Advice on refinancing credit card debt.

January 2, 2004 4:21 PM

My wife and I currently have about 12K in credit card debt. We have controlled our spending and are slowly paying off our cards starting with the highest interest rates first. Does anyone have any tips or experiences on how to refinance our credit card debt at lower interest rates? (more inside)

We've looked at several debt consolidation companies but there are a ton and many seem like they wouldn't be successful at what I want, mainly refinancing my debt at lower rates. We've applied for loan applications with our current banks as well as applying for credit cards with lower introductory rates but so far our credit ratings have been too low for us to be accepted. Also, we do not own a home. Currently I'm a student living in a small rural college town. Due to the size of the town, our income opportunites are pretty limited until I graduate. My balance sheet thanks you all.

posted by yangwar to Work & Money (10 answers total)

It sounds pretty simple, but have you tried contacting the issuing banks and asking for a lower interest rate? I do this about twice a year, and often they can lower your rate slightly or offer a promotional rate for a period of time (6 months maybe.) If your account is in good standing, many times they can find something that helps. But you have to ask. Suggesting you'll take your business to another bank can help as well, but if you're close to maxed out, not so much.
posted by ferociouskitty at 4:28 PM on January 2, 2004

There are other credit cards out there, and they'll often offer a favorable "balance transfer" rate. I've taken advantage of this before. Not a scam, but you really can't afford to be late with a payment, or they'll jack you up to their "bend over" rate.

It might pay to do some looking for other credit card offers out there.
posted by adamrice at 5:15 PM on January 2, 2004

It sounds like you have already applied for credit several times recently. Stop! Frequent applications for credit are a red flag -- it looks like you're desperately scrabbling for money -- and actually bring your credit rating down. As you credit rating flags, your ability to negotiate for lower rates does as well.

If the rates for consolidation loans aren't attractive, your credit card rates must be pretty reasonable already. If you'd like to get them lower, first try asking for a rate reduction. If that doesn't work, you can find out if any of your credit issuers are offering lower rates for balances transferred from other cards. If one or two of your creditors does that, you might be able to shuffle the debt around and substantially reduce the amount of interest you're paying overall.

Once you've reduced the finance charges as much as possible, work on your repayment strategy: controlling your spending isn't, in and of itself, enough. This is especially true if you have a couple of cards with higher rates. Focusing on repaying one helps, but you need to distribute your payments more evenly. Repay all of the expensive money first, not just the single highest debt. Cut the cards, so that you aren't adding to the principal. Ditch extraneous expenses, like cable or satellite TV or that NetFlix account, or even (horrors!) the DSL line. Every dollar spent on those things costs you in interest on dollars you aren't repaying, and with 12 grand in the hole, you're already spending a lot on interest!
posted by majick at 5:19 PM on January 2, 2004

You could always try "write off my balance for 10 cents on the dollar or take your chances in bankruptcy court". With that as your starting offer, they should jump at a lower interest rate when your negotiation gets that far. My parents have been doing this for years. My mother is an expert at abusing credit cards and staying this side of being legal. As die-hard leftists, this is their way of opposing capitalism.
posted by mischief at 5:34 PM on January 2, 2004

A pretty good book (this is a digression) is "Do What You Love With the Money You Already Have." Has some good stuff on managing the psychology of debt. Good luck. disclaimer: I have $5k, mostly car repairs, but am planning on teaching overload this summer and paying it off.
posted by mecran01 at 6:25 PM on January 2, 2004

mecran01, do you mean How to Get What You Want in Life With the Money You Already Have? Slightly different title... seems to have the spirit you mentioned, though...
posted by namespan at 7:21 PM on January 2, 2004

My wife and I paid off our cards using Genus. It was almost effortless and all of a sudden we were paying an amount less than our minimum payments would have been and making real progress on the debt. In under four years it was all gone and immediately after we got a home loan easily. It was not a black mark on our credit at all and in fact made up for some of the late payments and such before we went onto Genus. They charged a 3 or 4 dollar fee per month. There is a bunch of these credit counseling services, some charge more than others and some feel sort of shady. Dealing with Genus felt like we were dealing with a legit company who really helped us get our head above water.
posted by spartacusroosevelt at 7:51 PM on January 2, 2004

I'm guessing that you don't own your house. Moving all our credit card debt into a home equity loan was the best thing we ever did (helps that our home is accruing equity at a stratospheric rate due to a tight housing market) -- went from some 12% and 8% cards (not bad) to a single 5.4% payment that we can pay off in a manageable period of time -- and we get to deduct the interest on our taxes. (We also canceled the charge accounts, obviously.)

Otherwise, if you're looking for a true way out, check with CCCS or Genus ... they're wonderful, and CCCS especially will help you get your budget under control.
posted by anastasiav at 10:57 PM on January 2, 2004

If you go to most credit counseling services kiss your ability to get credit goodbye. My husband has been in two businesses (auto and home sales) that depend on customer financing- if customers have gone the CCC route they are dead meat.

We aren't familiar with Genus.
posted by konolia at 5:19 AM on January 3, 2004

To echo adamrice's post: there are certain credit cards that offer incredibly low interest on transferred balances. In the UK, there was one that offered 0%.
The kicker is that they make their money from the outrageous interest on money you then borrow when you make purchases on those cards.

The advice I got, from moneysavingexpert.com, a UK-based money advice site, was to transfer your balance to one of these cards with a low-to-no interest rate for transferred balance and NEVER EVER EVER use the card - cut it up.
posted by Blue Stone at 11:20 AM on January 3, 2004