Last week, I spent some time on the phone with Scott Bilker from DebtSmart.com. We talked about the debt challenge and what the best next steps are after hauling out all of the bills and making a list of debt. Since most people don’t know what they owe – and many get overwhelmed and bury their bills without even looking at them – that list is an important first step.
 
He told me that the list should include more than just the bill and the amount owed. Make a chart that includes the following:

* The name and payment address of the account
* The total amount owed
* The minimum amount due each month
* The due date (but remember that this can change from month to month)
* The interest rate
* The repayment terms
 
That’s a lot of detail, but it will help you get a handle on how you are going to repay your debts. It’s usually a good idea to start out with the highest-interest debt and pay that off first. So, once you create your list, put it in order of interest rate, from highest to lowest. The name at the top of the list is the one that we’re going to tackle first. That’s what I thought, triumphantly, until Scott corrected me.

“But what if your income is $4,000 a month and your debt payments are $5,000 a month?” he said. Hmmm…that was a situation that I remembered being in shortly after college. Between student loans, a new car loan, rent, commuting expenses, and all of those credit cards I’d accumulated during my undergrad years, even if I had a plan, I wouldn’t have been able to afford it.

So, Scott told me this great little secret: Credit card companies want your business. And when a company wants your business, there’s room to negotiate. So, he told me that you can call the credit card company and ask that your interest rate be reduced. You simply call the customer service department and tell them that you would like your interest rate reduced. If you have decent credit and can qualify for another card on which you can transfer your high-interest balance, you’ll have plenty of leverage. You can often get your interest rate reduced a few points even if you’ve got late payments in the past. Say you’re paying 20 percent on a $5,000 balance and $200 per month in payments. That will take 33 payments to pay off, and cost $6,600. If you renegotiate that rate to 17 percent, then the payment time is 31 months. That saves two months, or $400 in interest payments, which can then be applied to paying down debt. 

So, by the end of this weekend, get your list together and choose the debt you want to tackle. By Monday, call the 800-number of your credit card company and ask for a better interest rate. Tell us your results in the comments section. I’ll take any questions you have to Scott and see if we can take advantage of his excellent experience in debt reduction.

Meantime, read this excerpt from his book, which is truly inspirational.