Step Three, Part II: Take stock of your credit cards and loans

Your next step is to identify the cards/loans that are charging you the highest APR, and ask yourself the following questions:

1. Can I call them and ask if they can lower my APR?

Doing this isn't an unusual thing to do, and most people having financial trouble don't think to do it. All it takes is calling the customer service number on the back of the credit card or on the bill, and being friendly and polite to the customer service person answering the phone when asking if they have any deals for lowering your APR. 

The credit card company wants to keep your business, and they want to you keep paying money towards your balance, so quite often they'll be willing to help rather than to get another account in default. Sometimes there may not be a better APR available, but it's worth trying. It's even worth trying again in a few months when other deals may come up.

2. Can I transfer my balances between credit cards to get a lower APR for a certain length of time?

This method takes some careful timing depending on the cards and balances that you have. Again, the list you compiled will be an important tool here. Of course, this is best done when you have at least one credit card with a zero balance and a low balance transfer rate, both in APR and any balance transfer fees. On average this is usually 3-4 percent of the balance transferred, but the lower the better.

This also works best when you can make more than the minimum payment on your cards. With the new regulations for most cards, any payment you make above your minimum goes toward higher APR balances- usually in the form of the balance transfer fee! 

Keep in mind that there is no point in doing balance transfers if you can't take advantage of paying down the balances during the period of the lower APR. You may be giving yourself some time with a lower APR, but you're still exchanging that for adding a balance transfer fee to your total balance.

3. How do I time my balance transfers?

When considering balance transfer offers, you should also consider the following: When is your next bill due? Do the transfer after your statement closed, weeks before the next payment due date.

You can use this trick to save yourself a month's payment when doing a balance transfer to another card! That balance transfer will be a "payment" to the card- so take the money you would have sent for that bill and put it aside. If you must, use it to pay other bills. If not, deposit it into a high-interest savings account. I'll give you more information on savings in a future article!

Also for timing, keep in mind how long the balance transfer APRs last. They may often coincide, being six months or a year, or even longer if you have good credit. Of course, APRs of 0 percent are the most ideal; they allow you to pay off your balances without paying interest. But even if you're going from 24.99 percent to 12 percent is a good thing, so long as you can pay more than the minimum.

I've had good results by doing the following:

1. I called and got my APRs reduced by a couple of points or so.
2. I opened a new credit card account with a low APR balance transfer offer (this is when I was younger and didn't have too many cards).
3. I transferred the highest APR balance to my new card. I didn't transfer all of my cards to the new one because it's best to not utilize too much of your card balances if at all possible.
4. I transferred the next highest APR balance to the card that I had just freed from my last balance transfer which thankfully also had a transfer offer of a lower percentage rate.
5. I left other cards as they were if there were no other balance transfer offers available, or if they had higher rates than my other cards.
6. I paid at least $5 over the minimum on all of my card bills except for the one with the lowest balance. I paid as much as I could afford toward that card, usually from $25 - $100 or more if I'd just gotten a tax refund or something.
7. Once I finished paying off the card with the lowest balance, I took the payment money I put toward that card and added it to the payments toward the card with the next lowest balance. This method is called "snowballing" your payments.

Each time a card gets paid off, keep taking the money that would have been put toward those cards and pay off the next higher balance.

Occasionally it may make more sense to pay off a balance that's larger than another if it has a 0 percentage rate for a limited amount of time so that your payments are more effective while you have that rate.

When you've finished these steps, you will begin to make serious progress toward reducing the balances on the list of accounts that you just created!

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