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TRUMP UNIVERSITY WEALTH BUILDING 101

but keep in mind that you still must repay much of what is owed because of
the new bankruptcy legislation.
If, and only if, you are determined to discipline yourself in using credit
cards from now on, consider canceling your old card(s) and transferring the
balance to new cards that offer a low “honeymoon,” or zero-interest intro-

ductory rate for the first year. You may be able to cut your interest payments
substantially, which means you can direct more money to paying off the bal-

ance sooner. Make sure that you ask and confirm, in writing, that any balance
transfers aren’t counted as cash advances by the new lender, so interest accrues
at a much higher rate.
Then, after doing your research on available rates, play the credit card
game. Contact online sources such as bankrate.com , cardratings.com , and
cardweb.com to compare card offers. Call your current company and ask them
to match your new offer, or say that you’ll switch. If you do switch, eliminate
the old ones first. Transfer balances, destroy old cards, and cancel the account

in writing. Don’t order new cards until you do; if you don’t take this step,
you’ll simply have more cards to get you into more trouble, and more debt.
Transferring balances reduces the amount of interest paid and accelerates
the elimination of your debt. Do not fall for the ploy of refinancing old debt

for new debt by accepting lower payments and a longer payoff. Keep your
payments level. That way, more will go to principal and decrease the time
to pay off the debt.

The same applies for rolling debt into a home refinance or second mort-
gage. This is a huge trap created by lenders, not to provide you with relief,
but to make them rich. Don’t play their game, which is to transfer the balance
and only pay the lower minimum payment during the teaser period—and
then be right back where you were in six months to a year when the rate
ratchets up. The smart thing to do is to use the lower interest rate as an
opportunity to terminate as much of the balance as possible.

Habit 2: Establish Your Debt Elimination Plan

The second key to escaping from the trap of debt is to establish a good debt
elimination plan. We mentioned these plans in Chapter 5 . Here’s how these
plans work: You commit 10 percent of your gross income to your minimum
monthly credit card payments. If your gross income is currently $3,000 a
month, and your minimum monthly payments are $1,200, you now start
paying $1,500 a month toward your debt. Don’t add that 10 percent to each
of your debts—put all of that money on the debt you can eliminate the fastest.

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