer be necessary. Most
card issuers won't accept more than the amount
owed as a payment anyway. Else you could pay the
full balance due at the end of the month.
If you later build up a balance again
that you can't pay at once, you can revert back
to this idea until it's again paid in full.
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| Q. My banker thinks this is a dumb
idea. A. Then ask him for a
better plan. He'll probably recommend something
that you've never been able to do, like pay the
whole balance at the end of the month. Or pay all
the charges and a set amount each month. You
probably thought the same way when you "ran
up the cards". If you had done that you
wouldn't need this plan would you?
Else, your banker will suggest a loan
at a slightly better rate. If you don't cancel
the card, you'll most likely find yourself with a
maxed out card again in a few short months. And
even deeper in debt. The ultimate goal of this
plan is to get you disciplined and to think
smarter about credit in all it's forms. So think
it through.
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| Q. What about short and long term
savings? A. Do you have a
savings plan? Probably not unless it's something
like a 401k at work. Savings is important to you
and our economy as a whole. But I'm just trying
to get you out of credit card debt. You'll need
to make your own savings account decisions.
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| Q. But shouldn't I pay off the card
with my short or long term savings? A.
Only if that was the original goal of either of
your savings accounts when you started them. Or
just maybe if the original goal is no longer a
goal or has been acheived in some other way.
Again, I'm just trying to get you out of credit
card debt. You'll need to make your own savings
account descisions.
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| Q. I followed the plan and have one
card paid off but the others are still maxed out. A.
Then you didn't quite follow the plan. The
minimum payments would have paid down the other
accounts somewhat and any additional purchases on
the other accounts would have been paid as they
occured. If you followed the plan fully your
total credit card debt would be lower than when
you started.
Take a hard look and figure out what
you did wrong (if anything). There is some reason
why the other cards are still maxed out. Did you
miss a payment somewhere or forget to pay a
charged item? Interest? Fees? Did you just cover
the minimums with charges and payments?
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| Q. My bank is offering me a new card.
Should I take it? A. Are the
terms (fees and rates) better than any card you
already have? Will the starting credit limit let
you transfer the balance from the card you have
to the new card with the better terms? Remember
to transfer the balance and cancel the old card
then.
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| Q. I can't transfer the balance to my
new card but I want to get rid of the older (or
worst) one. A. Is that because
the new card has a smaller credit limit? In that
case you could begin using the new card but pay
the rounded up payments, fees and other charges
on the old one instead. Don't forget to cover the
minimum on the new card each month as well as
making sure you cover the minimum on the old one.
If you follow this modified plan,
you'll find the new card is maxed out or else the
full balance of the old card is on the new card
at some point in the future. Once the new card is
maxed out you'll need to immediately set your
focus on it and relegate the old card to the
minimum payments each month until it's paid off.
If you did it right you'll still owe less in
total.
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| Q. I can get a new card but they want
a bunch of fees up front. A.
Those fees on cards like that can run up quick
and reduce the available credit to almost
nothing. You'd probably be better off paying
those "fees" amounts to your original
card(s). Think real hard about it before
deciding. If you're getting offers like that,
you'll probably see an offer soon with a better
rate and terms.
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| Q. What if this never works? Or only
works until I get in a financial bind again. A.
Then you restart. And restart again. Remember the
$100.00 charge example above? As long as you have
a plan you're ahead of the game. It's when you
don't have a plan that the "challenge goes
unmet". Treat the charges for the period
"you're in the bind" as a big charge
and break them down into monthly payments as in
the example.
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