Getting Out Of Credit Card Debt

By Focusing On Your Interest Rates

Getting out of credit card debt is extremely difficult when the interest rates you are being charged are excessive. If you are paying 19% interest on your debts, it will be a long, uphill battle to become debt free. So the first thing that I recommend that you do is focus in hard on getting those high interest rates reduced. Here is one technique that you can try.

Sidebar: This technique assumes that you are current with your credit card payments and have at least been making the minimum payments. If you are behind on your payments, and are falling further into debt, I recommend that you see this article on debt settlement, as this may be a good debt relief option for you. By using a debt settlement technique it is not uncommon to settle your credit card debts for up to a 70% discount.

A First Step Towards Getting Out Of Credit Card Debt

Simply pick up the phone and call your credit card company. Don't be shy! When you get someone on the phone just ask them if, based on your payment history, you can qualify for a lower interest rate. (You want to ask like this because you don't want them pulling your credit report each time you ask. I say "each time" because this is something you should get in the habit of doing every other week.) If the answer is yes, great. You just took a big step towards getting out of credit card debt.

Here is an example of how powerful just reducing your interest rates can be in the process of getting out of credit card debt. Assume the following:

  • Your Credit Card Debt: $10,000
  • Interest Rate (APR): 19%
  • Minimum Payment Amount As A Percentage Of Outstanding Balance: 2%

If you did nothing but pay the minimum each month until your credit card debt was gone, it would take you 54 years and you would have to pay about $35,198 in interest charges. Now, if you asked for a lower interest rate and got it, say 9%, here is how those numbers would change. Instead of 54 years, it would only take you 21 years. And instead of over $35,000 in interest charges, you would have to pay $5,659.

What If The Credit Card Company Says No?

Now, what if the credit card company answers no, you do not qualify for a lower interest rate? Well, at this point you would start the negotiation. And remember, it is a negotiation.

Aside: You may or may not feel comfortable with this technique as it does involve some negotiating and "bluffing". If you aren't comfortable doing this, then my next suggestion would be to consider working with a debt counselor who can negotiate your interest rates down on your behalf, along with offering other debt relief services related to getting out of credit card debt.

OK, back to the negotiating... Tell the person that you are speaking with that if you cannot get a lower interest rate then you would like to close your account and transfer the balance to another credit card. Now, don't worry. They will not cancel it on the spot. What they will do is transfer you over to their customer retention department, whose job it is to keep you on as a customer. (It is not just credit card companies that have these departments either. If you have ever tried to cancel a telephone account, cell phone account, cable TV account, etc. you know what I mean. They all have customer retention departments at the ready just waiting to entice you into staying on as a customer.) The customer retention department is given much more power to negotiate with you, so ultimately this is the department you want to speak to.

When you do get transferred over to the new department, they will ask you some questions, the first likely being "why do you want to close your account?". Of course at this point you begin to negotiate with them. You can tell them that you are considering taking out a loan to pay off the debt or, as I mentioned above, that you are being enticed by other credit card companies who are offering much better rates, including extremely low interest rates on balance transfers.

If you play your cards right, as the saying goes, and get your interest rate decreased, you are one step further to getting out of credit card debt. And as I also mentioned earlier, if this technique makes you feel "uncomfortable" that's alright too. But, you should still be focused on getting your interest rates as low as possible. A good credit counselor can help you tremendously with this, as well as help you structure a budget that allows you to get out of debt in about 60 months in most cases.