Being in debt is not fun. Unfortunately, many people do find themselves in debt, carrying balances on multiple credit cards. Even if you have debt that seems insurmountable, you can eliminate credit card debt on your own without using a debt consolidation service. While I think these debt consolidation companies could be helpful to some, they are, for the most part, charging you money for something that you could do on your own.
Gather all of your credit cards and make a list. On the list write down the name of the card, what you owe, the current interest rate, and the phone number for each card. Here’s a sample debt reduction spreadsheet that you can use.
Note: In the illustration, the 1st number is the balance, 2nd number is the credit limit, and 3rd number is the interest rate
Call each company and ask for a lower interest rate; also check what they can offer you in terms of balance transfer deals. If the first customer service representative is not helpful, either (1) ask to speak with a supervisor, or (2) hang up and call again. There are good reps and bad reps; you don’t want to waste time with the bad reps.
If a company gives you a better offer, feel free to share that information with the others — it might motivate them to be more generous.
Note: This step might be harder now, thanks to the economic climate.
Once you have negotiated your rates with your credit card companies, update the interest rates and order the cards from highest interest rate to lowest. In our example, card A offers the much-prized “no fee 0% APR” transfer*, card B and C provides a courtesy interest rate reduction, and card D won’t budge.
* As pointed out below, you’ll probably have to pay off a card before you are offered a 0% balance transfer, so your other option is to apply for a new card then complete the transfer.
The quickest way to save money is transfer balances from high interest cards to lower interest card(s)*. For example:
* Assuming there is no transfer fee. If there’s a fee, you will have to include the balance transfer fee in your calculation.
Also, take a look at the article Should You Transfer Your Credit Card Balance?
There are also a few things you can try:
Pay the minimum balance on card C and A, and concentrate on paying the most you can on card B. Let’s assume you pay:
If a card offers a “no payment” grace period, don’t pay anything and put that money toward the highest interest rate card. However, you have to be careful and keep track of when the first payment becomes due; many cards with a no payment period retroactively charge you interest for the entire period (from day 1) if you are late.
Once card B is paid off, snowball that monthly payment to card C. For instance:
Once the card is paid off, snowball that monthly payment to the next card so that you’ll be paying $140 per month on card A.