Author Topic: Reducing Your Credit Card Debt  (Read 5337 times)

Offline Mark Austin

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Reducing Your Credit Card Debt
« on: August 17, 2009, 11:31:27 AM »
Reducing Your Credit Card Debt

The purpose of this report is to help you reduce your credit card debt (and get peace of mind!). But before we do that, let's discuss how to avoid major credit card debt before it starts. I think you will agree with me that in today's economy it's a challenge for everyday people like you and me to keep up, and it’s really easy to get into credit trouble. So if you are just start learning the ropes in the world of credit cards, there are a lot of things you can do to avoid credit card debt before it sneaks up on you.

This is an outstanding goal for you if you are just getting your first credit cards. If you know or talk to anyone who is battling tens of thousands of dollars of credit card debt, you know what a burden it can be. Once credit card debt gets that high, the time it will take even under the best of conditions to bring it down runs into the years if not decades. And for all that time, thousands of dollars of money goes down the drain to credit interest that doesn't buy you any food, tickets to the movies or new clothes. It just goes away with no value to you at all.

But if you are new to the world of credit, getting a credit card is a good thing. But once you get one, keeping it under control should be your main objective. You will find it amazingly easy to use a credit card once you get it. In fact, the retail world makes it difficult to conduct transactions any other way. You can pay for gas at the pump that way and even charge your groceries at the grocery store.

And while all of these great uses for credit are helpful, you can end up with a whopper of a credit card bill at the end of the month. And if you don’t pay that bill off, that is the first step on a lifelong battle with credit card debt.

So there are some guidelines you should follow to both use credit responsibly and also keep building your credit rating which has a real value to you. Remember that what the credit card companies don’t tell you is that making a charge on a credit card is a loan. Even if you just charge ten bucks to go to the movies, you took out an unsecured loan to finance that movie ticket.

Once you start using a credit card, keep in mind that you will be paying back everything you charge on it. It's NOT free money. A good practice is to save every receipt every month and keep a running tally of what you have spent on your credit card. Now you can you use that to cross check your credit card, it keeps you honest because each time you add a charge to your credit card, you can update your tally so you know for certain that you will be able to pay it off when the bill comes.

Paying off the credit card each month is the number one best way to keep your credit problems under control. Now it isn't a bad idea to let a little bit of the debt drift from month to month. This builds your credit history and credit rating which will serve you well down the road when you want to qualify for a larger purchase like a new car or a home loan. Staying on top of your credit and what you are putting onto your card, will help you develop the kind of habits that will lead to a lifetime of good!

Zero Percent Credit Card Offers

The desire to climb out of credit card debt is universal for anyone who is fighting to keep their head above water in today's economy. And it isn't an isolated problem. More and more people are having big problems with credit card debt especially these days when it's so easy to use credit on a daily basis even for the smallest purchases.

There is something a little strange then about credit card companies coming in with offers to help you climb out of credit card debt when its they that are the problem in the first place. It’s almost like a drug pusher pushing a new drug that can get you off drugs, but the drug he is pushing is just as addictive as the last one. But when you get offers for new credit cards each month, they often are pushing plans to help you get out of debt by going into debt to them.

Probably the most difficult offer to over look is the one that lets you do a balance transfer of some or all of your debt and pay no interest on it. These are often called zero percent offers and they have skilled marketing people write the copy for these offers so you are prone to believe that you really are going to be able to have a loan paying no interest, so you can just pay off the principle and that’s that.

So, are these zero percent credit card balance transfer offers for real? Well they are in the sense that they might transfer some of the funds and yes, the interest rate you will see on the first statement will be zero percent. But, like all things, there are catches and things to look out for. You have to remember that the credit card companies are entirely in the business of collecting interest. They don’t do anything else. They offer no value to society, build no roads or hospitals, sell no food or medicine, make no TV shows to make you laugh. They sit there, house your debt, collect interest and try to talk you into running up more debt.

That is there only mission!

So when you get a zero percent offer, they plan on recovering the lost money from the time they support your debt and you pay no interest. One way they do that is with a transfer fee. They will almost always charge you a 3-5% balance transfer fee with a minimum and sometimes a maximum value. Read the fine print carefully to make sure you understand how much this is going to be and that you agree to it. But be aware that the transfer fee is nothing more than disguised interest. So calculate that against the interest you would have paid leaving the debt where it is sitting now before you cash in on a zero percent balance transfer.

Also you will rarely see a zero percent balance transfer that is not for a very limited time frame, usually no more than three to six months. So with the transfer fee factored in, you have to wonder if the effort of moving the money was worth it. And at the end of the introductory period, they are going to raise your interest rate to something that they, the credit card company want it to be.

Be absolutely sure you know what that interest rate is going to be and that they live up to that stated level of interest. If you enjoy that zero percent transfer for three months and then face years at 21% interest, you did not win in that transaction, the credit card company did.

Getting Your Credit Card Debt Under Control

Credit card debt is the kind of thing that can go from a convenience to a cruel taskmaster in a very short time. Just because you may have a credit card debt problem doesn't mean the you are an irresponsible person. It only takes a few bad breaks to drive your debt level dangerously high. Unemployment, a few unexpected medical bills, home repair costs or other unexpected expenses and before you know it, you have a big problem.

There are a lot of advertisements for credit card debt consolidation. The first word of caution we all should have about using these services is be careful. A good rule of thumb is that if they have money to advertise on television, they are going to make money off of you in some way. If you have bad credit and few resources to tap to get that problem under control, the interest rate on the debt consolation could be just as much of a hardship as the debt itself. But there are good services out there too, so just shop wisely.

It’s a good idea to have a strategy for taking on no new credit card debt and starting to turn the corner and begin dealing with the problem. And part of that strategy is using the resources you have. The biggest asset you may own is your home. Now, most of us are hesitant to use our homes as collateral to get our credit levels down. But if you have a fair amount of equity in your house, it can be a tool to get a second mortgage that has a favorable interest rate that is capped so it doesn't float up and down at the whim of the lender.

A good place to start finding a good home equity loan is the lender who is handling the loan now. If the company that handles your finances now is doing a good job and doing business with you openly and fairly, you can get to them to negotiate a loan that both gives them some interest to make the loan worthwhile to them but gets your debt level under control. So if you can put all of your debt under a 30 year home equity loan at an interest rate sometimes 5-10% lower than credit cards, that frees up your budget to handle your expenses and start to see daylight on getting out of debt.

Another option for getting your credit cards under control is a credit management service. These agencies will take all of your outstanding credit card bills and work with the lenders to come up with a payment plan so they know they will get paid but the amount you have to put out is manageable by you. Again, these services will have fees but if they can at least put a fence around your rapidly expanding credit card debt situation, it might be a fee worth paying.

The important thing about you taking the first step of seeking help with your credit card debt is that you are taking charge of the situation. Too often, we feel hopeless and develop a victim mentality when we see those debts just keep going up knowing full well that at some point the monthly payments will overwhelm us.

Reaching out to skilled and qualified services that can give you back some feeling of control over your debt can be liberating to you and give you hope that there may come a time when the trap of credit card debt still holds you captive. And that will be a wonderful feeling of freedom when you finally get free and are able to live within your means again.

Digging Your Way Out Of Credit Card Debt

Sometimes we don’t take the time to get a real world understanding of not only what credit card debt is but how we got into this mess and what its going to take to get out of it. The first steps of solving the problem are the most important because by identifying what the problem is, you also identify what it isn't. So if we can think logically about the problem of being buried in credit card debt, the path to digging our way out will become more clear.

It doesn't take a committee to figure out the heart of how all this debt got started because it boils down to a very basic statement of economic fact. And that is that you got in debt because you spent more than you made. In other words, you are living at a standard of living higher than your income can support. And the overflow goes to debt.

It is pretty brutal when it gets to that level of honesty but when you look at it that way, then the solution begins to become clear to you. Now it’s important when doing this kind of analysis that no guilt is allowed. There are a lot of perfectly acceptable reasons you may have fallen into the debt. It’s not like you are necessarily running around spending lavishly on expensive cars and trips overseas.

Lots of things happen to a family budget that you have no control over and using your credit to handle it is the responsible thing to do. For instance; you may have lost your job or source of income. There may have been a family medical crisis that you just had to handle with credit funding. There are home repair emergencies, weather emergencies or trips you have to take to keep everything together. So for whatever reason as that credit hill turns into a credit mountain, then it becomes the family emergency to tackle.

The solution is evident from our diagnosis. It quite simply is not only to get to where you live within your means but to generate sufficient income to start paying that credit card debt mountain down the same way you drove it up, a little at a time. There are a lot of very adult things you can do and should do to make this dream a reality. You have to stop the debt from going up so to cancel as many credit cards as possible reduces the chance they will continue to accumulate charges.

Getting control over excess spending is going to take some family discipline. But if the whole family knows it’s a family quest to get debt off your backs, everybody can pitch in. You can eat at home more and eat out less. You can scale back extras like premium cable TV or rent movies instead of going to the theater. You can let the holidays be about love and togetherness rather than big expensive gifts.

This also might be the time to think about adding some additional income to the family budget to get that overflow that you can use to attack the credit mountain more aggressively. One person might take a second job while the other agrees to managing more of the household chores and everyone agrees that every cent of that job will go towards paying off debt. Keep good records and when the family sees that the debt is coming down, celebrate it together!

This is a hard step especially for the parent who has to work two jobs or if you have to send mom back to work for a little while to get this situation under control. Sometimes it can be made less harsh if the second job is something the adult going out likes to do like work a book store or a garden center which may be a hobby. Or if the job is on the Internet, that parent could work in the comfort of home and make that extra money.

But as the size of that debt starts to go down and month after month it gets smaller and smaller and the interest payments get smaller and some of the credit cards get paid off and all of a sudden there is more money in the family budget, that extra hard work and careful cost cutting will have all paid off and everyone will breath a sigh of relief because you took the credit card down the same way you ran it up, one month at a time.

You & Your Credit Score

When you see advertisement after advertisement on television of businesses who want you to find out your “free” credit score, that is a red flag that someone is looking to make some money off of you. The funny thing is they aren't lying to you but at the same time, you can be sure that those companies paying good money for advertising so that they can make a buck off of you.

The truth is, you can actually find out what your credit report says about you. What they are telling you about that is true. Your credit report tells you your credit score which helps you understand how creditors see you which is important if you decide to apply for a new loan. But your credit report also shows a detailed history of your past use of credit, currently open accounts and anyone who has checked your credit score in the last year.

This is important information for you because anyone can check your credit report anytime they want to. And if there are too many inquiries on your credit report, that itself can drive down your score. So if you find someone is checking your score too often, you can take action to put a stop to it.

But there are a couple things they are not telling you on those advertisements. One is that if you use their services, they will give you the credit report for free but not the credit score. They are going to have their hand out for that little tidbit of information. But the truth that those companies will not tell you is that you can get that score at least once a year absolutely free if you know how. In other words, those people hitting you up on television to check your credit score are relying on the fact that;

- You don’t know how to check it yourself and
- You are willing to give them money for something you can get for free once you know how.

The basic information you should know about credit reports is that there are three agencies that maintain credit reporting and they are; Equifax, Experian and Transunion. You can check on what each of these companies has in their file at any given time.

In addition to a lot of detail about your credit history as we just discussed, your credit “health” will be represented in the form of a number of a “score”. That score will run between 300 and 850. The higher your credit score, the better you will be received by credit organizations who are deciding whether on not to extend you a loan.

Once you have this information, you can take action to improve your credit history. First of all, review the credit detail in depth. You may find accounts still open that you have not used for years. Close those accounts. If you have a credit account that is not being used, it is of not value to you, it only runs down your credit score and there is always a danger someone will use it.

But the next step is to start being “credit smart” in how you use credit to help see that credit score go up over the next year. The steps to do that are….

- Always pay your bills on time. Late payments are reported to the credit bureaus and it runs your score down.

- Make more than the minimum payments. If you only pay the minimum on each credit card you owe, that will get noticed by the credit tracking software and make your credit score go down.

- Cut down on the amount of times your credit score is checked. Excessive inquiries into your score indicate that you are looking at getting more credit and that hurts your score.

- Close unneeded credit accounts.

- Start closing some of your credit card accounts once you pay them off.

- Don’t take out any new accounts.

Don’t let yourself get excited by the virtual nonstop advertising about your credit history. You don't need to know this information every day. But check it a couple times a year, no sooner than once every three months to keep tabs on what is going on with your credit history. It’s the responsible thing to do and you can just relax and change the channel on those noisy commercials.

I know that it's stressful dealing with your credit score, so here's a couple of resources that may be helpful to you. The first one is a video tutorial about raising your credit score by several hundred points. (Click here to learn more). The second resource is an ebook that discusses how to get rid of bad credit. (Click here to learn more.)

Your Credit Card Debt

There is something strange about what happens to all of us psychologically when we see our credit card debt just keep climbing and climbing with no end in sight. For some reason, our emotional reaction is often one of ambivalence or even acceptance as though having a mountain of debt to credit card companies is a part of life and no big deal.

But it is a big deal. Especially when a huge portion of your monthly budget goes to paying the debt, it’s a big deal because that money could be going toward a better house, a new car or even just for something fun for you or your family. Whatever it might be it's a lot better than just throwing money away on the interest of your credit card debt.

So as much as we all do strive for peace and keeping a positive attitude about life, in order to get some motivation to get out there and defeat this monster we call credit card debt, it might be time to get good and angry about the way credit cards handle our accounts and find the guts to finally find a way to just up and fire them.

In the retail world, it is a crime to use false advertising or pull off hat is called “bait and switch”. Bait and switch is a tactic where they advertise a price for a retail item and then when you get to the store, the price is wrong on the shelf or for some other reason (like, we ran out of the ones at the sale price), they bilk you into paying the non-sale price. That’s cheating and it’s wrong.

Credit card companies are the international grand champions of bait and switch. When they send you those glossy, well worded invitations to low interest, “no cost” credit cards, they have no intention of honoring that offer. Oh sure, they might set up the accounts that way.

But, if you read the fine print of what you are signing when you apply for the credit card, they retain the right to change the rules of how your credit bill is handled without notice and without restrictions. That means that even if they said there will be no annual fee, they can impose one and there isn't a darn thing you can do about it.

Even more outrageous is the fact that credit card companies can and often do raise the cost of what you are paying for the goods or services you bought using your credit card, again without any notice at all.

So, if you bought a refrigerator on your credit card which at the time was charging 8% interest, the credit card company can up and raise your interest level to 20% overnight, with no reason for doing so and no notice to you. So what just happened is they jacked up the price of the refrigerator you bought and you have to pay it. If that doesn't get you good and mad, well, it should.

If you watch how the credit card companies handle your accounts, you can tell they are looking for any excuse to raise your rates. If your payment comes in an hour late, they can double your rates. And guess what? They are the ones who determine if your payment came in late. So if you mail it a week and a half a head of time, they can still claim it as late and jack up your interest rate and impose a huge penalty for late payment.

It’s just amazing and completely outrageous that credit card companies are able to change the rules of how you do business with them with no respect for you as a customer. Getting good and mad about credit card debt is a good thing. It gives you the motivation to take charge and get rid of that credit card debt once and for all!

Credit Card Debt Consolidation

Credit card debt consolidation is a term that gets thrown around on television quite a lot. You see so much advertising for this service that you have to know that someone is making a lot of money off of people like you and me that have serious credit card debt problems. But once you understand what credit card consolidation is and how it is accomplished, it is very likely you can accomplish the same goals and get the same benefits without paying anyone an expensive fee.

The reasons these services have sprung into existence is that with the economy being so difficult and with gas prices and prices for so many of life’s necessities going higher and higher, many people are spreading their debt over many credit cards. The result is an average family might have three or four or even more credit cards with high debt run up on them and the interest fees being charged can get quite high.

Despite the customer friendly language that credit cards use when they try to lure you into running up your debt even higher, these credit cards are making credit card companies a lot of money and they want you to pay them down slowly so they can continue to charge big fees month to month. So the first step of credit card consolidation is to get all of that debt into one account, get rid of the credit card debt and perhaps close those accounts entirely and get a reasonable interest rate you can deal with over time.

The first core principle or “basic” of credit card consolidation is getting rid of multiple creditors and getting all of your debt into one account or at least fewer credit accounts. At the same time its preferable to work with a creditor who is willing to work with you with the goal of reducing debt so the interest rate can be set at a level significantly lower than what you were paying to the credit cards so more of what you pay goes to pay down the debt and less to interest and fees.

One tactic that is often used to move your debt to lower rate interest loans is to use zero percent short term offers from credit card companies. As we have discussed before, you have to watch those because sometimes there are transfer fees that are as high as an interest payment. On the other hand if you can move several thousand dollars to a zero percent loan for six months, you can then work on paying off higher interest credit cards while that part of your debt is not running up the balances.

Just be careful because at the end of the zero percent period, sometimes the interest rate on that loan will shoot up higher than any of your other loans.

The important thing is that you take charge of your credit and not let it be in charge of you. Start a log or a spreadsheet where you document each credit card you have, what the interest rate is, the expiration date on short term low rates, what you credit limits are and what your payments are.

This kind of consolidation of your records will tell you which credit cards need the most attention and where you should look to consolidate two credit cards into one or all of them into the one credit source that you feel you can work with long term. Then you have a partner to help you make a plan to get out of credit card debt and stay that way.

More About Zero Percent Interest Offers

Did you know that the credit card business is one of the most competitive industries there is? You can tell that because you no doubt get dozens of invitations for new credit cards every week.

That is because the only way a credit card company can continue to grow new business is to steal the business away from another credit card company. It isn't really a business where there are a lot of new customers coming into the market.

The types of accounts the credit card companies want are people who are carrying a lot of debt, who continue to pay on the debt but never pay it off and who have no history of defaulting on their loans. If that describes you, then you are on the A list for a potential customer for a credit card company.

If you have a lot of credit card debt, it really isn't that flattering that other credit card companies want your business. Even more infuriating is when a credit card company who already has you in debt sends you offers for still more credit cards.

But there may be a glimmer of light in this tough situation. You might be able to leverage you’re “A list” position with the credit world to find a way to manage your credit card debt more successfully.

Typically if you have three or four or more credit accounts, the credit ceiling on those accounts has probably gotten pretty high. That is because, as we just reviewed, if you carry debt but pay on it, that sets a cycle in motion for the credit card companies to offer you as much debt as they think you might use so you can owe them even more money. Again, while this seems cruel and heartless, that is how these folks make their living, so they have to find some way of attracting the debt of "A" list customers.

But another method they also use is to offer you an attractive rate of interest to either start a new account or transfer debt from an account you have to your existing account. A common “come on” like we have discussed before, is to offer you zero percent financing. This seems wonderful because in theory you could transfer all of most of your debt to the generous company and not pay any interest which would greatly speed your pay off.

Transferring balances has its good side and its negative side and you need to be smart about both. Read every word of the offer, even the small print on the back of the page because you must understand any hidden fees you might face if you accept their generosity. Almost always the zero percent or low percentage rate is for a very limited time of perhaps three or four months. In credit card land, this is a heartbeat. Then once they have your account balance of your debt built up, they can jack your rates up and you are right back where you started.

It's important to be smart about using these kinds of offers. A great tactics is to simply to transfer a fairly small amount of your debt to the zero percent offer. say a $1000 and then pay it off over the three to four mouth period. You win because you paid no interest and they lose because they can’t sting you with a high interest rate at the end.

Also be aware of any transfer fees or membership fees if you are taking out a new card. These fees can amount to additional interest and negate much of the benefit. But if you are smart and use these offers shrewdly, they can be terrific ways for you to drive down your credit card debt.

How To Get A Premium Rate

The challenge of tackling a massive credit card debt can seem almost impossible at times. When you look at the many bills rushing in each month and then you start going through that credit card bill, the idea of actually starting to pay that bill down can be overwhelming. And part of the reason that uphill battle to win over debt seems so hard is those almost ridiculously high interest rates credit card companies are allowed to charge.

If you have a credit card debt in the thousands of dollars and that interest rate can get above 15%, that is going to mean that a large portion of your monthly payment is going to go toward the interest. And what that means is that your balance will go down slowly which is very discouraging especially if you are also using the credit card so your balance continues to go up and up and up.

How often have you looked at the average interest rate that the credit card companies are charging you and thought, “I sure wish there was some way I could cut that interest rate in half or less”?

If you could just get that interest rate down under 10% or even better, that step alone would help you put more of the payment money you pay out each month toward reducing the debt. And if that rate could be locked in so it isn't constantly being jacked up by the credit card company, then you have a real path toward paying off what you owe once and for all.

There may be a way to actually get a credit card rate you can live with from the credit cards services you already are working with. It goes back to that old advice that your mom or dad might have given that goes – “You don’t know until you ask.” That’s right it is very likely that if you call the credit card company and explain to them the situation, they might have the resources to negotiate a rate with you that you can live with and offer you the same services a credit consolidation company would offer.

It’s good to take a moment and look at the world through the eyes of the credit card company. They are in business to keep good customers who pay their bills. For a credit card company, the worst kind of customer is one who is constantly late on their payments or doesn't pay at all, so they have to go through the expense of nagging those customers for the money.

Also customers who have the resources to dump them because their rates are too high are also a big threat to their livelihood because they depend on you needing them and being willing to pay those interest rates and fees.

So rather than see you dump them or take your debt elsewhere like to a credit consolation service or a second mortgage, its better business for the credit card company to cut your rate and continue to make some money off of your debt.

Competition is just as intense for the good customers in the credit card world as it is in any other business. So if you pay your bills and are the kind of customer these companies like, you have a bit of leverage with them that you may not have known you had.

Make sure when you call the credit card company to renegotiate your rate that you talk to someone who can actually change things. And bring some clout with you. Be prepared to cancel your credit cards or move your debt to another card or credit service. If you let that credit card company know you are unhappy because of the rate, they will have some kind of program to keep your business.

They aren't going to tell you about it but its there. And if you are persistent and want it bad enough, you can get the credit card companies to play ball your way and give you a premium interest rate you can live with.

Using Your 401K To Pay Off Credit Card Debt

There is sometimes a sense of panic that sets in when you see your credit card bills begin to spiral out of control. When you are fairly new to that sense of being trapped by credit, you may turn to a second mortgage. But then if the credit card bills continue to grow and grow, as they are designed to do, you suddenly realize you have put your home on the line and it might now be in danger if you default on those bills.

This is when that mountain of debt can begin to knock on the door of your last remaining resources to try to fight back and you have to make some important decisions. And one is whether it would be a good idea to cash in your retirement money or borrow on your 401K to get enough money to try to bring down your debt levels.

Deciding whether this is a good idea is a huge gamble because if you win, you could eliminate debt entirely. But if you lose, there goes your protection for your senior years and maybe the little nest egg you wanted to pass along to the kids as an inheritance.

Hitting the 401K to pay off your credit card debt is a bad idea for a lot of reasons. The most obvious reason is that your retirement money is tax deferred, so when you put it into that account, you didn't pay any taxes on it. You don’t have to pay taxes on it until you take it out. On top of that, the money is intended to stay in reserve until you hit retirement age so in a lot of cases, if you take it out early, there is a big penalty that you have to pay.

So right away if you cash out your retirement funds to pay down or pay off your credit card debt, you are losing a lot of money to those penalties and taxes. You might want to calculate how much that penalty is going to be compared to the interest you might save because it’s a big pay off just to get to those funds.

The prevailing logic of hitting the 401k is that in theory you will save more money from the interest than you would make from the investment. But there is some solid logic for leaving those retirement funds right where they are.

For one thing, debt will come and go, but retirement funds have a tendency to go away and never coming back. Once you cash out those retirement funds and give the money over to credit card debt, your retirement is gone. But if you find ways to take care of that credit card debt and leave your retirement alone, it is there for you and you have that sense of ownership that the debt has not taken everything from you.

One possible alterative is to borrow against your 401K and use it as collateral. Now in this case you are still just swapping out debt for debt. But secured debt is often easier to get a favorable interest rate and you can cap it so the rate doesn't float around like credit card debt. So there is some rational for going that route. But if that is an option, you are still putting a very important part of your financial future on the line so tread carefully before you make any big decisions.

The Shenanigans Of Credit Card Companies

When it comes to the dozens of credit card offers that you get in your mailbox every week, you might begin to think that some credit card companies are trying to trick you.

The one thing that all credit card companies have in common is that they use every tactic they can find to get you to take out yet one more credit card. You would think that the fact that credit card debt is a virtual epidemic in this country would let the credit card companies know that its time to get on the side of the consumer and help them learn responsible use of credit. Instead they do all they can to get you to have more, not less, credit cards and use them as much as you can.

We need to be smart consumers because as much as credit card companies try to make credit cards seem fun and happy and like big toys in your wallet, they are not toys. We should never forget that a credit card is nothing more than a way for the credit company to extend you dozens of small unsecured loans that will create higher payments, high interest rates and additional fees.

This is not to say that having a credit card is a bad idea. Good credit is one of the biggest assets any responsible adult has to make necessary purchases easier and more affordable. Credit has become the currency of choice replacing cash and checks as the preferred method for paying for gas, restaurants, retail stores, online and grocery stores. After all it is so easy to swipe that card and worry about paying for it later.

While the spread of credit as actual currency is a fact of life for us, it is also a major move by the credit card companies to take over the economy and to make you even more dependent on them. So the best defense is to take charge of your credit card life and make sure that you are the boss of your credit cards, not the other way around.

The next time you get one of the shiny new offers in the mail just keep in mind that they are in business to get your money. They will appeal to your sense of school pride by giving you a credit card in your college school colors. Your team spirit your favorite pastime or even take advantage of your love of animals to get you to accept their offer. They are tricky!

These days you can get credit cards that give donations to save The environment, help the poor or create a college fund for your kids. There are all kinds of premiums, cash back concepts, frequent flier miles and gifts and toys that credit card companies will fork over just to lure you into getting more credit cards and using them a lot.

To put it bluntly, you and I need to learn not to be suckers for these deals. We can laugh at the sneaky tricks they try to use. But if a credit card company is going to try to trick you into getting a card or using one, they are not doing business honestly with you.

You want a credit card company that deals straight with you. They should offer fair rates that don’t change at the drop of a hat. They should sustain a reasonable credit limit and not always be jacking it up to try to get you to buy more stuff on the card. And they should have good customer service and be ready to renegotiate your relationship with them so you are getting good value from their service, not just paying for a bunch of toys and frills that do you no good whatsoever.

By keeping in mind what a credit card company actually does and that credit cards are mature adult tools, not games or toys, we can keep in perspective how to use our credit cards and how to keep from abusing credit which will lead to a lifetime of credit card debt.

Turning The Tables

Does it ever seem like credit card companies treat their customers like indentured slaves? The policies that these credit companies use to handle your accounts are at best unscrupulous and at worst, down right outrageous. If any other industry tried to cheat their customers out of money like the credit card companies successfully do every day of the year, they would be investigated and jailed with a vengeance. But our government doesn't do that so the credit card companies literally have a license to steal.

The way these companies handle your accounts has a lot to do with why your credit card debt is so hard to get rid of. When you owe a few thousand dollars to a credit card company and they are constantly slapping you with fees, they jack up your interest rates and add charges to your account for “membership dues” and other bogus things, it becomes clear that in addition to the debt, the debt carriers are not your friend when it comes to reducing your debt.

Did you know that you can put them on notice and make them march to your tune, but to do that you are going to have to take charge and be the boss. Let's say you get dozens of credit card offers and perhaps have several credit card accounts already open, you may have the flexibility to put the credit card companies on notice and let them know that is time they serve you as a customer instead of you serving them.

To make these big companies stand up and take notice of you, they have to know that they can be fired. To prepare for battle you must first make sure you know what they are up to. To do this you will need a year’s worth of statements so that you can track the extra fees, the membership dues and make note of each time they have raised up their interest rates on your account.

Then armed with that information, call them and politely demand to talk to someone (a supervisor) who can make changes to your account. If the they don’t want to play ball, tell them to start the process of closing the account. That will get their attention. You might have to actually close the account but don’t miss the chance to make comments when they come to the part of the process where they ask why you are closing the account.

This is where you get your licks in. You can leave as the reason something like this. “I am closing the account because you are imposing unreasonable fees and membership dues and I want the interest rate dropped to a certain rate and capped.” That will get some effective attention. You will either get to a manager right away or one will call you.

Don't lose your nerve, don’t argue and be prepared to hear a bunch of lame excuses. They can come up with one after another because that is what they are trained to do. They can say things like; they raised your interest rate because you were late on a payment so this is a penalty.

A good answer to that would be, “I have no other choice than to close my account.” As long as you stay strong, there is no response that they can give other that to work with you on your terms, because you have a secret weapon that they don’t want you to know you have and that is that you are a premium customer.

The credit card companies know there is a limited amount of people who can carry a debt and make the payments. And each time they lose a customer, that pool of victims, or customers, goes down. And don’t be fooled by any talk that they have no leverage to change the rules of the game. They can and they will.

You can even go as far as to demand that they refund all charges they imposed in the last year. They can insist that you are being unreasonable all they want. You are well within your rights to respond with, “It’s unreasonable of you impose fines and fees on my account without notice and for no additional value added to my account. Its usury (charging of unreasonable or relatively high rates of interest) and I am within my rights to close this account and file a complaint with the Better Business Bureau and with the US Attorney General.”

These aren't just scare tactics. These are words that credit card companies live in fear of hearing. So use the tools you have and put the credit card companies on notice that they are going to march to your tune or you will take your money elsewhere!

“Keep away from people who try to belittle your ambitions. Small people always do that,
but the really great makes you feel that you, too, can become great.”
~ Mark Twain

Offline Jim Burney

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Re: Reducing Your Credit Card Debt
« Reply #1 on: August 18, 2009, 06:36:00 AM »

Excellent report.

A major UK card issuer has recently reduced its minimum % repayment, or £5, whichever is larger. :o :o :o

Sounds good?  ;C

Well it was calculated that if you had £5000 on this card and you paid the minimum payment it would take 98 years to pay off.

Does not sound so good now! >:( >:( >:( >:( >:(

Do not allow these banks to get control of your future happiness.



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Re: Reducing Your Credit Card Debt
« Reply #2 on: August 18, 2009, 10:58:23 AM »

Another excellent report! Thanks!


Offline ASUService

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Re: Reducing Your Credit Card Debt
« Reply #3 on: August 18, 2009, 11:41:58 AM »
Nice report Mark ... Thanks!

CC companies may not break your legs like a Loan Shark but recovering from a busted leg is a lot faster & easier than screwing up your credit!!!!!!  ;D

Offline Donald

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Re: Reducing Your Credit Card Debt
« Reply #4 on: May 27, 2010, 07:55:40 AM »
Good report Mark, but don't mention credit cards to me........... >:(

Offline Mark Austin

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Re: Reducing Your Credit Card Debt
« Reply #5 on: May 27, 2010, 05:28:53 PM »
Hi Donald,

Yeah, the problem with credit cards is that they're too easy to use!  :smiley:

“Keep away from people who try to belittle your ambitions. Small people always do that,
but the really great makes you feel that you, too, can become great.”
~ Mark Twain