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Show Lenders You Are Safe To Lend To
To keep rates low, creditors must be convinced you’re safe to lend to. Creditors divide people into two groups: Those people who are "High Risk" and those people who are "Low Risk".  Obviously it’s the low risk group who get offered the best rates. To show creditors you’re low risk you’ll want to:  

A.  Pay off your monthly balances on time.  Late payments alarm creditors and may indicate you’re over your head in debt. When it looks like you’re about to go belly up, creditors protect themselves by upping their interest rates. 

B.  Pay off more than your minimums each month. Before they offer you low rates, creditors first consider not just how much debt you have, but also how fast you’re paying it off.  The faster you pay it off the more low risk you are. The lower risk you are the lower rates you’ll get. And low risk debtors are in high demand.  It is the low risk debtor that creditors compete for. This applies not just to your existing credit cards but also to those unsolicited offers you receive in the mail. 

C.  Close out credit cards and existing credit lines no longer in use.  Remember, your credit rating depends on a variety of factors which include: Your income to debt ratio, and your potential to go into more debt based on the credit you already have.  Having less credit means you are at a lower risk for over spending. And a low risk debtor is bound to be offered lower rates.  

D.  Pay off any outstanding bills even if they’re very small. An unpaid bill of just $60 dollars may be enough to convince creditors you’re a high risk.  Remember, the creditor knows nothing about you personally.  And often the little they do know is learned solely from your credit report. If that report shows you’re lax with small debts, you’ll have a tough time convincing them to lend you a larger one. Or as the Bible says: Those who cannot be trusted with little, cannot be trusted with much. 

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How  I Kept My Rates Below 3% For Years  (Skip To Step By Step Instructions)
I was 18K in debt. I had four credit cards at 18%, 17%, 16% and 15%. When the costliest card would not give me a better deal, I would naturally transfer the balance to the cards with lower interest rates. So now I’d have $0 on my 18% and the rest of my debt stacked at 17%, 16% and 15%. Most people get this far. With nothing on the card at 18%, a few would then ask this card for a low balance transfer rate.  Again this is nothing new. Obviously, if you get a lower rate, a transfer would be made from one of the higher rate cards.

But what if the 18% card won’t offer a lower rate?  At this point, the consumer thinks they’re stuck. They know that a 17% interest rate is better than 18%.  So they leave things alone. The balance transfers stop. Now, with their debt stuck on the three cheaper cards, the card issuers have no reason to lower their rates further. And so the consumer is at an impasse until their debt is paid.

But it doesn’t have to end this way!

The consumer should know that as long as they can transfer balances to any card at will, their bargaining power is tremendous. This may mean using a higher rate card to remove debt from a low rate card, simply, so the low rate card will provide an even better rate. Doing this I received rock bottom rates for years. I also had them waive their transfer fees.

In the example above, I asked the card at 18% for a lower rate and they refused. At this point I called them back to get a different service rep. I told her I was considering a large balance transfer, but only if they waived their transfer fees. These fees can run up to $200 or more depending on the transfer amount.

Now the card issuer was in a bind. With no balance, they were still required to service my account, i.e. mail me out my monthly statements, their new card offers and all their new promotions, etc. For once, I was actually costing them money! Eager to start charging me again, they agreed to the fee waiver.

Next, I did something counterintuitive.  I transferred the balance from my cheaper card at 17% to the more expensive card at 18%. With no fees, the transfer cost me nothing. A week or two later I called my 17% card to confirm it had a zero balance. I explained it was way too expensive to keep my debt there, which is why I moved it. With my balance at zero, they knew I wasn’t kidding. I then asked the card at 17% for the lowest balance transfer rate they had.  It was 5% for five months. They gave it to me instantly. Once again I had them agree to waive the fees beforehand. At this point, I re-transferred my debt from the 18% card back to the prior card, which now had a low rate of 5%.  So while the card at 18% wouldn’t bargain, it made the 17% card cut me a better deal.

This process was repeated with every single one of my cards. Each card would be zeroed out so I owed nothing on it. I would then ask them for the lowest balance transfer rate they had.  Sometimes they’d bite. Sometimes they wouldn’t.  But I would do this to every card, even if it meant transferring my debt to a higher interest rate. There was no cost because the fees would be waived and I could always transfer it back if I had to.

So by stacking my debt onto any three cards at will, the card with a zero balance would feel compelled to give me their lowest rate. To make things extra easy, I made a chart to track when it was time again to move my balances. The chart listed all my card #s, their low rate expiration dates, card balance amounts and card contact #s. With it, I could play the balance transfer game at will, and in under thirty minutes. This saved me thousands. It also kept my rates at below 3% until my cards were entirely debt free.

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Transferring Your Balances To Keep Your Low Introductory Rate (See Narrative)
This section is for you if you're stuck with high interest debt that cannot be transferred to low interest credit cards.  Do not take this tact unless you are ready to stop using your credit cards for new purchases. Warning!!! If you can't control your spending this will only hurt you. 

To get the cheapest rates, the card issuer must be convinced of your power to go elsewhere. To do this, you must be able to get any one of your cards entirely free of debt. Then make them compete with each other through the balance transfer game. Here's how.   

Sample Debt Chart
Copy the chart below and put in your own data. Note: This chart shows that of five credit cards, three have zero debt.  Because credit card issuers cannot earn money on these accounts, these are the ones you'll have the most leverage on when asking for low promotional rates. Remember, your greatest bargaining power is always when your card is at zero.

Even if all three accounts don't get lower rates (unlikely), they can still be used to "zero out" your other credit cards. With five cards you have five opportunities.  For example, you could zero out Chase once the 5.9 % rate expires, and then stack this debt onto your 4 four remaining credit cards.  Now with Chase at zero, you can again bargain with them to give you another low rate. If they refuse, you can always use them to zero out another card and see if the other card will negotiate  In July, you can do the same with MBNA, as that is when its low rate expires.

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TOTAL    $16,658                     $14,242          


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Using Low Interest Loans To Reduce Your Debt
Property owners can use home-equity loans (average rate: 7.67%) to reduce their credit card debt.  Investors can use margin accounts with brokerages to do likewise.  Interest on these loans is tax deductible, while interest on credit cards is not.  College students are often able to obtain low interest school loans (financial aid) for living and school related expenses. If you work part-time and live on a tight budget, you may have enough left over from your school loan to pay off your higher interest credit card debt.

Warning: Be careful about substituting an unsecured credit card debt with a secured debt such as a mortgage or home equity loan. Defaulting on a secured debt could very well leave you homeless.

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Dealing With Mounting Bills
Stay calm. Pay your rent or monthly mortgage first.  Then pay off your smallest bills.  Remember, the fewer creditors on your back the better.  Next, check with each creditor about penalties for late payments.  This will help you decide which bills have low priority and should be paid last.  For instance, you may be able to miss a payment on your gas, utility or phone bills without penalty. On the other hand, missed payments on your credit card may result in substantial late fees or the loss of your introductory rate.  

If you find that you cannot pay your high priority bills, contact your creditors or mortgage lender at once.  Level with them before it's too late.  Try to work out a modified payment plan with them to reduce your payments to a more manageable level.  If you have paid promptly in the past they may be willing to work with you.  Sometimes, credit card companies will even knock off the interest on your balance if you promise to never again use your card. Even finance companies may be willing to help.  

When a friend of mine once had trouble making car payments, the lender graciously allowed him to tack the payment on to the end of his installment plan. This gave my friend another month to get his finances in order.  While he would still have to make up for the payment he missed, it would be at the end of the loan and without late fees, interest or penalties. 

Don't miss credit card payments if you can avoid it. Late payments show that you are "high risk" and may cause your other card issuers to boost their rates as well. 

To protect yourself against credit card rate hikes, keep a list of credit card accounts, payment due dates, balances and credit limits. If a credit card due date falls at a time of the month when cash is tight, call the issuer and have the due date changed.  Don't wait until your account is turned over to a debt collector.  At that point, the creditor has completely given up on you.  

If you need more help, contact a local credit counseling service.  Credit counseling services offer free or low cost counseling to indebted consumers.  These agencies are in every state and will help arrange a payment plan acceptable to both you and your creditors.  Check with your local bank or consumer protection agency for reputable financial counseling services.