Will Suze Orman’s ‘foolproof’ credit card payment approach work for you?

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While her approach can be clever, it can also backfire.


Key points

  • Suze Orman has indicated that paying off credit card debt can improve your financial situation.
  • She suggests a “foolproof” method for managing credit card debt.
  • She thinks using a balance transfer can help, but it might not be the right choice for everyone.

Paying off credit card debt can definitely improve your financial situation. Credit cards tend to have high interest rates, making them an expensive type of debt. Their high finance charges combined with low minimum payment requirements can mean that many people end up in credit card debt for decades.

That’s why it makes sense that finance expert Suze Orman suggests prioritizing paying off credit card debt as a financial goal. “Make this the year you tackle that credit card debt once and for all,” Orman suggested in a blog post on Oprah.com. It will make you and your family stronger and happier – forever.

But while most people know they’d be better off freed from credit card debt, it can be hard to figure out how to do that. Orman has an answer to that too. In fact, she suggests a “foolproof credit card strategy,” but is this the one that might actually work for you?

Orman’s strategy to permanently pay off credit card debt

Orman’s guaranteed method for debt repayment is to follow a few simple steps. She suggests:

  • Trying to qualify for a balance transfer credit card that offers an introductory interest rate of 0% for a period of time
  • Avoid loading anything new on the map
  • Repay the balance as soon as possible

If that’s not possible, she thinks the best approach is to pay as much as possible on the card with the highest interest rate until the balance is paid in full. Then redirect all your extra money to the card with the next highest rate and continue with this process until all debts are paid off.

Should this strategy be adopted?

Orman’s strategy may make sense under certain circumstances, but it’s far from foolproof. In fact, problems could arise and potentially lead to failure.

First, getting a balance transfer will generally only save you money if you’re likely to pay off your balance in full before the promotional rate expires. If you can’t do this, you’ll be hit with balance transfer fees – which are usually around 3% to 4% – and you could end up with a high remaining balance by the time the introductory rate drops. finished. This could make paying off your debt even more expensive, especially if you still end up owing a lot when the 0% rate expires and the balance transfer card has an even higher rate than your old card debt.

Getting a balance transfer is also risky if you haven’t demonstrated an ability to live within your means. The transfer will free up credit on the cards whose balance you’re transferring, so you risk reloading those cards and owing even more if you’re not sure you’re in control of your spending.

Orman’s approach is mathematically sound

Orman’s approach to debt repayment—paying off the highest-interest debt first—is also mathematically sound. But other finance experts, like Dave Ramsey, suggest it’s best to focus on paying down debt first with low balances, even if the interest rate is lower. Ramsey thinks you’re more likely to stay motivated if you do this because you score quick wins. You should think about whether you can stay motivated without this extra psychological boost.

Ultimately, Orman’s advice can make a lot of sense if you’re committed to paying off your debts, can qualify for a 0% APR balance transfer card, and are sure you won’t top up again. your old cards. But the strategy won’t work for everyone, and you need to seriously consider whether it’s likely to pay off before moving forward.

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