Consumer debt: Kill your credit card

Low-income households aren’t the only ones that struggle with bulging credit card balances, said Krystina Gustafson in CNBC.com. In fact, upper-income earners may be even more prone to such debt. Consider Will Chen, a California attorney “with a six-figure salary” who never­theless found himself $100,000 in debt. “Chen’s financial trouble began when he bought a nice house and new cars and joined several country clubs before he finished paying off his student loans.” It wasn’t until he took a lower-paying job, for which he felt less need to keep up appearances, that he brought his spending under control. Chen “got himself out of debt in about three and a half years” and today maintains a blog about frugal living, Wisebread.com.

If you’re serious about getting out of debt, consider simply cutting up your credit cards, said Donna Rosato in Money. “You’ll never have to worry about $39 late fees, 25 percent penalty interest rates, or creeping card balances again.” Studies show that consumers who pay with cash are frequently more attentive shoppers than those who pay with plastic. “A 2003 survey of supermarket receipts indicated that credit card shoppers rang up 30 percent bigger bills” and carted out twice as many nonessentials. Getting by without plastic may seem impossible, but these days debit cards are a “worthy substitute” and accepted everywhere credit cards are.

Short of eschewing plastic, call your issuers to negotiate better terms for hefty outstanding balances, said Shelly Banjo in The Wall Street Journal. If the first representative you speak to refuses, request to speak to a supervisor. “Quote specific offers from competitors,” and ask for a comparable rate. If all else fails, you can threaten to close your account and transfer the debt elsewhere—in which case “you may be transferred to a “retention unit” authorized to cut a deal in order to keep your debt on the books. These lenders know that borrowers can always find another company willing to offer them a low introductory rate. But do be careful if you go that route: Such low rates “often skyrocket to 25 percent or 30 percent at the end of the promotional period.”

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