Step 3: Learn to Play the Credit Card Game

As you already know, the credit card companies like to play a lot of games that can affect you financially. Unfortunately for us, these “games” are legal, and as long as you have a credit card, you’re in the game whether you like it or not. It is thus ever so important to know the rules of the game and have the skills to compete.

Part 1: Pay More than the Minimum Payments

If you’re the average American, then you probably have a decent job, but you also have $8,000 in high-rate credit card debt and no savings to fall back on. Worrying about your money is a daily chore and may even induce insomnia at night. And you might not believe us if we told you that $10 a day could solve your financial problems. But it can, and it can happen faster than you might expect. With this plan – assuming you follow it strictly – you can be credit-card-debt-free within 3 years.

Sound too good to be true? The secret is to pay more than your minimum payment. By applying $10 a day against your $8,000 credit card debt (assuming an interest rate of 16%), you’ll be debt-free in 33 months.

Part 2: Lower Your Interest Rates

You most likely get credit card offers every week in the mail. Call your credit card companies; let them know about the offers you’ve received for lower rate cards; ask them to lower your rate. If you make regular payments, they’ll probably be willing to negotiate. If they say no, tell them you’ll close your account this week and transfer your balance to a competitor with better rates. Tell them the name of the competitor so they know you’re serious. If you’re not getting anywhere with the customer support representative, ssk to speak with a supervisor – they have the authority to give you a lower rate on the spot. You can often cut your rate in half just by asking.

If you’re unsure what to say, you can use Jean Chatzky’s sample script:

“I have [name of card] with you and my interest rate is [X] percent. I received another offer in the mail from [other bank's name] for [X] percent, but before I take it, I want to see if you can lower my interest rate instead.”

If the representative says he’s not authorized to do that, you say:

“Look, you and I both know that if I transfer my balance today, next week your bank is going to send me an offer to come back at an even lower rate. Why don’t you just save the bank the cost of that effort by giving me several points today?”

If the rep says it’s not possible because your credit card is at a fixed interest rate, you say:

“Actually, that doesn’t have anything to do with whether or not you have the ability to lower my interest rate. A fixed interest rate only means that my rate doesn’t vary with fluctuations in the prime rate. In fact, the bank can raise it on my account at any time by just giving me 15 days written notice. And the bank can, if it chooses, lower the rate today.”

If the rep still says he’s not authorized to do that, you say:

“I’d like to speak to your supervisor.”

Then speak to a supervisor and follow the above script again.

Download a printer-friendly script
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Part 3: Four Tricks of the Credit Card Companies

Interest Rates: Credit cards today have interest rates ranging from zero percent to as high as 40 percent annually. Get out your credit card statements and find out exactly what your debt is costing you. Then go to a website like www.lowermybills.com or www.bankrate.com to look at competitive offers. Before you switch your debt to one of the low interest rate cards, call your current credit card company and ask to have your rate lowered using the tips above.

Late Fees: Late fees range anywhere from $15 to $39, after which credit card companies will typically increase your interest rate. Late fees contribute nearly a third of the revenue made by credit card companies. Fortunately, most credit card companies will waive your late fees if you call and ask. If you know you may be late one month, call in advance and ask for a grace period. If you’re already late, call and ask if they’d be so kind as to waive your late fee time (tip: trying to do this every month isn’t a good idea). And always, always, make sure you request the customer service representative’s name and ID number so you can document your own proof of the call.

Teaser Offers: How many offers for “zero percent” credit cards did you get this month? Word of advice: read the fine print. The catch on most of these offers is that if you are late just one time the interest rate can jump as high as 20 percent. If you’re late two times… yeah, not a good idea. Also, there is usually a transfer fee of 1% to 3% for debt that is moved.

Annual Fees: Most credit card companies’ annual fees range from $35 to $100 annually but can range anywhere from nothing to $2500. With some cards, you may be able to get these fees waived by simply calling and asking. Typically, cards with frequent flyer programs or rebate offers won’t waive the fees, but regular cards with no special offers often will.

Part 4: Which Credit Cards to Tackle First

Imagine a world with no credit card debt. Believe it or not, you can live in that world! You can eliminate your credit card debt once and for all. This is called Dead on Last Payment – or DOLP™, for short.

But not only do you want to get rid of all that credit card debt, but you also want to reduce credit card debt as fast as possible. Why is speed an issue?

• The more credit cards you have that carry a balance, the greater the chance you have of being hit with late fees, over-limit fees and annual fees
• Getting your cards paid off is an enormous emotional boost!

Here’s what you do:

1. List your current outstanding balances on each of your credit card accounts.
2. Divide each balance by the minimum payment that the credit card company wants from you. The result is that account’s DOLP number. For example, assume your outstanding MasterCard balance is $500 and the minimum payment is $50. Divide the total debt ($500) by the minimum payment ($50) to get a DOLP number of 10.
3. After you have figured out the DOLP 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.
4. You now know the most efficient order in which you should pay off your various credit card balances. Take half of your Latte Factor® money and apply it to the card with the lowest DOLP number. For each of your other cards, you make only the minimum payment.
5. Don’t close a card once it’s paid off! Leave the account open so you can show unused credit, which can help improve your credit score.
6. Continue doing this – card by card – until you’ve DOLPed your way to a debt-free existence!

Print David’s DOLP^™ chart!
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Step 3 Summary

You can now play (and win!) the credit card game by:

• paying more than the minimum
• lowering your interest rates
• understanding and avoiding credit card company tricks
• and knowing which credit cards to tackle first

Congratulations! That’s the end of Step 3.

Now you’re ready to go on to Step 4: Stop Spending

or go back to step 2

Debt Resources

• Lexington Law Firm
• Instant Online Debt Consolidation - Free Quote!