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An Innovative Way To Pay Less Interest On Your Credit Cards

By Michael Redbourn

Republish: EasyPublish™ Published: 30Apr2009 Word count: 728 Viewed: 393 time(s) Get Free Content For Your Site

Financial downturns and economic crises, were nearly always boom times for debt collectors, because how much they get paid is generally based on the amount of money they recover. This recession is very different however, because of its severity, and what was previously almost unthinkable, is now happening.

Credit card companies have finally realized that due to the depth and breadth of this recession, that a huge number of Americans are so hard-pressed, that they can't, and won't be able to pay their bills.

The result of this stark realization means that the number of troubled borrowers that are now getting payment extensions has almost doubled in the last six months, and borrowers that are in really big trouble are often being offered incredible deals that release them from between 20 and 70% of their credit card debt.

Over the years, credit card companies constantly augmented their profits by adding all kinds additional charges, such as late fees, pre-payment fees and over-the-limit fees, and they seemingly didn't realize that they'd eventually kill the geese that were laying the golden eggs.

Credit card companies recently announced that they expect to write off an unprecedented $395 billion of bad debts over the next five years, which compares with a total of about $275 billion in the last five years.

If, like a great many others you're buried under credit card debt then it's time to act, and the sooner the better, and here's how to do it.

Make a list of all your credit cards and include;

The account name, the phone number, how much you owe, the annual interest rate and the minimum monthly payment.

Now call each credit card company and do your best to negotiate a lower interest rate, bearing in mind that credit card companies will normally only offer loan modifications to people who meet certain criteria.

Be aware that most credit card companies say that they will only do deals with people that have been delinquent for 90 days or longer, and if you haven't been delinquent for that long, or at all, then your obvious response should be that you're in financial trouble and are trying to avoid becoming delinquent.

After each phone call, update your info with the new percentage rates that were agreed to, and then reorder your list of companies according to their interest rates, with the card with the lowest interest rate at the top.

Now call the FIRST credit card company, and ask if you can transfer the amount owed to the LAST company on your list to them, and if they agree then try to make sure that they'll still honor the new interest rate that they recently agreed to. If they don't agree, then call the second company on your list, and try the same thing again until you've finally called every company and achieved the best deals that you possibly could.

The next to last step is to reorder your list again, putting the company that's charging the highest amount at the TOP of the list.

The final step is to make only a minimum payment on every card on the list, with the exception of the FIRST one on the list.

You should pay the FIRST card on the list the maximum that you comfortably can, and when it's paid off you should close the account, delete it from the list, and then do the same thing with the next card that's at the top of the list.

If you persevere with this, you'll gradually see your list of credit cards getting smaller and smaller, and you'll have saved yourself a huge amount of interest at the same time.

Will The Above System Damage Your Credit Rating?

Yes it will, and you should expect a drop in your credit rating of between 70 to 130 points, and you might be adversely affected for as long as seven years. The adverse effects being that it will be far more difficult and expensive to obtain new loans.

Given these negative aspects, whether to follow the above advice and to save yourself a lot of money, will have to be a personal judgment call, and you will have to base your decision on your present financial state and your present credit rating.

In the event that you decide to follow the advice and to save the money, you'll now know exactly how to do it.

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