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Seven Things We Did to Slash Our Finance Charges from $400/month to $0/month


Every now and then, I am asked how we managed to reduce our finance charges. Right now we pay $0.00/month, but back when we had over $37,000 in credit card debt we were paying over $400/month.

In order to pay off our debt as quickly as possible, we had to slash those finance charges and have more of our payments go toward the principal and not interest. In five months, we reduced our finance charges from $400 to around $100. Sixteen months after that, we were able to reduce our finance charges to $0/month. That’s where they sit right now and I love it! Every dime we pay towards our credit cards is now going towards the principal balance and not interest.

It took some work and it took some time. Here’s how we did it.

1.) Called our credit cards to see if they would lower the interest rate

This is the one piece of advice that you hear over and over again – call all of your credit cards and ask them for a lower interest rate. I did that a few times. Did it work every time? No. But did it work at least once? Yes. For a few minutes of your time, it’s worth a shot. If it doesn’t work the first time, try again a few months later.

2.) Attacked our credit card debt

Being $37,000 in the hole didn’t make us very “good” customers. Our cards were almost maxed out and we were only making the minimum payment. To show our credit card companies that we were serious, we had to attack our credit card debt. We worked overtime. We sold stuff. We lived frugally. If we had extra money, it went towards our credit card debt. We attacked our debt.

3.) Worked to increase our credit scores

Increasing your credit score can sometimes turn into a hot topic. Some people think that your credit score isn’t important. I think it is, especially since we needed a great credit score because we may be looking for a new mortgage in a few years. There isn’t much that we did here except pay bills on time and pay off as much of our debt as possible. Reducing our debt decreased our credit utilization ratio which increased our credit score. Since February of 2006, my credit score has increased from 711 to 763 (although it was 800 at one point – more about that later).

4.) Transferred balances

I started reading through every balance transfer offer we received instead of shredding them without a second glance. I was looking for a great balance transfer rate with no balance transfer fee. We were able to use a free balance transfer when one of our cards raised their interest rate. Recently, a 0% offer that we obtained expired and I wasn’t watching those offers as much as I should have. By looking at available offers online, I was able to see that one of our cards did have a great balance transfer rate (0%) with a 3% balance transfer fee. After running numbers, it was a good deal for us even with the fee.

5.) Obtained a loan from Prosper.com

Prosper.com is becoming well-known as a place to go to try to consolidate your debt on your own terms. Everyday people go there to lend and borrow money. When I first heard of it, Prosper was fairly new but I decided to give it a shot to try to reduce our interest rates. It worked. Thirteen lenders bid on my $3,500 loan request and they reduced my interest rate from 13% to 9.9%. Another note about Prosper loans – they have a fixed interest rate! No more worrying about that interest rate magically increasing.

6.) Used our cards strategically

I have my own credit cards and my husband has his. We used this to our advantage. For a while, all of our debt was split evenly between our cards. We had a goal of getting a 0% credit card offer, so as soon as we could we shifted all of the credit card debt to my husband’s cards. My credit score shot up to 800 and I was easily able to get a 0% offer because our credit card debt was no longer attached to my name. I should have checked to see what it did to my husband’s score, but I didn’t think about it at the time. I’m sure it took a temporary nose dive.

7.) Applied for a new credit card with a 0% balance transfer offer

Once all of our debt was on my husband’s credit cards, I found a good no annual fee 0% balance transfer offer and applied for it. I was only given a $4,000 credit line, but as luck would have it, the card I applied for had the same parent company as one of my other cards. I was able to transfer some of the credit line from the old card to the new card and voila! All of our credit card debt was now at 0%. From what I’ve heard, not all companies will shift credit limits around so some good fortune did help us out with getting all of our credit card debt at 0%.

We were were able to pay off $29,000 of our credit card debt so far thanks to some slashed finance charges. If all goes well we will be credit card debt free next year. Reducing our finance charges took some time but it was worth it.


  • Reply Colleen in MA |

    Excellent advice. I have tried most of your suggestions and have been amused/appalled at how arbitrary the credit card industry can be when I have made calls about finance charges. I have concluded that yes, a positive answer in my favor will depend on my balance, having made payments on time, etc. but it can also depend on the operator’s mood/the moon phase, etc! For a while I even tried asking for lower available credit because I have been given monstrous amounts of it, but within a few months I get letters in the mail saying “Congratulations, we’ve raised your limit!” The bottom line – always read every statement and see what the competitors are doing. The credit card companies are not working for their consumer’s best interests. Congratulations Tricia on working so hard on this! I too will be debt free next year. It would have been this year but I was able to pay cash for my wedding in October (while my fiance paid the mortgage). Now he and I are concentrating on my remaining debt. It will feel so good to be debt free – I’m already planning how I’m going to celebrate that day!

  • Reply Tricia |

    Cheryl – it depends on the card because I think some of them may not do it for a card-to-card transfer. All of ours have done it, but some have had those actual paper checks that can be used to pay any creditor.

  • Reply San Francisco Certified Financial Planner |

    What an awesome success story for dealing with credit card debt. As a financial planner, I cannot emphasize you first point enough. Call those credit card companies. It doesn’t always work, but when it does, it can be huge. I have one client who owes over $20,000 on a Visa that was at 18%. He spoke with a ‘rate specialist’, touting his rising credit score and declining balance and got his rate cut in half, from 18% to 9%! His monthly interest charge was instantly reduced by $150, which will help him pay off his debt even sooner.

  • Reply Jade Cow |

    These are great tips! I would also recommend keeping track of the starting balance and the balance after each payment that you make, even if you just write it down on a piece of paper for yourself. It is so helpful to see that, yes, it is actually going down!

  • Reply Debtfree |

    Great advice. I am going to check out Prosper.com. I have never heard of it before. Interesting.

So, what do you think ?