6 Steps to Reducing Credit Card Debt
Bring balance to your life with these simple steps

Walecia Konrad, September 21, 2007

We've become a nation dependent on plastic. We think nothing of pulling out credit cards to rent cars, buy gifts online, make airline reservations, or pay for hundreds of other transactions every year. That's not necessarily a bad thing. Credit cards can be a convenient and safe alternative to cash. But too often, before you know it, credit card purchases can spiral out of control with a simple swipe of the card. Then, with high rates, fees, penalties, continued spending, and the other pitfalls that can happen with credit cards, debt accumulates much faster than your ability to pay it down. But this all too common and sad scenario doesn't have to happen to you. Whether you're carrying a balance of a couple hundred dollars or several thousand, consider taking the following steps to help yourself get out of debt -- fast.

1. Know where you stand
When you're feeling overwhelmed by debt, it's easy to let the bills pile up, unopened, like so much junk mail. But, you can't control your credit cards if you don't have a handle on how much you owe, says Bill Driscoll, a financial planner in Plymouth, Mass. Sit down at the computer screen (or with pencil and paper) and make a list of exactly how much you owe and the rate of interest you're paying on each card. Then, list your cards in order of highest rate to lowest.

2. Pay your highest-rate cards first
These cards are costing you the most over the long run so you need to make every effort to pay more than the minimum payment each month on these bills first.

3. Get a better deal
Call the toll-free number for your highest-rate cards and ask the customer service representative if he or she can give you a better deal. Let him or her know that you've been getting offers in the mail for much lower rates and you've been tempted. At most credit card companies, reps are authorized to lower your rate rather than lose you as a customer, says Robert Manning, director of the Center for Consumer Financial Services at the Rochester Institute of Technology. You'll be surprised how easily this works.

4. Consider using a different card
Hang on to all those 0% and other low-interest credit card offers you've been getting in the mail. Done well, transferring your high-interest balance to one of these cards can save you an enormous amount in interest and put you on a solid track to paying down debt. But these cards are often filled with caveats that can end up costing you more in interest than you expected, and sometimes more than if you had stayed put. Check the time limit for the low rate, where the low rate applies (balance or new purchases), and the fee for transferring balances.

5. Beef up your credit score
If you're having trouble getting a no- or low-interest card, it's most likely because your credit score is too low. This number represents how responsible you are when it comes to handling debt. So if you have a history of late payments or are already maxed out on several cards, your credit score will suffer. If you make all your payments on time over the next six months and aggressively pay down your biggest balances first, you could improve your score by as much as 50 points.

6. Avoid penalties and fees
Interest rate hikes and hefty monthly fees can ruin even the best-laid payback plans.

  • Late payment penalties. It's not unusual for your interest rate to jump to 25% or even 30% if you make a late payment. If you have trouble keeping track of your due dates, consider setting up automatic payments from your checking account each month.
  • Penalties for late payments on any card. Even if you pay on time, some credit card companies will hike your rate if they see you've made a late payment on another card. This practice, called universal default, is waning somewhat, thanks to pressure from consumer advocates, but it can still happen.
  • Credit limit fees. If you go over your credit limit, it's not unusual to get hit with a $40 fee. Do it a few months in a row, add the interest payment, and you're talking real money.

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Article used by arrangement with, April 2007.

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This story ran on on September 21, 2007.