Getting a credit card debt reduction is not always easy, but it can be done. Naturally, some methods are less stressful than others. Let’s look at the easy options first.
Ask for an interest rate reduction first.
One of the first things you should do is call up each of your credit card companies to ask them to reduce your interest rate. Ask them if they have any better rates available and, “Is this the best you can do?”
By getting your interest rate lowered, you will automatically pay off more debt every time you make a payment. Less will go to interest and more will go toward paying down your principal.
Consolidate balances onto low-interest cards.
Although it’s not always possible, you might consider consolidating two or more balances onto a low-interest credit card. While you may pay a balance transfer fee, this could be off-set by the lower interest rate.
The end result is you get a lower interest rate, which makes it easier to pay off your debt faster.
Pay off high-interest balances first.
In many cases, it makes the most sense to pay off your highest-interest cards first. Take whatever extra cash you can afford and use it to pay down your highest-interest balance.
Once you pay off this balance, you will have even more to pay down your next highest-interest balance. And so forth.
Use lump sum payments like tax refunds to pay down principal.
Many families will get at least one lump sum of money each year, usually in the form of a tax refund, sometimes in the form of an inheritance or performance bonus.
Rather than using that money to buy a new doodad or gadget or toy, use that money to pay down the principal of one or more credit cards.
By using your windfall in a wise and responsible way, you will quickly see a significant credit card debt reduction. You may even pay off one of your cards entirely and get to enjoy more cash flow every month!
Put your credit cards in a Ziploc bag of water… and freeze them!
One of the big reasons so many good people struggle to get out of debt is because every time they make some progress, they put more debt on their credit cards.
The temptation to use credit cards is just too easy. And you’ll never make long-term progress if you keep using your credit cards while you try to pay them off.
One technique is to simply remove your cards from your wallet or purse and place them in a file at home. But if the temptation to use them is still too strong, you can put them in a Ziploc bag full of water… and freeze them!
By doing this, you will not be able to use your credit cards whenever you feel the compulsion to buy something. You will actually have to pull the Ziploc bag out of the freezer and let it thaw.
Of course, this may take a few hours. And by then, you may have cooled down yourself — and no longer feel the need to buy whatever it was you wanted.
All of these methods are relatively painless. Anybody with enough self-control and self-discipline can do them. But if you’re really in a pinch… and you’ve got to get a credit card debt reduction fast… then there are a couple of more painful methods.
Hire a debt reduction and consolidation service.
There are many debt reduction and consolidation services that will create a debt repayment plan for you and deal with the credit card companies on your behalf.
This is the route my brother and his wife chose to go. They hired a company that figured out how much they could afford to pay against their debt each month. They then used this figure to create a debt repayment plan.
During this time, my brother and his wife stopped making payments to the credit card companies. They began to get calls from collection agents. But they expected this.
Fortunately, the company they hired has been able to bear the brunt of the calls and negotiate debt reduction deals with the credit card companies.
Thankfully, my brother and his wife are making good progress now. And even though they are still in debt, they finally see the light at the end of the tunnel. They have hope.
Try to get a credit card debt reduction yourself.
Although it’s usually not advisable to do this, you can try to negotiate a credit card debt reduction yourself.
Unfortunately, most credit card companies are very experienced. They’ve heard all the sob stories. And they won’t be very willing to forgive any of your debts.
Which means you will have to stop making payments if you want to have any kind of leverage in the negotiation. This is the same process you would go through if you were working with a debt consolidation company… but this time you’d be handling all the phone calls and negotiation yourself.
It’s not necessarily the way I would do it; but I have heard of some brave individuals trying to go it alone.
No matter whether you hire a company or not, it’s fairly common for people to get credit card debt reductions of anywhere from 40% to 60%.
So if you had a balance of $10,000 on one card, you might see it reduced to as low as $4,000 and maybe as high as $6,000. In the end, you have to decide:
Is all the stress worth it? Is it worth it to wreck your credit score to reduce your debt? And could you possibly accomplish the same thing by choosing some of the easier, less stressful methods first?
Wrapping It All Up
If you’ve still got a source of income, and you can discipline yourself, then definitely choose some of the less stressful methods first. Try to get your interest rates reduced. Consolidate balances onto a low-interest card. And so on.
If, on the other hand, it is literally impossible for you to make all your minimum monthly payments, then you will probably be forced into choosing the more stressful method of hiring a debt consolidation company — or trying to negotiate with the credit card companies yourself.
Choose wisely. And I wish you all the best as you seek to get a credit card debt reduction.