Now before you read further, let me clarify that the only way you can save thousands is if you owe thousands and at high interest rates. When I worked as a credit counselor, I helped hundreds of people lower the amount of interest they would owe on their credit cards. Sometimes the dollar amount would be in the tens of thousands, helping them finally break through the endless cycle of unsecured debt.
The easiest way to get a lower interest rate is to call and request one, and there is a chance (a very small chance, but a chance!) they will lower the rate. You need to present a case, you always make your payments and have been a loyal customer, but it is not in the bank’s interest to lower your interest rate. This is how they make their money!
The second easiest way is transfer the balance at some promotional rate to another credit card. There is a cost of course, usually 3% of the balance, but for 0% interest for 12-18 months, the cost savings is huge. For example, you owe $10,000 at an interest rate of 20%, you will pay roughly $2,000 a year in interest fees. Now if you transfer that balance they will charge you a fee of $300, but every dollar you now pay goes straight to the principle. So if you keep the same payments, you will lower the total debt by $2,000 in the first year alone. Now over time you may need to transfer the balance multiple times, or if your bank allows you to get the balance transfer to your checking account, you can just recycle the balance transfer to your same card.
Now if a balance transfer is not available, and the bank is not willing to lower your rate, there is another recourse. Every bank has a hardship department, but in order to qualify you need to be willing to close the account and prove that your current credit card payment has put you in a financial hardship. Now closing your credit card does have a negative effect on your credit score, but over the long term, reducing your debt significantly outweighs the short term dip in your score. Before calling and asking for the hardship department, you need to review your budget and be able to run through your numbers with their representative. The purpose of the hardship department is to get a lower payment, with a lower payment they lower your interest rate and then spread the payments over 60 months. You need to be sure to mention you need lower payments, because of the hardship the payments cause you. You need to be able to run through your income and expenses and show that you barely have the income to meet the payments. So if you make $3,000 a month after taxes, and have a housing payment of $1,200, utilities $300, cable and internet $200, food $500, car payment and insurance $300, that is a total of $2,500 in expenses. Now add that you have $400 in credit card payments between the card for hardship and any other credit cards you may have, that leaves $100 for any and all other expenses. If you can show that you have a need for lower payments, they can drop the interest rate to low single digits, and lower your payments to make it more manageable. Keep in mind there is no prepayment penalty, so after you get your finances under control, you can make larger payments and get yourself out of debt much quicker.
If credit card debt has been something that weighs you down and has you worried, I hope these tips help you alleviate some of that stress and help you in your fight against debt.
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