How To Pay Off $35,000 In Credit Card Debt In One Month

Several years ago, I put around $35,000 on my one and only credit card thanks to a home remodeling project and a new watch purchase. My “reward” was a 1% rebate towards my home mortgage, which is not bad considering $350 paid to principal is thousands in interest savings over the life of the loan.

$35,000 is the most I’ve ever put on a credit card in one month and it felt kind of odd. But, I really wanted to create a new bathroom from a closet to add functionality and value to my house. There’s an amazing amount of stuff you need to buy when building a new bathroom: wall tiles, toilet, limestone, shower heads, copper pipes, sinks, mirrors, lights, deep soaking jacuzzi jet tub, lights, light fixtures, paint, doors, crystal knobs, skylight, ventilator and so forth. $20,000 in materials adds up quick!

The watch was a Stainless Steel Daytona that cost $9,600, which I promptly sold for a profit three weeks later because a friend begged me to sell it to him! For those who know watches, the Stainless Steel Daytona is one of the most coveted watches on the market, which can’t be bought in any store. You need a jeweler, connections, or a history of purchases to gain access to this particular watch. It’s a big waste of money, but one of my weaknesses that I so conveniently categorize as a hobby to justify.

Add on all the other normal purchases of food, insurance, membership dues and transportation costs, racking up $35,000 in credit card debt in a month is just as easy done as said!

THE SECRET TO PAYING OFF $35,000 In CREDIT CARD DEBT

When the bill came due 30 days later, I had a choice of paying the minimum (stupid), paying a portion of it (stupid), or paying it all (commonsense). I spent a good 15 seconds deliberating what to do, and came up with the following steps to show you how to pay off $35,000 in credit card debt.

1) Log into your bank account.

2) Identify which account (checking, savings, money market) has at least $35,000.

3) Transfer $35,000 to your linked credit card account and press send.

4) If you credit card account isn’t linked, send an electronic check for $35,000 from your checking account to the appropriate address.

5) Kick back and relax, knowing that you just got to borrow $35,000 interest free, while getting reward points in the process.

Pretty simple right?  There wasn’t any funky 0% credit card transfers, nor was there a liquidation of investments, or a loan from my 401K . The bill was just paid off, like all bills are supposed to be paid off every single month. There’s no way I was going to let the credit card company charge me 9.8% interest for that month.  Even with the 10-year yield below 3.5%, and inflation still benign, I cannot believe that the lowest rate I can get with a 780+ credit score is just below 10%. Ludicrous!

You might be wondering where the insight is. Well, it’s right in front of you. The reason why I can pay off $35,000 in credit card debt in one month is because I was approved by the credit card company.  No credit card company will give you a line of credit without checking your credit history and income level to make sure that you can pay. If they never checked, they’d surely lose a ton of money with poor creditors and blow themselves up.  Companies are not stupid if they plan to survive.

When you read stories about people paying off $70,000, $80,000, and even $100,000 in credit card debt, it’s not that incredible. The reason why they have $70,000-$100,000 in credit card debt is because they have a high level of income to support such credit lines. In other words, having such high credit card debt means you can afford it, otherwise, you wouldn’t have it in the first place!

DON’T WORRY ABOUT OTHER PEOPLE AS THEY’RE DOING FINE!

You wouldn’t lend an unemployed 22 year old college grad with $100,000 in student loans much money, if any. Whereas you wouldn’t mind extending a $50,000 line of credit at a 10% interest rate to a doctor whose been making $650,000 a year for the past 5 years and has a 780 credit score. Everything is aligned, just the way it should be.

The media tends to trick you with asymmetric information. There’s really little to worry about with the typical US consumer.  Only a small minority of people are delusional enough to spend more than they earn or have. Furthermore, everybody knows that not paying back what you owe is a highly dishonorable thing to do. The good thing is that credit card companies prevent you from blowing yourself up by giving you only what you can afford.

The next time you are amazed at someone paying off a huge amount of credit card debt, don’t be. Just like how no student gets into $100,000 in debt if they don’t plan to work in a lucrative field after college, Very few people get into massive credit card debt without being able to afford it. To do so would be like dropping dumbbells on your toes on purpose! You can never count out the US consumer. We are logical and strong like bull!

STRONG RECOMMENDATION

Check Your Credit Score: Take a moment to check your free TransUnion credit score through GoFreeCredit.com, a company I trust. 30% of credit reports have errors, which could put a serious hamper on your refinancing or new loan borrowing abilities. I had a $8 late payment I didn’t even know I owed crush my score by 100 points come up during my last refinance. The average credit score for rejected mortgage borrowers has risen to 729 due to more stringent lending requirements. Do you know what your score is?

Updated: 10/27/2014

Sam started Financial Samurai in 2009 during the depths of the financial crisis as a way to make sense of chaos. After 13 years working on Wall Street, Sam decided to retire in 2012 to utilize everything he learned in business school to focus on online entrepreneurship.

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Comments

  1. says

    That’s awesome and it also is good that you netted a profit on the watch. I’m still rocking out my $50 Fossil watch from a few years ago, so that’s definitely something I *cannot* relate to at all :)

    • says

      Thx. Fossil rocks!

      I used to be aghast at spending more than $500 on a watch, but check this out. If you can get the highly coveted time pieces such as the Rolex SS Daytona, Panerai Black Seal, IWC Big Pilot etc and sell for a 20% profit ($1,500-$2,000) in a short period, why not! The more you buy, the more they want to sell to you as many of these jewelers have a $50,000 minimum threshold until you can gain priority access.

      In essence, spending $10,000 on a watch is CHEAPER than spending $50 on a Fossil b/c you make money. Just like buying a rare $250,000 Ferrari is cheaper than a Ford Explorer. You just need the capital.

  2. says

    Interesting post and story to boot. Yes, the media does have a tendency to sensationalize and obfuscate facts. Looking at the glass as half full is certainly reasonable.

  3. says

    “Only a small minority of people are delusional enough to spend more than they earn or have.”

    I have to respectfully disagree here, although I wish you were right (from my perspective). There’s a huge segment of the population that will overspend because of basic ignorance.

    The negative savings rate in this country (until of late) illustrates this perfectly for me.

      • David M says

        Sam thanks for the Laugh!

        I’m not replying to this email as I know what you will say – exactly what you wrote to Macrochesse!

      • david M says

        We have had this discussion many times at least twice in the past and we are just going to agree to dsagree on this one! :)

      • says

        I don’t overspend but 75% of the people I know do, chronically infact. I know so many people who have overspent to the point they lost their house, cars repossed, had to move back in with parents (I am talking over 30, married with kids).

        So sadly, yes there are a lot of people who still overspend, but more people are coming to their sense I think and many people in bad situations now are that way from earlier mistakes and they are now learning from it.

        Great story btw. :)

        • says

          Why do you think people overspend though? Seriously, is that not completely illogical to spend until you lose things? Or, is it completely logical since there will always be bailouts?

    • David M says

      Don’t worry about me I do not overspend.

      What I was first referring to is, I read this post early this morning, when no one had posted. I knew we would not agree and thus I did not post. However, I knew how you would respond to anyone who thought more people than you do overspend. This is why I wrote, “thanks for the laugh” I laughed because I knew what you would write which made me laugh and smile.

      I posted about how I made money using credit cards – not sure if it got lost or whether you deleted. If you deleted, I understand as it was not really on topic. However, you should write a post that allows people to write about all the things they have done to “make money” with credit cards. Or maybe I should create my own blog like you told me a few months ago!

      I’m off to Japan for vacation tomorrow – flying first class with frequent flier miles! (Most of the miles were from credit cards!

      • says

        Hmmm, didn’t delete anything. All comments are welcome.

        If you don’t overspend, then you agree with me and prove my point that consumers are fine, b/c nobody overspends!

        Have a great trip. I wouldn’t expect anything less than first class from you. If you’d like to write a guest post, let me know.

  4. says

    The people I know that get in to trouble with credit card debt are not the ones that have one card with a huge credit limit. It is the people that take out numerous credit cards and charge them all up that seem to get in financial trouble instead.

    • says

      But when you apply for another credit card, the company will heck to see what other credit cards you have and will o Ly approve if you are deemed credit worthy. If not, then no card….. No?

      • says

        I know when I was in college, there was no shortage of credit card offers being sent my way. I could have really gotten myself into trouble. I did get a few cards, but fortunately, I did not charge them up. I did have some late payments though, and the offers kept on coming.

        I can’t say what the exact rules are within credit card companies are when they decide to offer a credit card to certain consumers. However, the people I know that got in trouble had many cards and charged them up. Maybe when they got the cards, their credit was good. Then bad circumstances happened and they charged up every card they had.

  5. says

    Yes, but there is a big BUT Sam. While people are not given lines of credit without a background check, not all use it responsibly. Many people can do what you did without a problem, but some people screw up.

    But comparing the government to a consumer (as you did in your Tweet) brings up entirely different issues. Yes, the government can write a check to pay off any loan. But unlike a consumer, if the bank account doesn’t have enough to pay the check, the government can just make up money to fix the issue.

    I don’t have to explain the long term impacts on the economy of one person screwing up to the government getting into an overwhelming level of debt to you.

    • says

      The media has blow credit card debt way out of proportion. Nobody spends what they don’t have, that’s just stupid to put yourself in financial peril. One might have a financial mishap, but nobody conscientiously tries to screw themselves.

      Good point about the government and their printing press! Which is why we should never give govt more than we have to, as they’ll spend recklessly!

  6. says

    This is an example how you can make money with money. I used my rewards credit card for a minor remodel for my daughter’s condo. It was a quick 25,000 miles in less than three weeks and yes, there was cash to pay it off immediately. Having the cash provided the opportunity to make additional money!

  7. says

    Rolexes smack of nouveau riche, especially the “limited edition” models. I’m still amazed how many people buy into their marketing. It’s probably a good thing that you sold it off to your friend, at a profit no less.

    • says

      Is there something wrong with nouveau rich? How long does someone have to live to not be considered? Next time you go to a watch store, ask if you can buy a SS Daytona. Would be interested in seeing their response. Thx

  8. says

    Interesting perspective.

    There are certainly no shortage of these stories, every finance magazine no matter how institutional has at least one per issue, and Yahoo throws them on the homepage at least once a week. At the end of the day, most people have the earning power to make it happen, pay off their bills, and retire debt.

    The truly poor, though, don’t. Most don’t even have access to a checking account, let alone a credit line.

    The US consumer is in fine shape, but the future retiree isn’t. That’s my only concern.

    • says

      We don’t have to worry about the poor ruining their finances and destroying the economy bc credit companies won’t extend much credit beyond their income and credit score. Which means they won’t blow themselves up due to greed or delusion.

      Poor or rich, we will all spend in line with our income.

  9. Jonathan says

    “Just like how no student gets into $100,000 in debt if they don’t plan to work in a lucrative field after college…”

    I don’t think this is true – LOTS of students rack up significant student loan debt with no real idea what they want to do after college, and no real sense of how much debt they are accruing. To many college students, any number with 3 zeroes behind it is a fairly abstract concept. And today, student loan debt is so common that many students simply EXPECT to have large loans when they graduate, because “everyone does, and therefore it’ll surely work out fine.”

      • says

        My student loan debt was 35k… another friend of mine about 20k…another friend about 65k…and then another at 200k (this one has yet to graduate, and will be in a low paying field). I dont mean to beat back everything you say Sam, but I these aren’t out of the ordinary examples, at least not with the people I know I guess.

        As far as the mentality of expecting to have large student loans… I certainly was in that school of thought… I figured I made out great with only 35k…now years later, I wish I had prevented the loans before they happened.

  10. says

    I had never thought of that, but that’s a good point — people are extended credit in proportion to their income, and therefore the people with the capacity to have higher debt also have higher incomes.

    Whenever this is not true, we end up in a subprime mortgage disaster, as we’ve seen in the past few years.

  11. says

    Yes people are extended credit according to income, however, I dont remember ever sending over a pay stub to the credit card companies? Do any of you?? I stated it on a credit request application. No I dont spend more than I make, but at one time I did, and by quite a bit…that led to increasing debt month over month.

    I would also bet that that the recently unemployed, the one’s who had credit prior to being laid off, are spending more than their earning…. I doubt unemployment makes up for it all. How about all those people that took out interest-only loans, only to have interest come due and not have the money to pay their mortgage each month? Often times they put other expenses on credit while paying their mortgage, until everything caught up with them. No that wasnt me, but I do have more than one friend in that situation…and the housing bubble burst for a reason.

    I agree with media blowing just about everything out of proportion…I mean corporate stocks dont even trade based on balance sheets anymore, just speculation. But that doesnt mean that some of it isn’t at least partially true.

    • says

      Unemployment checks for 99 weeks and savings help.

      Interest only loans which are resetting now are resetting LOWER as rates have gone lower, so they are high fiving themselves for not taking out long term duration loans.

      Just saying, things aren’t as bad as they seem, which is why I was a heavy investor in the markets back in June, 2010. And today, things have discounted a lot, but I don’t see a massive pullback at all.

  12. says

    Sam,

    The post doesn’t make sense at all. It assumes that money is sitting in an account to pay the bill in full every month for every single person, and that is just not true.

    If 1/1/2011 I receive a check for 10K, spend 10K from checking account and still charged 4K – then I had spent 104% of my income.

    It seems like you are just saying I am more responsible than most people which is fantastic lol

  13. says

    I really wish everyone had your common sense Sam, but sadly I don’t think they do. You talk about how paying back debts is the honourable thing to do, and I completely agree, but I believe you overestimate the average consumer.

    Take a look at all the people that are buying into this whole, “strategic foreclosure” practice. I think that people are beginning to take their cue from the government and not exercising basic money management principles. Instead they are using the modern day principles of: “I want more now, we’ll worry about the future tomorrow.”

    • says

      Strategic foreclosure is actually quite brilliant, and there are 7 non-recourse states that allow you to do so. I have a post about this that I’ll publish someday. Cheers

  14. says

    Sam, I love pretty much all of your articles, but Im starting to think you are purposely messing with us on this one. I think what you did with your credit card is great, but the assumptions you are making seem to contradict most of what we have experienced. There are a ton of personal finance bloggers who started blogging because of the severe debt they have experienced. In fact, a very good portion of the Yakezie. LoL you have to be messing with us…consumers tend to be illogical.

    • David M says

      I also think Sam does not 100% believe all the talk about people being rational and thus never overspending. However, he always replies back that he does.

      However, being a good writer and having opinions that are a little out of the norm but defendable -is a great way to bring traffic to your sight. Sames opinions and great writing – certainly make me look forward to seeing a new post from him!

      • says

        I agree with you guys- Sam, are you messing with us? ;)

        I was expecting to see a huge revelation on how to pay off $35K in credit card debt, and saw the simple answer and was surprised.

        Some people believe that credit card debt isn’t debt if you can fully pay it off when the bill is due.

  15. says

    I remember getting tons of credit card offers as a student. Credit card companies can be so evil that way trying to lure poor students into the dangerous world of plastic money. Interest rates on credit cards are horrible these days too. Gone are the days of 7-9% interest.

    • says

      Indeed… with government rates so low, yet credit card rates still so high, the spread has blown out and it should make people MORE vigilant to pay off their bills every month.

  16. says

    You know, I think banks do offer to extend credit that is a bit more than you can afford, in an attempt to get you to spend and rack up fees for the bank. But then again, if you fall into this category, you may be a financial dumb ass!

  17. says

    I just looked up the Stainless Steel Daytona! That’s quite a watch!!! My roommate from college also had a hobby for collecting watches!

    I think it’s a great idea to use the credit card for large expenditures like this, provided like you said, that you have the money to pay it off. 1% cash back is $350! Not bad!

    • says

      Ha, it’s a cool watch, but it’s not in short supply as the 2nd hand market makes it out to be. Artificially withheld, like diamonds. Don’t get into watches, unless you plan to trade em!

    • says

      Don’t think I’m a minority. I dont know anybody who doesn’t pay their bills off. That would be irrational. I’m sure you pay your bills every month and only buy what you can afford. All the commenters here do the same.

  18. says

    You made me gulp at your expenditures on your bathroom!!! We are renovating our master bathroom and small downstairs bathroom right now, and our spending is in the few thousands. This is for three new vanities, two toilets, closet storage/shelving, new tiled floors, and a new bathtub. Of course we are doing most of the work ourselves, so that accounts for a lot of savings.

    I hope your new bathroom is great–sounds like it is:).

    • says

      It’s great and worth every penny. These Ann Sacks tiles and Waterworks fixtures aren’t cheap, but I said what the heck. A bathroom with a great soaking tub is one of the things I enjoy most. So relaxing and peaceful!

      I’d screw things up if I did the bathroom myself. Happy to pay a professional.

  19. says

    Wow, your $35k month makes my max of $7k look like small potatoes and I was charging six months worth of rent on top of the usual!

    I have to agree with the other commenters that consumers are not all rational and can loose track of how much they spend in a month (or months if they never check their statements). Justin made a good point that most information on an application is self reported as well. However, I also agree with you that the media does tend to fear monger in this area and every other area.

    • says

      It’s my one and only credit card, so it’s not that impressive. Some folks have like 5 credit cards with $8,000-$10,000 credit lines each. Now that’s more impressive!

      I generally never put on more than $3,000 a month. This was just a special month of remodeling.

  20. Pickapen says

    “No credit card company will give you a line of credit without checking your credit history and income level to make sure that you can pay. If they never checked, they’d surely lose a ton of money with poor creditors and blow themselves up. Companies are not stupid if they plan to survive.”

    Sorry dude but you are wrong with half of that premise, that may have been true with that credit card u got back in 1975 but today there is rarely an income verification process with major banks, you see verification done with most credit unions because of their stricter underwriting standards but not the majors simply because the majors process applications in massive volumes;generally relying upon the credit report. Occassionally Amex will conduct a FR and have u send in documentation.

  21. ineed35000 says

    My wife and I can’t have children and we going to adopt. Our adoption is going to cost us $35000, I make $37,000 a year and my wife makes about $45,000. I wish it was that easy to “transfer $35,000 over” and pay it off in one month. Easy for you to say.

    Besides the $35,000, we normally have around $4000 in our savings that is “our” money that we put there. I consider that pretty good for being 30 years old and only making what I make. That’s about 12% of my salary. If $35,000 was in your savings, assuming thats about 12% of your salary, then I guess you would be making close to 300k a year. I pay stuff off all the time $1500 here $2000 there. So when you brag about your $35,000 payoff in one month, you don’t impress me because its the same thing as what I’m doing and most other people as well. So go buy another $10,000 watch and make yourself feel good. I’ll buy a $100 watch that will tell time just as good as the ones only special people have access too.

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