Negotiating Lower Interest Rates

• The quotation "ask and you shall receive" rings especially true in the matter of lowering the interest rates on your credit cards. Trent Hamm, the founder of the financial blog The Simple Dollar, recommends taking the credit card with the highest interest rate and calling the number on the back of the card, then letting the representative know that you're having a difficult time making payments. Ask for a lower interest rate. If the representative says no, let her know you are looking into debt consolidation and transferring balances to cards with lower interest rates. "If the supervisor still won't budge, hang up and call back another time of the day," Hamm advises. Persistence may pay off at the rate of a 5 percent to 7 percent decrease.
  
  

Credit Card Calculators

• Use a credit card payment calculator to figure out how long it will take you to pay off your credit card based on the amount you are currently paying. The calculator will ask for your balance, interest rate and monthly payments. Play with the numbers to see how much of a difference small changes will make.
  
  

Order of Payment

• There is some disagreement among financial advisers about which credit card to pay off first. Some recommend paying the card with the smallest balance first since it provides the psychological boost that can inspire you to continue paying off the rest of your cards. Other advisers recommend paying the card with the highest interest rate first, because the interest is costing you money the longer your balance sits there. "The amount you owe doesn't really matter when you're paying an enormous amount of interest," says Linda Sherry, editorial director for Consumer Action.
  
  

Minimum Payments

• Minimum payments pay toward the interest rate of the credit card and very little toward the balance. In February 2010, statements from credit card companies showed a side-by-side comparison of how long it would take to pay off the credit card with minimum payments versus paying off the balance in a period of three years, in order to demonstrate the long-term cost of paying the minimum. The new statements were one of the effects of the Credit Card Act. Financial planner Kathleen Longo recommends paying the minimum on all the cards except the card that you have made a priority (such as the card with the highest interest rate). On the priority card, make the highest payment possible each month. Then move on to the next card.
  
  

Considerations

• The only way to pay off your credit cards and stop the cycle of debt is to stop accumulating new debt. In the book "365 Ways to Live Cheap," Hamm recommends making small financial changes rather than vast ones in order to maintain frugal living over a long period of time. Hamm points out that in order to pay off your debt and create an emergency fund, you must spend less than you earn and keep track of your progress.