Credit Card Debt

Last month, Miriam wrote a very good blog on Five Tips to Help you Stop Using Credit Cards. It’s very interesting, and good advice for those who need to get a handle on their spending (which would be the overwhelming majority of us!) If you have a lot of debt, you may want to add another couple of steps – first, negotiating a better interest rate.

Some night when you’re not stressed, take out all your cards and their statements. Arrange them from high to low interest. Is there a big range? Assuming that your credit isn’t in shambles, you shouldn’t be paying more than 12% or 13% on your highest card (and that one ought to have a substantial reward tied to it.) Most people just don’t bother to credit card shop. DO! It can be a huge money saver.

First, if you have a high percentage credit card, ask yourself why? Maybe it’s a company that you really like and have a good history with. If you’re reluctant to change for one reason or another, you don’t have to. Try calling them and asking to speak to a supervisor. Always ask to whom you’re speaking if they don’t introduce themselves. It puts them on their toes, and your responses are usually better. Politely and calmly tell them that you have the opportunity to switch to a much lower rate credit card, but that you like their service and have a positive history with them and would like to stay. Tell them you’re having a hard time justifying the extra cost, and ask if they have a lower interest rate one available for good customers.

My dad recently did this and had one of his cards lowered by 7%. Just for asking. Over the life of his card, that is going to add up to some big bucks. Total cost for this reduction: 15 minutes of his time. Even the call was free.

If they say they can’t help you, thank them for their time, and ask what the steps are to cancel your card. Even if you don’t do it right away (you may not want to, but simply to take all the debt off of it), it lets them know you’re serious, and they may be able to find another deal for you. Always be polite. Always. If they can’t help you, be prepared to switch to a low or zero interest card. I’ll show you some of the better ones in the next blog.

Note: If your credit is really poor, you don’t have a lot of negotiating power. In this case, it’s much better to simply hit the cards hard, pay them off, then start anew.