Why Banks Don’t Want You to Use the Velocity Debt Payoff Strategy

Banks want you to think that debt is a serious problem that requires a strict budget and sacrifice. But what if I told you that the banks themselves have created a system that allows you to pay off your debt significantly faster than they let on? The velocity debt payoff strategy is exactly what banks don’t want you to know about.

Let’s start with how credit works in our current monetary system. When you borrow money from a bank, you’re essentially lending it back to them by paying interest on the principal amount borrowed. This creates a cycle of debt that seems impossible to escape. But what if I told you that there’s a mathematical trick hidden within this cycle?

The key is velocity. Velocity refers to how quickly money moves through the economy. When you borrow and repay your credit card balance, you’re not just paying off the principal amount; you’re also redeploying your money in the form of interest payments. This means that the time it takes for you to pay off your debt is actually decreasing, even as the total amount borrowed remains constant.

For example, let’s say you have a credit card balance of $1,000 with an interest rate of 20%. If you only make minimum payments, it’ll take you 10 years to pay off the principal amount. But what if you’re able to earn 5% interest on your money? Suddenly, you’ve got a new source of income that can help reduce your debt faster. By redeploying your $1,000 towards interest payments and earning more interest in return, you’re effectively shortening the repayment period.

Now, here’s where things get interesting. Banks don’t want you to know about this because it means they’re losing control over your debt. If you can pay off your credit card balance faster than expected, you’ll be paying less interest to the bank and taking on less risk for them. This is exactly what banks want to avoid.

The rate decay effect also comes into play here. When you borrow money at a fixed interest rate, there’s a built-in mechanism that causes the rate to decrease over time. This means that as you repay your debt, the interest rate itself will start to erode, making it even cheaper for you to borrow in the future. But what if you’re able to earn more interest on your money than the rate decay allows? Suddenly, you’ve got an even bigger advantage when it comes to paying off your debt.

So how can you use this knowledge to your advantage? The key is to redeploy your money in a way that takes advantage of velocity and rate decay. Instead of just making minimum payments, try to earn more interest on your money than the bank is charging you. This might mean putting your excess cash into high-yield savings accounts or investing in assets with higher returns.

In conclusion, banks don’t want you to use the velocity debt payoff strategy because it allows you to cut your own paycheck – I mean, debt payoff time in half. By redeploying your money and taking advantage of hidden mechanics like velocity and rate decay, you can become a master of your own financial destiny. So next time you’re tempted to just make minimum payments on your credit card balance, remember: the banks are working against you – but you don’t have to be.