Step 3: Learn how to manage your credit cards

We sometimes don’t realise that the small amounts of money we can find in our week can make a big difference if we paid them off a credit card. With this plan, taking an extra $10 a day, you can pay off $8,000 in credit card debt in just 3 years.

Lower Your Interest Rates

Call your credit card companies and tell them that you have received offers for cards at lower rates and ask them to lower your rate. If you have always paid regularly, they are likely to negotiate. If the company says no, tell them that you will be closing your account this week and transferring your balance to a competitor who offers better rates.

So that there is no doubt about your seriousness, tell them the name of the competitor you have in mind. (It shouldn’t be difficult to come up with a name, since you are probably constantly getting applications in the mail from credit card companies who want you to transfer your balances to them).

You can ask to speak with a supervisor. Supervisors have the authority to give you a lower rate right there on the phone. In many cases, you can cut your rate in half simply by asking.

The Credit Cards to Pay Off First

When you have a lot of credit cards, figuring out how to pay them all off can be pretty daunting. Is it best to 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? Follow these next steps and your credit cards will be paid out quickly.

Here, the basic idea is to reduce the amount of debt you are carrying on the credit cards you have as fast as possible. Why is this important?

1. The fewer credit cards you have and use, the better!
2. The more credit cards you have, the greater the chance you have of being billed with late fees (up to $39 a month), over the limit fees (up to $35 a month) and annual fees on your cards that can range from $25 a month to $200 or more.
3. Getting the amount of cards you have paid off is a huge emotional boost. You’ll see yourself making progress quickly!

Make a list of the current outstanding balances on each of your credit card accounts:

1. Divide each balance by the minimum payment that particular card company wants from you. The result is that card’s payout number. For example, let’s surmise that your outstanding VISA balance is $600 and the minimum payment due is $60. Dividing the total debt ($600) by the minimum payment ($60) gives you a payout number of 10.
2. Once you have figured out the payout number for each account, rank them in reverse order, putting the account with the lowest number first, the one with the second lowest number second, and so on.
3. You now know the most efficient order in which you should pay off your various credit card balances. Take half of the money you have been able to find in your ‘Daily Spending Habits’ and apply it to the card with the lowest pay out figure. For each of your other cards, you make only the minimum payment.
4. Once a card is paid off, close it!  Of course, when you get to paying your last credit card off, it is OK to keep that one account open – but make sure you pay the balance off every month. 
   Finally, ask the credit card companies to waive your annual fees on the cards you have, whether you use them or not.

You should continue doing this until you have paid off your way to being debt-free!