If you are looking for a way to reduce monthly interest payments on your credit cards, the credit card shuffle is for you.
Who benefits from the credit card shuffle?
Anyone who has debt on high interest credit cards can benefit from the credit card shuffle. People with excellent credit can benefit from the credit card shuffle if they have credit instruments with high interest charges. This isn’t just for those who are over extended or have a low credit score. If you recognize yourself in any of these descriptions, it is time to shuffle.
- Do you have store credit cards? Store credit cards are typically seen as weaker credit instruments. They usually have reduced credit requirements and carry higher interest rates.
- Do you carry a large number of credit cards? If you carry a large number of cards with a variety of interest rates, you would probably benefit from the shuffle.
- Have you recently seen a dramatic increase in your credit score? If your credit score has recently improved but you are still struggling to pay off your debt, you may benefit from the shuffle.
Remember, the credit card shuffle isn’t just for people who have bad credit or too much credit. The evaluation process is a valuable one to go through from time to time, so those with good credit and low interest rates can still benefit from going through at least the first steps of the process.
Steps to shuffle credit card debt effectively
- Order a free credit report with credit score. Each year you are eligible for a free credit report from each of the three credit reporting agencies or bureaus. If you haven’t ordered your report for this year, make sure you check it and clear up any errors.
- List your debt – The name credit card shuffle may make this process sound informal, however, the most important thing you should do is sit down and take stock of all your debt. Write down balances, minimum payments, available credit remaining and the interest rates you are being charged. If the interest rate is due to go up on a scheduled increase, make note of that information as well.
- Write down contact information for all creditors. – Check your statements or find their phone numbers online and start making phone calls. Ask each to reduce the interest rate you are paying. Many companies will reduce your rate with no questions asked. Other companies will want to know if you are going through financial difficulties or whether you expect to. The important thing is to have each card at the lowest rate possible.
- Update your information – After making all the phone calls about rate reductions, update the information you organized in step one of this process. Pay particular attention to the interest rate being charged and credit available on each source.
- Now, it is time to shuffle! – Find your lowest interest rate credit card or credit source with available credit that allows you to do a balance transfer or no fee / low fee cash advance. Use that available credit to pay off or pay down the card or credit source with the highest interest rate. After the lowest rate credit source is exhausted, move to the next lowest and use that to either continue paying down the highest interest rate card or start paying down the next highest interest rate item. Continue on with this pattern until you have paid off as much of the highest interest rate credit as possible.
- Pay debts with highest interest rate first. – Once you are finished with the shuffle, start paying off the card or debt with the highest interest rate first. Pay as much over the minimum payment as possible to reduce your debt more quickly and pay less in overall interest charges.
How much can the shuffle save you?
The following are examples of how much money the shuffle can save you. Keep in mind these examples are oversimplified and don’t take into account any late fees, insurance or cash advance fees you might incur. The Federal Reserve has a simple to use calculator to figure out how long it will take at different interest rates or payment amounts to pay off your debt, so take the time to figure out your personal debt repayment schedule. It’s a great idea for the overall health of your finances.
Scenario – You have good credit but too many high rate store cards
Imagine in this scenario you choose to pay only the minimum monthly payments. The first table shows a snapshot of your credit picture before the shuffle. In the second column you see the bank card has a $5000 credit limit, so there is room to shift debt to that card.
| Scenario – Pre shuffle | ||||
|---|---|---|---|---|
| Card Name | Balance / Avail. Credit | Interest Rate | Min. Payment (2%) | Total Interest Charges |
| Clothing Store Card | 1500 | 18% | $30 | $2906 |
| Department Store Card | 600 | 22% | $20 | $393 |
| Bank Credit Card | 2500 / 5000 | 14% | $50 | $2842 |
During the first stages of the shuffle the bank card company agreed to a rate reduction from 14% to 10%. Even without that rate reduction, shifting the higher rate store card debt to the bank card will save on interest charges.
| Scenario – After the shuffle | ||||
|---|---|---|---|---|
| Card Name | Balance / Avail. Credit | Interest Rate | Min. Payment (2%) | Total Interest Charges |
| Clothing Store Card | 0 / 1500 | 18% | $0 | $0 |
| Department Store Card | 0 / 1000 | 22% | $0 | $0 |
| Bank Credit Card | 4600 / 5000 | 10% | $100 | $2617 |
| Interest saved after the shuffle – $3524 |
Scenario 2 – You have several bank cards with a variety of rates
Imagine you have collected a variety of bank cards and have been slowly paying them down with older cards carrying higher rates. As market rates lowered you would get a new card to take advantage of introductory offers. Now you find yourself a bit overextended. The shuffle will help you gain control over this situation.
| Scenario 2 – Pre shuffle | ||||
|---|---|---|---|---|
| Card Name | Balance / Avail. Credit | Interest Rate | Min. Payment (2%) | Total Interest Charges |
| Platinum Card | 1500 / 5000 | 15% | $25 | $2575 |
| Gold Card | 1200 / 3000 | 18% | $25 | $1800 |
| Silver Card | 2500 / 5000 | 14% | $50 | $2842 |
| Blue Card | 1000 / 5000 | 12% | $25 | $450 |
In the second table you can see that all but the Blue Card agreed to a rate reduction. After shifting card balances to those with the lowest interest rates your interest savings is substantial, your debt is paid off more quickly and you didn’t have to apply for new debt to pull this off.
| Scenario 2 – Post shuffle | ||||
|---|---|---|---|---|
| Card Name | Balance / Avail. Credit | Interest Rate | Min. Payment (2%) | Total Interest Charges |
| Platinum Card | 1500 / 5000 | 12% | $25 | $1390 |
| Gold Card | 0 / 3000 | 14% | $0 | $0 |
| Silver Card | 4700 / 5000 | 10% | $100 | $2842 |
| Blue Card | 0 / 5000 | 12% | $0 | $0 |
| Interest saved after the shuffle – $3504 |
The credit card shuffle is an excellent way to manage your credit, reduce your interest fees and pay off your accounts more quickly without applying for new debt.