How to Pay Off Your Maxed Out Credit Cards with ZERO Cashflow!!!| @JustJWoodfin

Summary

This video script introduces a disciplined approach to tackling credit card debt through a method akin to 'velocity banking.' It advises individuals with maxed-out credit cards and no extra money to pay down their debts by using all available cash flow after essential expenses. The strategy involves making payments close to the statement date to report a lower balance to credit bureaus, thus improving credit scores and reducing interest charges. The script emphasizes the importance of lifestyle adjustments and strict financial discipline to effectively eliminate debt and build a savings cushion within the credit card balance.

Takeaways

• 😀 The video introduces a debt repayment strategy for individuals with high credit card balances and no extra money to pay down their debt each month.
• 🏦 It suggests a concept called 'velocity banking', which involves using discipline and possibly lifestyle changes to eliminate credit card debt.
• 💰 The strategy requires separating essential non-credit card expenses, such as rent or mortgage, and putting the rest towards credit card payments.
• 📈 The video uses an example of a person with a $4,000 monthly income and expenses, including a $10,000 credit card balance with a high 30% interest rate.
• 🔄 It emphasizes the importance of paying the credit card balance as close to the statement date as possible to report a lower balance to credit bureaus and improve credit score.
• 💳 The method involves using the remaining cash flow after essential payments to pay down the credit card debt, thus reducing the balance and creating a 'savings account' within the credit limit.
• 🚫 The video advises against spending on the credit card for a few days after making a payment to ensure the reduced balance is reported.
• 📉 As the credit card balance decreases, the interest charged also reduces, making it easier to manage the debt over time.
• 🔄 The strategy is to repeat this process monthly, gradually reducing the credit card balance and increasing the cash cushion within the credit limit.
• 🔄 By month 18, the strategy aims to bring the credit card utilization rate below 30%, which is a significant marker for improving credit score and potentially qualifying for a balance transfer card.
• 💼 The video concludes by emphasizing the importance of discipline, adjusting the strategy to personal circumstances, and becoming reliant on the credit card for spending while ignoring cash for daily expenses to avoid overspending.

Q & A

What is the main issue addressed in the video script?

The video script addresses the issue of managing credit card debt, particularly for those who are maxed out and struggling to make minimum payments.

What concept is introduced in the script to help with credit card debt?

The script introduces the concept of 'velocity banking' as a method to manage and reduce credit card debt.

What is the significance of paying off the credit card balance before the statement date?

Paying off the credit card balance before the statement date helps to lower the reported balance to the credit bureaus, which can improve the credit score and reduce the interest rate applied to the balance.

How does the script suggest handling non-credit card expenses like rent or mortgage?

The script suggests separating non-credit card expenses like rent or mortgage and placing them in a different account to ensure they are paid on time and not mixed with credit card debt.

What is the proposed starting point for managing credit card debt in the script?

The starting point is to transfer any remaining cash flow, after paying for non-credit card expenses, to the credit card to reduce the balance and monthly payment obligation.

How does the script propose to deal with the interest rate on the credit card?

The script acknowledges the interest rate but suggests that by reducing the balance each month, the interest calculated will decrease, and additional income can be generated to cover the interest payments.

What is the role of discipline in the velocity banking method described?

Discipline is crucial in the velocity banking method as it requires consistently transferring available funds to the credit card, avoiding unnecessary spending, and making timely payments.

How does the script suggest using the credit card to create a 'savings account'?

By consistently paying down the balance and only using the credit card for expenses, a 'savings account' is effectively created within the credit card limit that can be used for emergencies or other needs.

What is the importance of maintaining a low credit utilization rate?

Maintaining a low credit utilization rate is important because it shows credit bureaus that the individual is managing their credit responsibly, which can lead to a better credit score.

How does the script recommend finding additional funds to pay off the credit card debt faster?

The script suggests finding additional income sources such as gig economy jobs (e.g., Instacart, Uber Eats, Uber Lift) or odd jobs to cover the interest payments and accelerate debt repayment.

What is the final outcome of following the velocity banking method as described in the script?

The final outcome is the elimination of the credit card debt and the establishment of a disciplined financial habit that can lead to better credit management and potentially saving money.