America seems based on a culture of debt. Get it today, and pay for it tomorrow. The problem is that most Americans do not pay off their full credit card balance every month, so we are not paying tomorrow. We are paying week after week, month after month; the great deal we thought we had to have today ends up being a very costly purchase when compound interest is added on. The mentality of “buy now, pay later on credit cards” has been the cause of many a family’s hardship, especially when credit card interest rates go up or when the family cannot make its minimum payments.

In this first installment of a three-part series, we will consider some simple strategies that may ease your “credit crunch:”

Ask to renegotiate your interest rates: If you have ever read the fine print on your credit cards, you know that your credit card companies can increase your interest rate for pretty much any reason they see fit. You are at their mercy, which is not a safe place to be. If you are not paying off your full balance each and every month, an increased rate means an increased payment for you each month. It also lengthens the amount of time it will take you to finally pay off the debt. So, regardless of whether your interest rate has increased recently or stayed steady, call your credit card company and ask about renegotiating your interest rate to a lower amount. Anyone can do this, and it does not cost you anything. You do not need to hire an agency to do this for you; just pick up the phone and call yourself. The worst they can say is “no,” but they may just reduce your rate. You will never know for sure until you ask.

Consider your options. Yes, this may not be the best time to apply for new lines of credit. We have all heard the news reports about how credit has “dried up” and lenders just are not lending anymore. But, just because it may be difficult does not mean it is impossible.

• Chart your debt. Begin by making a chart of your current credit cards. For each, note the current balance (even if you do not owe anything); the current interest rate; if the rate is promotional, also note when it changes and what the new rate will be; also list the credit limit and the bank’s 800 number for easy reference.
• Can you find a balance transfer that makes sense for you? On each of your current credit cards, call and ask if a balance transfer option is available.
  • In a balance transfer, you move debt from one credit card company to another in order to get that debt at a lower interest rate. Remember that balance transfer rates are often temporary and include a one-time service fee. At this point, you are not ready to make a balance transfer; you are just gathering information. You may get turned down a few times, but if you do find one or more of your credit card companies willing to offer you a balance transfer, add this information to your chart: how long the rate is available, what the reduced interest rate would be and how long it would last, how much debt you could transfer, what the service fee would be, what the rate jumps to after the promotional period, and any special requirements. For example, Discover recently began requiring cardholders to make one or more purchases a month (at a higher interest rate) to keep their lower balance transfer rate.
  • If you do receive a balance transfer offer rate, count the cost. Consider this:  if you have $3,000 of debt on a twelve percent card and have the opportunity to transfer the debt to another of your cards with a five percent rate, that seems like a good deal, right? In one year, your interest cost on the twelve percent card will be $360, while on the five percent card it would go down to $150 for an annual savings of $210. But if the promotional rate is just six months long with a three percent service fee, your savings of $210 turns into a paltry $15. When you add to the mix the fact that after the balance transfer rate expires, your new interest rate would jump to sixteen percent, a full four points higher than where you are right now, this promotional rate does not seem like such a good deal.
  • You must determine if you can transfer enough for a long enough period of time at a low enough rate to make the service fee worth it, and then proceed to pay off as much of that debt as possible during the promotional period. Never assume that when one balance transfer promotion ends that you will be able to find another one to “rollover” your debt. You must be ready and willing to pay the standard rate, after the promotional period, before you transfer debt.
  • One final caveat: Many consumers have if you have two or more separate credit card accounts with the same bank. In this case, you typically may not transfer debt between those lines of credit, although you may be able to consolidate the two lines of credit if that helps your situation. Each bank’s policies on this are unique and may even vary from customer to customer, so call and inquire to be certain.
• What about getting a new card? Often credit card companies offer balance transfer rates or other incentives to entice new customers. To find out what rates and incentives are available, start by visiting www.bankrate.com and www.creditcards.com regularly. If you see an offer that beats your current interest rates, consider applying. But before doing so, make sure you have exhausted every option to negotiate down your current interest rates. If you do decide to apply for a new card, pick the one that would benefit you the most and start there. If you apply for multiple cards at once, banks see those applications on your credit report and get nervous. If you get turned down, wait three or more months before trying again with a different bank.

There is no guarantee that any or all of these options will work for you. Depending on your credit score, payment history and balances, banks may not be willing to lower your interest rate, offer you a balance transfer rate or a new line of credit. But again, you will never know until you ask. So make the effort and start making your credit card chart. If nothing else, making the chart will open your eyes to exactly what your current debt situation is.

Tags: Credit Calamities, Credit Card Rates, pay off your debt, paying down your debt, renegotiate your interest rates