How Do I Know A Good Credit Card Debt Reduction Strategy When I See It?

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How Do I Know A Good Credit Card Debt Reduction Strategy When I See It?

By: Matt Clarkson

Credit card debt reduction is an important part of the debt reduction process. The way credit card debt reduction works is if you have five credit cards, you need to keep track of and pay 5 bills every month.

Once you enter a debt consolidation program all your accounts will be consolidated into one account. So now, you'll need to pay only one bill each month.

Sometimes it can even help to see a credit card debt reduction counselor to help you with understanding why you continue to use credit cards. A good credit card debt reduction strategy will include both of the above strategies along with a professional debt reduction plan.

A debt reduction plan is a process that allows you to combine all of your monthly bills into one monthly payment, sometimes up to 50% lower than what you're currently paying.

A good debt reduction plan will work with your creditors to reduce and/or eliminate high interest charges, waive late fees and other penalties, and update your past due accounts to show the current status.

Sometimes a company will prepare a debt reduction plan and get paid on a performance basis with their fee being a flat percentage of the amount saved. This fee can be just 25% of the amount of money eliminated as your debts are settled.

If you're looking this subject up then it's pretty important that you take serious action to get help.

With an increase in the debt problems across the country, there's a high-end growth of debt consolidation firms nationwide. Be careful to choose the debt reduction services of the right firm to become debt free.

A good Debt reduction services company will offer a confidential program individually designed to provide you with a unique solution for your financial situation.

Their professional, certified counselors will assess your financial situation, assist in creating a spending plan, and negotiate the terms of your debts with creditors.

By negotiating terms such as lower interest rates and waived late fees, they can often provide you with more affordable payments and a shorter payoff period. A debt reduction services company will consolidate all of your unsecured debts into one convenient monthly deposit that will disburse directly to your creditors.

About The Author

Matt Clarkson is a specialist in both traditional and online business that has years of experience in borrowing money and investing for capital growth.

The Free Information Online website is designed to help people find unbiased advice and tips with out the worry of any high pressure selling.

For more free and unbiased advice go to...


Bodona 11.10.2008. 18:28

My parents are financially irresponsible and want me to cosign a personal loan. What should I do? My parents (in-law's, actually) are in their late 50's, and should be preparing for retirement. In stead, they are spending erratically, racking up massive credit card debt, remodeling their home, etc. Yesterday they asked me to cosign a personal loan, which they plan to use to pay back a payday advance from a predatory lender. How to I help my parents without jeopardizing my financial security, too? Any money I give (I don't lend money to family) is that much less I have for my kid's college accounts.


Admin 11.10.2008. 18:28

Oh boy, what a mess to be in. On the one hand, you want to help and be accommodating since after all, these are your wife's parents. On the other hand, if you say "no" you could strain relations between you and the in-laws, not to mention your wife.

However, to protect your own credit, absolutely do not co-sign on a personal loan ~ever~ with these people. From what I've read, they will probably default on the loan leaving you stuck with paying the tab if you want to preserve your credit. If you want to give them the money that's fine; however, this sets up a precedence that you will give them money when asked, therefore enabling them to continue spending foolishly.

My ex is like your in-laws and my grown sons have a great way of handling their dad's financial irresponsibility:
First, they never hand their dad cash but will buy him groceries or fill up his gas tank whenever he asks for money. If he asks for additional funds, they always reply "Sorry Dad, that's all I have to spare."
Secondly, when ever their Dad runs short, they will sit down with him and discuss his spending habits & bills, and help him develop a strategy for reducing debt. This debt reduction plan may even include having a garage sale, or selling off a car.

You could try this with your inlaws, and even offer to pay for them to go in for credit counseling, but never, ever give them cash or co-sign on a loan. Once you start, you'll be setting yourself up for a lifetime of phone calls and visits from them whining for financial help.


Tireless 01.11.2007. 16:06

Got caught in a bad real estate deal. I am getting out but need a debt reduction strategy. What debt should? I pay off first? I have a credit card with $20K on it that is 0% for a year. I have a car payment at 9.15% for 15K. I have a $7,000.00 student loan which is annnoying me at 6.9. Thoughts?


Admin 01.11.2007. 16:06

car studed loan and than the credit card!!!


Nikki H 15.05.2008. 14:29

Paying off credit cards and closing the accounts? I have a few credit cards all have been current, but feel I'm getting in over my head. How do I go about paying the cards off then closing them?
I plan on taking my stimulus money and paying them off, so the money isn't an issue. But I can have them closed before they receive pay off?
MZ, they charge yearly fee's if left open, should I still keep them open? I've cut them up so I won't use them.

Nikki H

Admin 15.05.2008. 14:29

There is a method you can use to pay off your credit cards, but you may not want to close the accounts.

The first thing you need to do is decide to stop using them (at least for a while) and lock them away. If you have a problem with self-restraint, one trick is to place them in water and freeze them. Often by the time the frozen water is defrosted, the urge is gone.

Once you have control over your ongoing spending, you want to focus on getting credit card debt below 30% of the authorized limit. Doing this will have an immediate beneficial effect on your credit score.

Next, select a card (preferably the one with the smallest balance) and focus all your extra funds on that one card. Stop sending more than the minimum payments on the other cards. You are just spreading yourself thin and diluting the effect of the over payment.

Continue sending every extra penny to reduce the balance on that one card. Bring that balance to Zero! Put that card away and only use it for emergencies!

Once that card balance is at zero, take the money you had been sending on that card (principal, interest and overpayment) and direct it to payment of the one of the other cards.

Here you have two choices. Some people prefer to direct the money to the highest interest rate card so that balance comes down as quickly as possible. This will obviously save you a lot of money, as the interest will be saved in direct proportion to the reduction of the amount owed.

However, you might be better served by continuing the strategy used to repay the first card. If you have another card with a relatively small balance, you should select that card and add what you had been sending on the first card to the minimum payments you had been sending on it. This will bring that balance down as quickly as possible.

Once you have paid off that card, put it away too and repeat the process.

Repeat the process, until you have achieved your goal.

Do not cancel the cards. Having no available credit damages your credit score too. Furthermore, a history of good payment improves the score.

Leave them alone. Just use them occasionally to keep them active. Simply be sure to limit your purchases to amounts you can pay at the end of the month.

This requires self control, but you can do it!

Good luck!


Janie 01.10.2009. 15:18

How do I avoid being charged interest from my credit card company? I reached my credit limit months ago, but every month I make sure to pay at least my minimum payment. I thought that making at least my minimum payment would help me avoid paying interest. I even have automatic payments setup so I'm aways on time. But I recently found that a finance charge was deducted from my account. How do I avoid another?


Admin 01.10.2009. 15:18

You need to pay the balance in full if you want to stop paying finance charges. Credit card companies are in the business to make money. They love it when customers pay only the minimum payment. This means the customer will have a revolving balance for years and they will make lots of money in finance charges. The longer the card holder carries the debt, the more money the creditor will make. The minimum payment on credit card debt is calculated as a percentage of your total current balance, or as all interest plus 1 percent of the principal. Card issuers also set a floor to their minimum payments -- a fixed dollar amount that the minimum payment won't fall below. The minimum payment drops as your balance is paid, but thanks to compounding interest, you will end up paying for a long, long time if you pay only the minimum.

You should try to pay more than the minimum payment each month. You should also pay your bill before the due date.

Credit cardholders who carry a balance from month to month do not have a grace period; the credit card company charges interest every day of the month until the bill is paid. The cardholder loses a little money every time he or she makes a monthly payment around the same time as the statement due date.
In addition, this interest compounds. For example, on the second day of the billing cycle, a cardholder pays interest not only on the outstanding balance, but also on the interest charged on the first day.

By contrast, every early payment you make saves you a little money.

"Paying early is always better because the math works," says Scott Crawford, CEO and co-founder of, a San Francisco-based free online service that helps consumers create a debt reduction plan and pay down debt.

"This strategy can save you money as long as your credit card interest rate is greater than that of your bank account -- or wherever you hold this cash," Crawford says.

These savings are modest but add up over time.

For example, imagine a cardholder with an 18 percent annual percentage rate, a $10,000 balance and a minimum payment of 3.5 percent ($350) of the balance. If the cardholder pays on the last day of the billing cycle, finance charges for the period will total $152 on an average daily balance of $9,989.

However, if the same cardholder pays on Day 2 of the billing cycle -- long before the bill shows up in the mail -- the average daily balance falls to $9,661.

How much will this save in finance charges? Just about enough to buy a latte: $5 a month, or $60 a year.

Savings are even greater when the card interest rate is higher. At 29 percent, the cardholder saves $8 a month, or $96 a year.

Paying on time and in full is the only way to avoid paying interest. If you carry a balance, paying earlier in the month can shave off a few dollars in finance charges.


Jen 12.06.2008. 22:04

How do I not let debt ruin my life? I'm a college student who gets straight A's and work a part time job. I was a little irresponsible with my credit cards and am $4,000 in debt. It's starting to hurt me financially because I have to make such big minimum payments and the interest is really high. I am going to try to consolidate it but in the meantime what can I do so I don't stress out about this? It's starting to make me feel really depressed.


Admin 12.06.2008. 22:04

1. Stop spending- do not increase the debt. When you are standing in the bottom of a hole, you put down the shovel and stop digging. Otherwise, you are not getting out.

2. Cut your expenses - You need to make sure that your money going out is less then the money you have going in. Take a close look at what you are spending. Can you cut your cell plan and have less minutes? Cut your cable bill to a less expensive plan? Major reduction to the beer/pizza/eating out budget.

3. Increase you income - I know being a student full time is a lot of work. But can you work more in the summer when you are out of class and save up?

4. Pull your credit report. You can get a free copy of your credit report each year from You will have to pay about 6.00 to get your score. If there is anything wrong on your report, you can dispute it.

5. See if you can get the credit card company to reduce your interest rate. - I have a card that will creep the interest rate up for no reason. When I catch this....I call them, fuss at them, tell them that if they don't put that rate back down, I'm going to transfer the balance from their card - freeze their card in a block of ice and never use it again. Since I have been a good customer (pay my bill on time every month) - they do it. The threat does not work if you are a bad customer.

6. Work to improve your credit score - About 35% of your credit score has to do with paying your bills on time each month. This means every bill (rent, utilities, etc). Don't bounce checks.

About 30% of your credit score is your debt to available credit ratio. That means, you have a credit limit of 8,000. You owe 4000 - so 50% of your available credit is used. The lower the % - the better for your score. When you have a low %, it shows lenders that you are responsible with credit.

If you have too - you can see if the credit company will raise your credit limit - thereby, reducing your %. BUT - be do NOT use that increased credit limit. Otherwise, you only make the deep hole you are in deeper.

7. Remember, it took time to create that debt. It's going to take time to get rid of it.

8. Dave Ramsey. He has several books and a radio program. He gives good advice about money and debt. You want to become educated about money. He outlines a good strategy for reducing your debt.

A diet won't work unless you become educated about food/nutrition so you can make good food choices- so that you can lose weight and keep it off. Debt won't go away and not come back, unless you get educated about money.

Good for you to realize you have a problem. The average American citizen has over 8000 worth of credit card debt. So you are already ahead of the curve!


Niko 14.12.2010. 22:15

Does anyone know about a company called Freedom Plus? I'm looking to consolidate my credit cards, and have seen some of their ads. Does anyone know anything about them? Thanks.


Admin 14.12.2010. 22:15

Freedom Plus, offered by Freedom Financial Network, is a program where consumers get free evaluations (either online debt comparisons or consultations with debt consultants) to evaluate the best debt resolution program for their personal needs. The staff and I have researched Freedom Plus and reviewed information on the company and on its debt resolution strategies. We give Freedom Plus a thumbs up.

The Freedom Plus program is an online resource where for free you can pull your credit report, validate who and what you owe, and then compare side-by-side your debt consolidation and debt relief options including Credit Counseling, Making Minimum Payments, and Debt Resolution options.

If you are indeed struggling with unmanageable debts then we would recommend evaluating your lifetime TrueCost of debt paydown, and compare debt options for getting to debt freedom. There are many different debt relief options - including credit counseling, debt settlement, bankruptcy, debt consolidation and even bankruptcy if your debt is debilitating. You can take control of your situation and get out of debt with one or more of these options, some of which you can indeed compare for free with FreedomPlus:

Credit counseling
Debt consolidation
Debt settlement
Bankruptcy has created individual solution pages within the debt portal, but here is a quick summary of each one to get you started as well.

Credit Counseling
Credit counseling is a program that enrolls you on a debt management plan ("DMP") which usually allows you to qualify for a concession rate from your creditors for lower interest rates and lower payments. The plan should include reduced interest rates, lessons in budgeting and money management, or a comprehensive debt management program.

Debt Consolidation
You may be able to consolidate your debts with a home equity loan, mortgage refinance or other debt consolidation loans. If you're confident that you'll be able to make the payments without building more credit card debt, debt consolidation can be an excellent way to reduce your payments and possibly reduce your taxes. You usually must be a homeowner to qualify for most debt consolidation loans. You can apply with's approved debt consolidation lenders.

Debt Negotiation or Debt Settlement
Debt settlement services offer to negotiate and settle your debts for less than you owe, many times reducing debts by as much as half. Debt settlement is an option for people who cannot afford their monthly payments, and who are not worried if their credit rating will be negatively impacted during the program. It's important to be aware that you are NOT making monthly payments and staying current on your debts while enrolled in a debt settlement program, so be aware of the credit impact and the potential collection harassment from your creditors.

Self-Help Debt Relief
The easiest debt relief options are things you can do yourself, as covered below like budgeting.

*Tracking your spending
*Checking your credit reports
*Negotiating with creditors for reductions

Track your spending - Write down every penny you spend for one month, including monthly bills, automatic payments and bank charges. If you see a lot of unnecessary expenses like $10 weekday lunches or $4 magazines bought at a newsstand, cut those expenses and use the savings to pay down your debts.

Check your credit reports - The government provides three free reports a year at Annual Credit Report and 4 out of 5 people's reports have errors that can increase your interest rate or damage your credit.

Negotiate with creditors - Call your creditors and ask them to reduce your interest rate in order to keep you as a customer. If you know a payment will be late or you can't pay it, call the creditor before the due date to arrange a new payment plan.

Bankruptcy should be your last choice for getting out of debt because it will damage your credit for 7-10 years and, depending on which type of bankruptcy you file for, you could be forced to give up some of your assets or assigned a long-term payment plan. There have also been legal changes put in place by congress that makes if more challenging to qualify for a Chapter 7 Bankruptcy, forcing many people to file for a Chapter 13 Bankruptcy which is really a repayment plan.

Editor's Note: In the spirit of full disclosure, considers Freedom Financial Network and all of it's related financial services platforms as sister companies and thinks highly of their debt resolution programs -- but be sure to do your own homework and find the right solution and the right provider for your own needs.

I hope this information helps you Find, Save, and Learn.



Aaron 06.02.2007. 15:43

Is this a good financial strategy? Im 24 years old. Ive saved a good amount of money but I also have some debt. I have apx 50k in debt (all my car and student loans, NO credit cards). Ive knocked this down from 65k.

I have apx. 20k in assets. I have about 7.5k in what I call an emergency account, and 3k in a small funds account. I also have a well funded 401k.

Whats my next step? Any extra money I have should i try to knock down my debt, start investing in stocks, or both?
Dont own a a freelancer for a tv station...

dont laugh: am PHASED OUT of a roth IRA, i made 111k....highly unstable!


Admin 06.02.2007. 15:43

Without a complete financial picture (do you own a house?), it's a bit more difficult, but here's what I suggest:

First, make a spending plan (if you don't already have one). Start with necessities (rent/mortgage, food, utilities, transportation - auto loan, gas, insurance). After this, budget some for nice-ities (movies out, CDs, books, every week or two). The rest will go to debt reduction.

Now, list your creditors, balances, and interest rates in order from smallest balance to largest (unless you have one very high interest rate, then it will go at the top of the list). This is the order you'll pay off the debts. Pay as much as you can on the first debt, and the minimum on all the others. When debt #1 is paid off, move that money to debt #2, continuing to make minimum payments on the others. The total of your debt payments will remain the same each month until all your debts are paid off.

Since you have more than enough in emergency funding, you need to determine where that money is better suited. For example, if your emergency fund is earning 1 or 2% in a bank savings account and you're paying 15-25% on your highest rate debt, liquidate all but $1000 of the emergency fund and put it on the debts.

If the "small funds" account is a pre-tax account (you'd have to pay taxes and penalties if you withdrew the funds) leave it there. If it's after-tax dollars, consider liquidating it, too, and paying off the debts (again, based on interest rate differences). If you make 10% on this money but pay 12%, you're losing money.

Leave the 401(k) alone, but reduce your contribution to just what the company will match until you pay off the debts. Once the debts are all gone, re-fund your emergency fund with 3-6 months EXPENSES (not pay), then increase your 401(k) contribution again.

For more info, check out Dave Ramsey's books, "Financial Peace" or "Your Total Money Makeover".


Jacquot- Un chat furieux 25.02.2008. 16:17

What do you think of Bank of America raising credit card rates even on good accounts?

Jacquot- Un chat furieux

Admin 25.02.2008. 16:17

Personally, I think it sucks and it is a very poor long-term business strategy especially given recent reductions in interest rates by the Fed.

I think the best strategy for every BOA customer that carries a balance would be to take advantage of one of the many opportunities to transfer your balance to another card that offers 0% on balance transfers...and then set up a budget to allow you to pay off the entire balance before the promotional period ends...and then close your BOA account (or, if they offer a grace period for purchases, use it for daily expenses and pay it off each month so you incur NO finance charges)! The balance transfer will cost you 3% (typically...I've seen higher and lower offers), but that's a lot less than the 9% you're paying to carry a BOA balance now and A LOT less than the 28% they may charge when the new rates take effect.

One note: read the fine print carefully...some balance transfer offers require you to make a certain number of new purchases (at a much higher rate) to retain the rate...and they pay off the lower-interest balances before they start paying the higher interest new purchase balances. Even if they don't require you to make any new purchases, if you do, you could end up paying a lot of interest on those new purchases while they are applying all your payments to your 0 interest balance transfer!

In a way, BOA may be doing their card holders a favor...motivating them to pay off their balance as quickly as possible As you've mentioned in other posts, consumer debt is out of control in this country...we're all building a huge house of cards that could tumble down around our ears because of even a little wind! I was shocked by the amount f the proposed increase...and I hope others are shocked too...just enough to reconsider the wisdom of living beyond their means using credit cards!


Carl 12.04.2007. 05:54

Will a higher credit limit on my credit card lower or increase my FICO score? Array


Admin 12.04.2007. 05:54

You also have to submit the details of your current financial situation, your credit or FICO score and your short-term and long-term financial goals. These documents are reviewed and assessed, and after that, a credit counselor is assigned to you to help you select a right Credit card debt reduction program, get rid of the nasty debts and regain control over your finances and budget.

Get Out Of Your Dilapidated Financial Crisis

Credit counselors can even help you with strategies to eliminate credit card debt on your own. If you are really feeling distressed and do not want to do the things on your own, they may even offer you a Credit card debt reduction program. This program allows them to take care of your financial problems. They negotiate with your creditors on your behalf and persuade them to substantially reduce the interest rates and merge all the monthly payments into one single consolidated monthly payment. The credit counselors also negotiate with your creditors and persuade them to write off the penalties and other charges, if there are any. This way, the credit card debt consolidation program as suggested by your credit counselor not only helps put your finances back on track, but also save you from the hassle of dealing with your creditors or collection calls. Read more about it at:,Credit_Card_Debt_Reduction_Your_Opportunity_To_Rebuild_Your_Finances


thepest_says 28.02.2007. 00:56

credit limit wrong on credit report. is there a quick fix? I just discovered that my credit report is showing one of my credit cards as having a $0 credit limit w/$3500 borrowed against it. The actual card limit is closer to $7k - so I'm clearly w/in range. Is there a quick way to get this fixed on my report? It is obviously not helping my score!


Admin 28.02.2007. 00:56

Credit repair does not require the assistance of a service. You can take a number of steps to help repair your own credit.

Although there are numerous credit repair companies offering their services for a fee, savvy individuals can do their own credit repair with a few simple steps. The advertisements placed by credit repair services touting their experience, qualified personnel and other qualifications can make the process seem daunting but it is really quite simple.

The basic steps for do-it-yourself credit repair include:

Request a credit report from all of the three credit reporting agencies
Carefully review all of the information on the credit reports
Dispute any mistakes on your credit report and document every step of the dispute process
Devise a debt reduction strategy
Establish good credit strategies now and carry them into the future
The first step of do-it-yourself credit repair is to request a copy of your credit report from Equifax, Experian and Trans Union. These are the three major credit reporting agencies and individuals are entitled to one free credit report annually from each of these agencies. Requesting a report from each of the three agencies is important especially if you believe there may be a mistake on one of the reports. The information on all three reports will be similar but mistakes may only appear on one of the records.

Once the credit reports are acquired it is time to review all of the information carefully. Each item on the report should be examined and discrepancies should be noted. In reviewing this information, highlight anything that seems suspect and review your documentation to verify the validity of the item.

After compiling a list of mistakes, it is time to officially dispute any inaccuracies on the credit report. The dispute processes will most likely involve filling out a dispute form or writing a letter detailing the alleged mistake. In both cases documentation supporting the validity of the dispute will be required. For specific information on how to officially file a dispute, contact the credit reporting agency directly. Once the dispute process begins, document every aspect of the process. This is important because dispute resolution is a time sensitive process with specific guidelines for how quickly a dispute must be resolved. The agency may be required to remove a disputed item from a credit report if they do not respond in a timely fashion.

When a negative credit report is a result of a poor credit history and not mistakes, only time will properly repair the credit. The long term credit repair strategy for financial errors in judgment includes devising a debt reduction strategy which will demonstrate diligence and establishing sound credit strategies which will be viewed favorably in the future. Credit reporting agencies do not hold grudges. Credit lapses are removed from credit reports after set periods of time and a history of good credit is rewarded with a solid credit score.


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