How I Am Using My Bank of America Credit Card to Pay Off My Credit Card Debt

trishasaccount By trishasaccount, 3rd May 2014 | Follow this author | RSS Feed | Short URL http://nut.bz/2h8yi2mh/
Posted in Wikinut>Money>Credit Cards

Obviously, the easiest way to pay off credit card debt is to make sure you are never in debt to begin with, but if you are not so lucky, I have another idea. I will begin by using my personal Bank of America Rewards Credit Card to pay off the balance, and then, I will use the card to add a small amount of income to my monthly budget. Here's my plan:

Part I: The Current State of My Credit

Right now, I owe $3,516.91 on a credit card with a $3,500 limit. So it doesn't take a genius to realize this is a major problem and will negatively affect my credit for a long time if I don't get this under control. At last check--approximately 6 months ago--my credit score is in the low 700s, and this amount of credit card debt hasn't really changed in a little over a year. Not so much of a problem since I already own my home (mortgage) and two vehicles (paid in full), but what if I want to refinance my home loan or finance anything else when my baby is born?

Part II: What Kind of Rewards Plan Does My Card Offer?

I am a very very lucky person, for the simple reason that my Bank of America card allows me to transfer money back and forth into the account via online transfer. In addition, the card offers 3% cash back on gas, 2% on groceries, 1% on everything else, and various special offers along the way. You can "cash in" on the cash back when you reach the $25 rewards amount, plus you get 10% cash back when you decide to do a transfer into your own Bank of America bank account. For instance, if you select the $25 cash back transfer to your own Bank of America checking account, they will transfer $27.50 into your account. Not a bad deal. Right now, I have $17.51 in rewards and $2.38 pending (will roll over during the next billing cycle).

Part III: How I Will Pay Off My Debt

1. Since I am $16.91 over my credit limit, there is no way that I can spend any money on the credit card and earn rewards, so for the next month, I will transfer $5 each time I go to the bank or weekly--whichever is more frequent. By the end of this month (May 2014), I will be under the limit on the card.

2. I will continue this trend until I have at least a $15 cushion in the card's account.

3. I will use the credit card like a debit card, and transfer money from my checking account rounded up to the nearest dollar. Complicated as that may sound, it will allow me to pay down the credit card, and earn rewards in small, manageable increments. In example, let's say I go to the grocery store to grab 3 gallons of milk while they are on sale for $2.99/gallon. The total bill, with tax, is $9.64. I will transfer an even $10 from my checking account immediately after I return home, and I will let the $0.19 in rewards ride until it reaches $25.

4. Once the account rewards balance reaches $25, I will make a cash transfer to my checking account in the amount of $27.50, and once again, transfer a rounded-up $28 into the credit card account to pay down the balance.

5. I will begin with small amounts (grocery store or drug store purchases under $10) until I reach the cash out amount, and then, I will begin using the card to fill up my gas tank. This will be crucial because the rewards for purchasing gas are at 3% of the total purchase.

6. Once the debt is repaid, I can use the card to pay for all my monthly expenses and then use the rewards to earn an extra $27.50 monthly. But more on this when it becomes closer to being a reality.

Part IV: The Basic Rules

There are some basic rules that I will follow to ensure that I don't shoot myself in the foot with this plan:

Do not use the credit card if I don't have the funds in checking to pay it off immediately.

Be patient with myself--it's fine if I can only pay off a few dollars at a time as long as I continue making progress.

Continue to build my savings cushion and emergency fund for the unexpected car expenses. There will be separate posts on these later.

In Conclusion...

I will give a monthly update, at the beginning of the month to detail how the repayment of my credit card debt is going.

As a side note, I am paying my debt in this way because I can't afford to do anything else, and I need to make the system work for me. When I say I can't do anything else, I mean that in Raleigh, North Carolina, as a teacher, I bring in roughly $1,400 per month (sometimes a little more with babysitting extras) and my expenses (not including groceries and gas) total $1,100 per month. I am 7 months pregnant and I would work more if I could, but unfortunately, I have had to tap into savings and use my credit card to pay for unexpected problems with my car or for medical bills I have incurred. This is one of the reasons why I have been researching multiple ways to earn money from home.

For Further Reading...

If you want to know more about my progress, please read:

How I Am Using My Bank of America Credit Card to Pay Off My Credit Card Debt (June Edition)

Please leave any other questions/comments you may have and I will address them in the next edition.

Thank you,
Trisha
http://www.wikinut.com/in/tjpkll/

Tags

Credit Card, Credit Card Debt, Low Income, Pay Debt

Meet the author

author avatar trishasaccount
I'm a 32-year-old mother, teacher, nonprofit worker, partner, and all-around exhausted woman. But there's no sense in complaining when life is so much stinkin' fun.

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Comments

author avatar cnwriter..carolina
4th May 2014 (#)

sounds very interesting...

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author avatar cnwriter..carolina
4th May 2014 (#)

good luck and let us hope some more work opens for you...

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author avatar Fern Mc Costigan
5th May 2014 (#)

Best on luck!

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author avatar Ptrikha
6th May 2014 (#)

Adventurous approach, but if you suddenly come across unexpected expenditure, it can get bumped off!

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author avatar trishasaccount
10th Jun 2014 (#)

After taking your comment into consideration, I have also been saving (nickles and dimes really) small amounts of money to put in a separate emergency fund so that hopefully my plan doesn't get derailed too quickly :). Thank you so much for the comment.

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author avatar Phyl Campbell
25th May 2014 (#)

Have you been to see a credit counselor? Your plan works on paper, but like Ptrikha said, one bump and you could get derailed. $3500 is not a lot of debt, really. You might be better asking for a credit line increase. Cards typically want your spending to be at 50% or less of the credit line. If the interest rate on the card is under 5%, the reward system you propose might work. If the APR is more than that, you may have problems. You mentioned having two cars and a mortgage. Does that mean you share expenses with another adult? If that person makes the same as you or more, you may consider the tax benefits of single-income families. If you are alone now, I might suggest selling one of the vehicles to eliminate the debt. Even if you have a partner, cutting back to one vehicle can be a great way to save money.
And now, I did say I was going to plug one of my articles. See if you can find "How Credit Counseling Helped My Family." I am a teacher like you. My husband and I got into financial trouble. Then we paid off $40K in 3 years. This was after paying the minimums at over 25% APR for 7 years. We never defaulted on any loan. We had cars and a mortgage. We rent our house now by choice. I hope that information in my article will help you. BOA may have friendly employees, but BOA is not your friend and will try to hurt your credit. Good luck!! I am rooting for you! !

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author avatar trishasaccount
10th Jun 2014 (#)

I have submitted a second article (an update) and "Part III" will address many of the concerns you brought up in your comment. Thank you so much for your questions and thoughts.

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