Today one of those credit card consolidation companies called. They wanted me to consolidate my credit with them. They promised I’d be out of debt 10 years earlier than I planned, and I’d have lower interest rates. They only wanted me to pay them $50/month (hello!?!?) for their services as an “administrative fee.”
The thing is–I don’t need them! I did everything they were going to do, only I did it for free and I’ll be out of debt years earlier than they planned.
Here’s what I did:
1) I called my credit card companies, explained that I wanted to pay down my debt and be debt free. They were amazingly supportive. They lowered my interest rates to the lowest they possibly will allow. In some cases this meant getting rid of the premimum cards that have “incentive” programs. Thing is–I never used the incentive program, so this was a no-brainer.
2) I asked them if they could lower my monthly payment. Many did. They will even move your monthly payment to a set date if there is one convenient for you (ie. the 15th or 23rd of the month)
3) I got rid of all of those payment protection plans. They charge quite a bit each month, and it’s not worth the savings if you used them when you have a life event (moving, giving birth, getting married, etc). Think about it– if you are paying $30/month to these payment protection plan, that’s $30 less going to your principal and they’ll only cover your payment for one or two months each year. You’ll be paying more over time, than if you didn’t have it at all.
4) I inputted all of my banking, savings, credit and student loan info into Microsoft Money. It tallied it all up, and if you create a debt reduction plan, it will show you which ones to pay off first to maximize your money. I generally can’t stand Microsoft products, but this one is fabulous.
5) Cut your spending, and cut your cards. Don’t use them and you can’t accrue more debt.
6) Pay your bill faithfully each month, on time. Pay more than the minimum.
7) Determine the maximum amount you can pay each month to credit cards. Continue paying that much until they are all gone. If you pay off card #1, roll the money you would have sent to them each month, to card #2. Keep doing this until they are all paid off.
This is what works for me. See other ideas at Rocks in My Dryer.