Last time we discussed the benefits of rebalancing your debt load. This time we need to take a half step back and employ a very useful tactic.

Three Way Negotiating Dynamic in Your Favor

Before you actually transfer a balance, call the card where the balance resides and tell them you intend to transfer a portion of your balance or the entire balance if that is the case, but be specific. Then ask the company holding the balance today to give you a lower rate before you use the balance transfer. This will save you a cash advance fee and that can be very important even if they are only matching the rate!

You should also ask for a lower regular rate as opposed to a teaser rate. Tell them that you would like to keep things where they are not just for the next 3-6 months, but until the balance is paid in full.

If they can’t give you a lower regular rate then ask for a teaser rate and if that doesn’t work, then transfer the balance.

Know Your Credit Report

Order a copy of your credit report and study it in detail to understand how you will look to your credit card company at this point in time. Keep in mind that they will look at your history covering all of your creditors and not just your single account with them. If you find any errors or omissions, note them and take actions to correct them, but be ready to describe them on the phone and fill in the gaps. Similarly, if the credit report lags behind the actual status of your accounts by a month or three, be ready to do a fast reconciliation explanation on the phone.

For More Information see:

Part 1: Prepare Before You Call Your Credit Card Company for a Better Interest Rate

Part 2: Credit Curb Appeal for Credit Card Rate Negotiations

Part 3: Paying Down Debt Positions a Better Rate Negotiation

Part 4: Researching and Scripting the Pitch to Lower Your Credit Card Rates

Part 5: Credit Footprint Improvements Prior to Rate Negotiations

This is our fifth part in our series describing the steps that you can utilize to prepare for a future Credit Card Rate Reduction.

Today we are going to focus on three areas. Reviewing your total footprint on the credit card company you will negotiate with, transferring balances to ‘balance’ your debt load percentages and avoiding the balance transfer trap.

Total Foot print with a Bank or Credit Card Company

If you have more than one account with the same bank, review those accounts as well. With the mergers and consolidations it is not unlikely to have multiple accounts with the same company. Review the big picture of your relationship with this bank and discuss it with the agent on the phone.

Rebalance your debt burden so that none of your credit cards have balances in excess of 80% of your Credit Limit.

Consolidate your debt utilizing balance transfers. Move your outstanding balances to your cards with both:

1. A low fixed or adjustable rate before the balance transfer incentive, and
2. A good balance transfer incentive

Avoid the Balance Transfer Trap

Do not transfer your balance to a card with a teaser transfer rate when the normal fixed rate is higher than the card you are currently paying today.

It’s a trap. The credit card companies are counting on consumers to screw up and borrow more at higher rates. There is a reason why they offer those rates and its not to get your business, its to get your business plus interest. They know they will profit from you in the long run.

Don’t skip a payment on a card just because the balance transfer covered your minimum for the month. Pay anyway. It lowers your total debt balance which is good!

For More Information see:

Part 1: Prepare Before You Call Your Credit Card Company for a Better Interest Rate

Part 2: Credit Curb Appeal for Credit Card Rate Negotiations

Part 3: Paying Down Debt Positions a Better Rate Negotiation

Part 4: Researching and Scripting the Pitch to Lower Your Credit Card Rates

Last time we mentioned that your credit card rate negotiation will benefit from paying down your debt and boosting your income. Now its time to cover the obvious step that every body hates.

Stop Spending So Much

It’s the discretionary income that really makes the difference. If you earn a $100k a year and spend $120k you are worse off than someone that earns $30k and saves $10k, but you have more potential to turn things around. From a financial perspective its easier to cut costs and expenses than it is to boost your revenue. Psychologically, it’s a different story, but force yourself it will help.

Before you make the call work hard to decrease your expenses. There are a number of things you can do to decrease your expenses and divert some of those funds towards your credit cards. These are just a few:

• Stop dining out all together
• Buy cheaper food at the grocery store
• Take your lunch to work
• Don’t go shopping for anything but necessities
• Stop renting movies
• Drive less to save money on fuel and wear and tear on your car
• Drop your cell phone plan down
• Drop your cable package down or cancel it even if its just for the summer.

Why?

All this work to decrease your expenses can make it possible for you to get your balance down further and faster. That might bring your outstanding balance down to a percentage level that allows the credit card company more room to offer you a better deal. Paying down your credit card is the overall goal anyway, and so it helps no matter what the result of your rate negotiation.

What’s coming In our next installment?

We will cover some of the research needed and start to talk about ‘The Script.’

For More Information see:

Part 1: Prepare Before You Call Your Credit Card Company for a Better Interest Rate

Part 2: Credit Curb Appeal for Credit Card Rate Negotiations

As we continue to look at the ways to better negotiate your credit card rates, today we are focused on some very basic steps to take. You want to look good to the credit card companies when you call so that they will give you what you want. Here are two basic things you can do to brighten up your credit.

Pay Down as Much As Possible

You need to attempt to pay off your debt aggressively before you call. If you have extra money in your bank account, send it in as a payment to get your balance down. Do what you can to bring in more cash and make a big payment on the target card in question.

Benefits

• This helps bring your total balance down improving your metrics.
• It shows the credit card company and possibly the analyst on the phone that you are serious.

Boost Your Income

Find ways to bring in extra money, such as asking for a raise, taking a part time job, doing freelance or contract work on the side, holding a garage sale, using your income tax refund, selling a few things on Ebay.

Paying down your debt as much as possible and reporting that your income is higher than what it used to be are the two most powerful things you can do. Now don’t worry if this is not an option we have more tips coming in our next installments.

For More Information see Part 1: Prepare Before You Call Your Credit Card Company for a Better Interest Rate

A few days ago we prepared an article providing the useful tip that it only takes a little negotiation to get a rate decrease on one or more credit cards. Since then we have received several requests to elaborate on this topic more and we have prepared this article to provide a more comprehensive strategy for decreasing your credit card rates through negotiations with current and new credit card companies.

This process can be done off the cuff with a simple phone call and a request, it never hurts to ask or you will definitely receive nothing. A rate reduction can save you hundreds if not thousands of dollars, which can make it very important to many people.

So we will cover are going to cover 15 steps in multi part series to prepare you for the call. Future articles will cover even more strategies and tactics that you can use. Lets face it something that can save you thousands of dollars in compound interest is worth a little more investigation!

The Test Run Option

Now, I do not recommend calling without preparation but it won’t hurt much and will give you some practical experience. If you fail come back and do the preparation we recommend and improve your odds of succeeding. Do not wait forever to make things ‘perfect.’ If they were perfect, your debt would be paid off you would be able to use cash to make your purchases and the call would not be necessary.

Getting Serious

If you tried the test run or not the first thing you need to do is a little soul searching. You are going to be negotiating to save yourself thousands of dollars. That is like trying to talk yourself into a free car. You need to understand your own position and motivation and perspective. So our first tip is to ask yourself if you want to change to a different credit card company if you do not get a better rate?

1. Consider their customer service.
2. Consider how often they have increased your rates in the past.
3. Consider how many penalties they have charged you.
4. Consider how many balance transfer fees your have been charged and if they were reasonable.

You need to understand just how serious you are about your effort before you proceed. Everything that we will cover in the future will be determine by your goals and attitude, which will come across on the phone!

Many people are sometimes able to avoid bankruptcy by negotiating a settlement with their credit card companies. On occasion when your finances are in tough shape you may find yourself negotiating a lump sump debt settlement on your credit card. To achieve such a settlement, a lawyer or credit counseling agency may also assist. However, I would highly advise you try a debt repayment plan first, as this will affect your credit score.

These settlements can save you thousands of dollars in interest and possibly in principle as well.

A simple argument that is weighed by the credit card company plays out as follows:

1. So they might agree to a settlement with you. Suddenly, your mountain of debt has been greatly reduced! Congratulations, but be warned life is not entirely green on this side of the fence
2. Your credit card company has to write off a portion of your debt and they have to account for this in their financials.
3. They also have reporting agreements in place with credit monitoring agencies. When they write off that remaining balance, that write off will go on your credit history as bad debt.
4. That Bad Debt note will stay on your credit history for seven years.
5. You can add an explanatory note to your credit report, but it will not change the fact that you have cost a company a bad debt.

When possible you are usually better off trying to negotiate a payment plan that includes a reduction in interest rates. This has the benefit of allowing the credit card company to recover their principle without reporting a lump sum payment bad debt write off.

Under these plans you can typically pay the balance down faster if you have the money, further reducing your actual interest costs.

Regardless of the credit rating implications a lump sum settlement can be the right course of action to take. If you do not have the money, you do not have the money and not too much can change that. Odds are that if you are at this stage you already have some credit issues to concern yourself with and so the blight on your credit may not be insurmountable, but you should understand that it is similar in principle to a foreclosure, repossession or even a bankruptcy and that will take effort to overcome.

Sometimes when we think about debt we think directly of some small country in Africa with public debt over 100% GDP, but we shouldn’t be so hasty to look elsewhere. Debt is a problem that rings true very, very close to home.

We are going to list a few of the world’s top debtors in terms of both their public debt and consumer debt. The figures are equally as surprising as they are horrifying.

(more…)

Now that you have acknowledged that you are in debt, the second stage of getting out of debt is planning your escape.  Don’t take it lightly, I mean escape when I say it.  Debt is such a heavy burden to carry, it gets you down and saps your will until you reach your lowest.

Meta Spending Tips
To break the cycle of being in debt and adding to it you need to stop your spending, which sounds easier than you might think.  If you want out of debt then you’ve got to stop adding to it, so here are a few tips to help you on the way.

A word of warning here.  None of these tips are particularly ground breaking on their own, but when you take them together they are a very powerful way of changing your spending habits.

• Adopt a new attitude to money.  By that I mean you must become frugal, you want to hold onto you money.  It is your money, get that into your head.  You need to to hold onto as much of it as possible.
• If possible consolidate your credit card debt onto a single 0% interest card.  This will mean you will no longer be spending money paying off interest that can otherwise be used to pay off your balance.
• Hack your lifestyle.  Start cutting out costs like those lunches out, concerts and clothes shopping sprees.  None of this will help you get out of debt, so stop it.
• Think laterally round a problem.  When your car decides to break down, don’t jump at the first solution as this may be the most expensive.  Ask friends and family for help until you find the answer to your problem.
• Break it down.  Looking at your whole life makes the idea of saving money hard to comprehend because there are so many facets to modern living.  Break down your life into components such as eating, entertainment, transportation, communication etc.  Then go through each part of your life with a fine comb and start ripping out things you don’t need to spend on.
• Start reading.  You aren’t the first person to have a spending problem.  There are tons of great blogs where you can read up on other people and their personal finance experiences.  Learn from how they stopped spending and got themselves out of debt.
• Track your spending.  The more cold data you can gather on your spending patterns the easier it is to spot trends and eradicate overspend.  There are plenty of online applications you can use such as  Expenses Tracker,  Pear Budget and DimeWise to name but a few.

Recommended Reading
Here are a few resources to help you save money.  There will be a degree of overlap, but if you can get through them all you’ll find lots of ways to stop spending.

• 118 ways to save money in college (Scolarships Around The US)
• 101 ways to save money (CreditCave)
• 66 ways to save money (Pueblo, CO Citizen Information Center)
• 20 strange ways to save money (Bankrate)
• How to stop accumulating debt (Binary Dollar)
• The psychology of spending (Get Rich Slowly)

Debt can de debilitating, especially if you have accrued a substantial amount of debt over a period of time. But for some strange reason, there is a tendency to ignore debt and even add to it. This is especially true in the case of credit card debt because it is so easy to buy stuff online, over the phone and downtown. In other words, as a credit card transaction is nearly almost electronic you do not get the physical reminder that you have spent money.

Therefore, the first step that you absolutely must take to get out of debt is to admit it to yourself. And there is no better way to admit and acknowledge your debt problem than auditing your finances. Here are a few tips that I recommend.

1. Make some free time where you are not going to be disturbed by anyone. If you share your debt with another party, have a meeting with them present.
2. Gather all your bills together (including the unopened bills tossed into a dark corner) and group them into credit cards, loans, mortgage, utilities etc.
3. Fire up your computer and setup a spreadsheet on either Excel or Google Spreadsheets.
4. Start entering your data. I like entering totals of previous bills so that I can identify trends.
5. Add up your totals. Find out exactly what you owe on your credit cards, loans and living costs such as electricity and heating.
6. Now you can clearly see where you stand financially and the extent of your debts should be laid bare before your eyes.
7. If you have any payday loans, especially from online payday lenders, get them paid off now! Sometimes payday loans are a necessary evil but you should never use them as revolving credit, so if you have an outstanding payday loan or cash advance get it paid off immediately.

What you do from now on is crucial. I’m going to make further blog posts on the topic of getting out of debt so please visit again soon or subscribe to our RSS feed.