But the point that stood out the most from their commercial was their claim, “Credit card debt is NOT your fault!” Excuse me!!! If it’s not your fault, whose fault is it? This is the very kind of thinking that gets these people into the financial hole that they are in. Not your fault my foot!

To be fair, the credit card companies are no different from any other company in our free-enterprise system. They have been created to make money. In their case, they do this by providing credit to consumers. We pay for this credit in the form of interest charges. So obviously, the more credit they can get us to take on – and the higher the interest rate they can charge us – the more money they make.

A lot of people are in a lot of debt and not much is being said about it. I believe it’s time to start talking about one of the biggest financial problems facing people today. The reality of the matter is if you know what to say and how to say it, you can attack the problem, starting with getting the credit card companies to lower your interest rates and waive your annual fees or late fees.

How is this possible? Because credit card companies need you! The credit card industry cannot operate without your business. The industry today is all about recruitment.  In order to recruit you, the credit card industry is doing everything it can to make you believe that credit card companies exist to help you. They want you to believe they are your friends and that they like you. To prove it, they offer all kinds of perks, bonus reward points, frequent-flyer miles, college account rebate programs and on and on and on!

Unfortunately, that is simply not the case. The credit card companies are false friends. While their services can make your life easier and more convenient, if you don’t use them responsibly, you will end up getting deeper in debt at higher and higher interest rates. The reality is that credit cards can be a great convenience if you use them responsibly! That’s the challenge – and the big “if”. If you are one of the millions of people who have extensive credit card debt, and by extensive I mean greater than $10,000.00… listen up. What you need to know now is how to fix the problem that you have created.

Even the name of their product – the “credit card” – can mislead you. The point is, when we hear the word credit, most of us tend to think of good things, not obligations. And so we think a credit card must also be something good – a ticket to the good life. If they wanted to be honest with us, the banks and the credit card industry would call them liability cards. After all, what does a credit card do every time we use it? It incurs liabilities – that is, debts – that we have to finance and eventually pay off.

Fortunately, we are not totally at the mercy of the credit card companies. They have spent a fortune to get you as a customer. According to the Wall Street Journal, the credit card industry sent out 1.85 billon credit card applications in 2006. That’s a lot of direct mail, which costs them a lot of money. As a result, it makes much more economic sense for them to do what they must to keep you happy than to lose you to a competitor that’s offering a lower rate or a better deal. You simply need to know how to negotiate with them.

The credit card industry is an extremely competitive one. It is also highly regulated by the government.  What this means is that rather than you being at their mercy, credit card companies can be at your mercy – if you know what you are doing. The thing to keep in mind is that unless you are a total deadbeat, the credit card companies want and need your business.

This fact should serve as the basis for all your dealings with credit card companies. As long as you operate on the assumption that they need you at least as much as you need them – and that if they don’t treat you right, you’ll take your business elsewhere – you will do just fine. You will be amazed at how accommodating these companies can be when you remind them of this (politely of course!).

The key is to never let them intimidate you. Yes, you owe them money. And yes, you are both legally and morally obligated to pay off your debts. But that doesn’t mean they are entitled to treat you badly, take you for granted, or charge you an unfair rate.

The fastest way to save money on your credit card debt is to talk down the costs – that is, to get your credit card company to lower the interest rate it charges you. Here’s how go about doing this:

1. FIND OUT HOW MUCH INTEREST YOU ARE CURRENTLY PAYING.  Pull out your latest statement and head for the fine print! Generally speaking, the interest rate you are currently paying is listed on the bottom of the very last page in a table called something like “Finance Charges” or “Rate Summary”. Don’t blame yourself if it is difficult to find, they do it this way on purpose. These tables can be very confusing, with one rate for purchases and one rate for cash advances, and a third rate for “special promotions”. Is it possible that the credit card companies really don’t want us to know what we are paying? What ever the reason; if you are having difficulty discerning what your interest rate is, simply call the company and ask.

2. FIND OUT WHAT THE COMPETION IS OFFERING.  Once you know your rate, you need to know how much better you might be able to do elsewhere. This doesn’t mean you should start applying for other credit cards – not yet, at least. All you should do at this point is to go online to one of the many websites that specialize in consumer finance information and see what the prevailing rates are as well as what kind of introductory offers you can find. Among the better ones are www.bankrate.com., www.cardweb.com and www.lowermybills.com. On these websites, you will find credit card offers as well as introductory “teaser” rates.  

3. TALK TO SOMEONE WHO CAN MAKE A DIFFERENCE. Having armed yourself with some specific information about both the rate you are currently paying and the kind of rates other banks are offering, find the “Customer Service” phone number on your latest credit card statement. Then call your credit card company and ask to speak with a supervisor. Do not – I REPEAT – do not ever try to negotiate a lower rate with the first person who answers the phone. The people who answer the phones generally do not have the authority to approve changes, so you will be wasting your time.

When you are connected to the supervisor, tell him or her that a competing bank is offering you a much lower interest rate than the one you are currently paying – and that unless they can match or beat the competitor’s rate, you intend to transfer your balance to the competitor. Don’t be vague: Tell the supervisor the name of the competing bank and the actual interest rate it is offering. Chances are that the supervisor will agree to lower your interest rate on the spot.

I have worked with people who were being charged rates as high as 29%, and with one phone call were able to get it reduced to below 14%. I promise you this works and you can do it with all of your credit cards.

By the way, you should be aware that there are often many levels of supervisors. The departments that handle these calls have on average two to five levels of management. So if the supervisor you get the first time doesn’t see things your way, ask to speak to that supervisor’s manager. And if you don’t like what the manager tells you, keep barking up the food chain! If you don’t get what you want, apply for the account with the company offering better rates and then transfer your balance to that card.

4. GET THE FEES WAIVED. Yet another secret the credit card companies don’t want you to know is that you can get them to waive both late fees and annual fees. How? Exactly the same way you got your interest rate lowered – by calling and negotiating. In fact, it’s often easier for the person on the phone to cancel your late and/or annual fees than to lower your interest rate. Call the company and ask, “Can you please waive this late fee? I am not normally late and I would really appreciate it.” Late fees can cost as much as $39.00 each. If you get hit with several late fees, you can be out hundreds of dollars before you know it. This is your money we are talking about – so if all it takes to get it back is making a simple phone call and asking – why in the world would you not make the effort? You won’t know if you don’t try!

If you have several credit cards, a really effective way to make it easier to get out of debt is to consolidate all your balances on just one or two cards. If nothing else, it means less paperwork for you, since now you have only one or two credit card companies to deal with (and make payments to), making it much easier to focus on getting debt free.

Again, to get what you want, you really don’t need to do much more than “just ask”. When you are negotiating with the credit card companies to lower your interest rate, make a point of telling them that you are prepared to move all of your outstanding balances to the company that offers you the lowest rate. You should have a pretty good idea of what prevailing rates are from your online research. If for some reason you do not have access to the Internet, check the business section of your daily newspapers. See what the national average is for credit rates – and ask for half of that!

Or better yet, ask the credit card company or your local bank what kind of rate it is offering to customers like you who are willing to consolidate their debt. Let them try to sell you! You may find, that in order to get all your business, one of your credit card companies will offer to waive all interest charges for 6 or 10 or even 12 months. If so, be careful – ask them what the rate will be when the introductory offer expires, and WRITE IT DOWN!!! In may jump to 25%, in which case you will need to move once again to a new card company.

Also, make sure you understand the penalties they will impose if you are ever late – even with just one payment. Many of these zero-interest-rate offers have very specific disclaimers – in the tiniest of print – to the effect that if you are late paying by even one day, your 0% interest rate will be increased to 19.98% - RETROACTIVELY!!!!!; if you are late twice, your interest rate will jump to 24.95%, and so on. As a rule, the moment you fall behind, you forfeit your 0% interest – or low interest deal and can wind up being lambasted with a hefty interest charge back-dated to when you first opened the account.

And pay attention to due dates. As I mentioned before, the banks have been shortening what’s know as the “grace period” – the time you have to pay a bill before they start charging interest. Back in 1996, grace periods averaged 27.8 days, according to Cardweb.com; by 2006 they had shrunk to 20.6 days. The companies are required to inform cardholders of changes like this, but the notices are usually s in such tiny print.

Consolidating your credit card balances – and reducing the interest charges they generate – are both important. But let’s not forget that the real goal is to eliminate them. I want to share with you a proven system that will enable you to get rid of your credit card debt entirely – and do so far more easily and quickly than you probably thought was possible.

Eliminating your credit card debt is your goal and obviously having a plan and a system to accomplish that is of utmost importance. If you organize things properly, paying off your credit card debt is easier than you think.

Ideally, you should begin the process by consolidating all your balances on one card. Obtain a card with as low a rate as possible. The new consolidated balances may look scary at first, but if you are like most people, you will find it easier and less anxiety-provoking to deal with one big debt rather than several medium sized ones. You will have fewer separate bills to pay and you will be less likely to miss payment dates.

Once you have consolidated all your balances into one account, the next question is obvious: How much of your resources should you devote to paying it off? Of course you are going to make more than the minimum payment. But how much more?

Many “experts” will tell you the same thing: “if you owe credit card debt, paying it off should be Priority One. Once you have done that – then – you can start saving”. While I know this advice is given with good intentions, I happen to think it represents the single biggest mistake people make when it comes to dealing with credit card debt. Devoting all your resources to paying off your credit cards means not having anything left over to Pay Yourself First. It also virtually guarantees you will stay in debt and never start saving.

Think about how corporations handle debt. Most companies borrow money – huge amounts of it – in order to finance their growth. Now once a company does incur debt, do they devote all their income to paying it off?  Of course not! Any company that would do so would see its stock values plummet – and most would go out of business – still owing that debt.

What a smart company does is allocate a portion of their resources to debt reduction, while at the same time devoting other portions to developing new products, exploring new markets, and generally expanding their business. What they do is “grow themselves out of debt”. They pay down their debt and invest money in their future at the same time. And that’s exactly what you want to do. By doing both at the same time, you will get a huge emotional and psychological boost: you will feel and see your progress. You will see money being saved and your debt being reduced.

The bottom line here is that while you want to get rid of your credit card debt as quickly as possible, you also need to start building a nest egg for your future as quickly as possible too. But right now let’s focus on how much money should be directed toward debt reduction. I would suggest that you divide your resources equally: meaning I want you save an amount each month equal to what you pay toward your credit card debt. This of course means we need to find extra money in your monthly income. There is two ways of doing that.

First, you can make more money. There are myriad ways to make more money but getting a second job is not one that would suggest. I want you to learn to work smarter ~ not harder.

For the time being let’s be practical. Let’s look to what you spend each month on non-necessary items. I lump beer, cigarettes, recreational drugs, ridiculously priced coffee, excessive dining out, lottery tickets and the like into the “non-necessary” spending category. I am not saying to eliminate these items completely, but I am recommending you cut way back on them.

Let’s say we can find $15.00 per day in non-necessary spending:

                        1 pack of cigarettes                               $ 3.50
                        1 large coffee and morning snack           $ 2.75
                        1 fast food lunch                                    $ 5.75
                        3 after-work draft beers                         $ 3.00
                       
This represents about $450 per month. I know this seems excessive, but it is not far from reality. On different days you will spend different amounts. Just one night out on a date for dinner and a movie with popcorn and soda can cost upward of $100.00.

I recommend that you take half of your monthly non-necessary spending and apply it to your debt reduction. It’s only temporary while you are getting out of debt, but if you can break bad spending and bad eating habits in the process, more power to you!

The key to getting out of credit card debt is to pay more than the minimum due each month. How much more? The magic formula for figuring this out is really quite simple. You should aim to pay at least $10 a day more than the minimum payment. If you do that, you can be out of debt in five years.

Say for example, you have a $10,000 balance on your credit cards with an average interest rate of 20%. The standard minimum payment for a $10,000 balance is $250.00. If you simply make the minimum payment, it will take you 37 years to pay off the balance. You will have paid almost $19,000 in interest charges. On the other hand, if you up that monthly payment by $10 a day ($300 a month), which you have derived from stopping your non-necessary spending, to $550, you will be out of debt in just 22 months – less than 2 years! And, you will have paid only about $2000 in interest charges.  Need I say more?

But what if you can’t consolidate your debt onto one card? You have a lot of credit cards with a pretty big aggregate balance. Figuring out how to effectively pay them can be somewhat daunting. Do you pay a little on all of them at once?  Or should you concentrate on one card at a time? And if so, which one goes first? Here’s your solution:

1. Make a list of the current outstanding balances on each of your credit card accounts.
2. Divide each balance by the minimum payment that a particular company wants from you.
3. Once you have determined this balance-to-payment ratio, rank them in reverse order, putting the account with the lowest ratio first, the one with the second lowest next, and so on.

You now know the most efficient order in which you should pay off your various credit card balances. Take half of your non-necessary spending savings and apply them to the card with the lowest balance-to-payment ratio. Take your other half and get it into a savings plan that will make you a respectable return. Keep this up until the balance is paid off. Close the card and direct your efforts to credit card that is next on the list. For each of the other cards, make only your minimum payment. Keep doing this until all of your balances are paid off and your credit card accounts closed. There’s not much point to doing this if you are not going to change your habits… if you are going to get yourself back into debt with the same cards you just paid off… CLOSE THE ACCOUNTS!!!

Most people are able to get themselves back on their feet. But you may be one of those people who need professional financial help. Serious debt problems are the worst. They can cripple your spirit, break your courage, threaten your marriage and even ruin your health. There are places called credit counseling agencies you can turn to help.

Like any other industry, there are reputable agencies and those that are intent on simply taking advantage of you. Legitimate credit counseling agencies like the Consumer Credit Counseling Services basically do two things. They help you sort out your current problems by negotiating with your creditors to get you lower interest rates and more bearable payment plans. And, they try to prevent future problems by teaching you some basic financial management skills.

In closing, I urge you to be pro-active and take charge of your debt. Make it your goal to be out of debt in as short a time a possible. Seriously examine your non-necessary spending and put that money to work for you, rather than against you. Follow the simple plans that I have outlined for you and get started on your financial future today.