- 11 Ways to Get Debt Faster
- Steps to get debt faster
- 1. Pay more than the minimum payment
- 2. Try the debt snowball method
- 3. Pick up a side hustle
- 4. Create (and live with) a bare-bones budget
- 5. Sell everything you don’t need
- 6. Get a seasonal, part-time job
- 7. Ask for lower interest rates on your credit cards — and negotiate other bills
- 8. Consider a balance transfer
- 9. Use ‘found money’ to pay off balances
- 10. Drop expensive habits
- 11. Step away from the _____
- Managing Debt
- Obstacles to Higher Yields
- How Much Are You Losing?
- Where to Find Higher Rates
- What About Safety?
- Concerned about Early Withdrawals?
- Upping the Bottom Line for Savers
- Can You Go to Jail for Debt?
- Can You Go to Jail for Not Paying Student Loan Debt?
- Can a Debt Collector Sue Me?
- What Is Time-Barred Debt?
- 1. Set Up a Budget
- 2. Bring in More Money
- 3. Look Into Debt Consolidation
- 4. Consider Debt Payment Strategies
- 5. Seek Help
- The Bottom Line
- Credit Card Interest Rate Reduction Scams
- Protect Yourself
- File a Complaint
11 Ways to Get Debt Faster
We’re a nation in debt. As of late 2017, the average American carried $6,354 in credit card debt and more than $24,700 in non-mortgage debt such as car loans, according to Experian. The average student loan balance, meanwhile, has hit a record high of $34,144.
The fact is, more than half of Americans actually spend more than they earn each month, according to a Pew Research study, and use credit to bridge the gap. So it’s easy to see how so many people are struggling with debt — and why some choose to bury their heads in the sand. For many in debt, the reality of owing so much money is too much to face — so they simply choose not to.
But sometimes, disaster strikes and people are forced to confront their circumstances head-on.
A series of unfortunate events — a sudden job loss, an unexpected (and expensive) home repair, or a serious illness — can knock one’s finances so off track they can barely keep up with their monthly payments.
And it’s in these moments of disaster when we finally realize how precarious our financial situations are.
Other times, we just become sick of living paycheck to paycheck, and decide we want a better life — and that’s OK, too. You shouldn’t have to confront disaster to decide you don’t want to struggle anymore, and that you want a simpler existence. For many people, becoming debt-free the hard way is the best and only way to take control of their lives and their futures.
Steps to get debt faster
Unfortunately, the space between realizing your debt is control and actually getting debt can be wrought with hard work and heartache. No matter what kind of debt you’re in, paying it off can take years — or even decades — to get debt.
Fortunately, some strategies exist that can make paying off debt faster — and a whole lot less painful. If you’re ready to get debt, consider these tried-and-true methods:
1. Pay more than the minimum payment
If you carry the average credit card balance of $15,609, pay a typical 15% APR, and make the minimum monthly payment of $625, it will take you 13.5 years to pay it off. And that’s only if you don’t add to the balance in the meantime, which can be a challenge on its own.
Whether you’re carrying credit card debt, personal loans, or student loans, one of the best ways to pay them down sooner is to make more than the minimum monthly payment.
Doing so will not only help you save on interest throughout the life of your loan, but it will also speed up the payoff process.
To avoid any headaches, make sure your loan doesn’t charge any prepayment penalties before you get started.
If you need a nudge in this direction, you can enlist the help of some free online and mobile debt repayment tools, too, Tally, Unbury.Me, or ReadyForZero, all of which can help you chart and track your progress as you pay down balances.
2. Try the debt snowball method
If you’re in the mood to pay more than the minimum monthly payments on your credit cards and other debts, consider using the debt snowball method to speed up the process even more and build momentum.
As a first step, you’ll want to list all of the debts you owe from smallest to largest. Throw all of your excess funds at the smallest balance, while making the minimum payments on all your larger loans. Once the smallest balance is paid off, start putting that extra money toward the next smallest debt until you pay that one off, and so on.
Over time, your small balances should disappear one by one, freeing up more dollars to throw at your larger debts and loans.
This “snowball effect” allows you to pay down smaller balances first — logging a few “wins” for the psychological effect — while letting you save the largest loans for last.
Ultimately, the goal is snowballing all of your extra dollars toward your debts until they’re demolished — and you’re finally debt-free.
3. Pick up a side hustle
Attacking your debts with the debt snowball method will speed up the process, but earning more money can amplify your efforts even further. Nearly everyone has a talent or skill they can monetize, whether it’s babysitting, mowing yards, cleaning houses, or becoming a virtual assistant.
With sites TaskRabbit and Upwork.com, nearly anyone can find some way to earn extra money on the side. The key is taking any extra money you earn and using it to pay off loans right away.
- Read more: How to Make More Money
4. Create (and live with) a bare-bones budget
If you really want to pay down debt faster, you’ll need to cut your expenses as much as you can. One tool you can create and use is a bare-bones budget. With this strategy, you’ll cut your expenses as low as they can go and live on as little as possible for as long as you can.
A bare-bones budget will look different for everyone, but it should be devoid of any “extras” going out to eat, cable television, or unnecessary spending. While you’re living on a strict budget, you should be able to pay considerably more toward your debts.
Remember, bare-bones budgets are only meant to be temporary. Once you’re debt — or a lot closer to your goal — you can start adding discretionary spending back into your monthly plan.
5. Sell everything you don’t need
If you’re looking for a way to drum up some cash quickly, it might pay to take stock of your belongings first. Most of us have stuff lying around that we rarely use and could live without if we really needed to. Why not sell your extra stuff and use the funds to pay down your debts?
If you live in a neighborhood that permits it, a good old-fashioned garage sale is normally the cheapest and easiest way to unload your unwanted belongings for a profit. Otherwise, you can consider selling your items through a consignment shop, one of the many online resellers out there, or a yard sale group.
6. Get a seasonal, part-time job
With the holidays coming up, local retailers are on the lookout for flexible, seasonal workers who can keep their stores operational during the busy, festive season. If you’re willing and able, you could pick up one of these part-time jobs and earn some extra cash to use toward your debts.
Even outside of the holidays, plenty of seasonal jobs may be available. Springtime brings the need for seasonal greenhouse workers and farm jobs, while summer calls for tour operators and all types of outdoor, temporary workers from lifeguards to landscapers. Fall brings seasonal work for haunted house attractions, pumpkin patches, and fall harvest.
The bottom line: No matter what season it is, a temporary job without a long-term commitment could be within reach.
7. Ask for lower interest rates on your credit cards — and negotiate other bills
If your credit card interest rates are so high it feels almost impossible to make headway on your balances, it’s worth calling your card issuer to negotiate. Believe it or not, asking for lower interest rates is actually quite commonplace. And if you have a solid history of paying your bills on time, there’s a good possibility of getting a lower interest rate.
Beyond credit card interest, several other types of bills can usually be negotiated down or eliminated as well — we highlighted them in Six Bills You Can Negotiate Down to Save Money. Always remember, the worst anyone can say is no. And the less you pay for your fixed expenses, the more money you can throw at your debts.
If you’re not the negotiating type, a service TrueBill can help. The app will review your purchase history to find forgotten subscriptions and other repeating fees you might want to cut from your budget, and it can even negotiate some bills down for you.
8. Consider a balance transfer
If your credit card company won’t budge on interest rates, it may be worth looking into a balance transfer. With some balance transfer offers, you can secure 0% intro APR for up to 18 months, although you might need to pay a balance transfer fee for the privilege.
If you have a credit card balance you could feasibly pay off during that time frame, transferring the balance to a card could save you money on interest while simultaneously helping you pay down debt faster.
- Related: Best Balance Transfer Credit Cards
9. Use ‘found money’ to pay off balances
Most people come across some type of “found money” throughout the year. Maybe you get an annual raise, an inheritance, or bonus at work. Or maybe you count on a big, fat tax refund every spring. Whatever type of “found money” it is, it could go a long way toward helping you become debt-free.
Each time you come across any unusual sources of income, you can use those dollars to pay off a big chunk of debt. If you’re doing the debt snowball method, use the money to pay down your smallest balance. And if you’re left with only big balances, you can use those dollars to take a huge chunk whatever’s left.
10. Drop expensive habits
If you’re in debt and consistently coming up short each month, evaluating your habits might be the best idea yet. No matter what, it makes sense to look at the small ways you’re spending money daily. That way, you can evaluate whether those purchases are worth it — and come up with ways to minimize them or get rid of them.
If your expensive habit is smoking or drinking, that’s an easy one — quit. Alcohol and tobacco do nothing for you except stand between you and your long-term goals.
If your expensive habit is slightly less incendiary – a daily latte, restaurant lunches during work hours, or fast food — the best plan of attack is usually cutting way down with the goal of eliminating these behaviors or replacing them with something less expensive.
11. Step away from the _____
We’re all tempted by something. For many, it might be the local mall or our favorite online store. For others, it might be driving by a favorite restaurant and wishing we could pop inside for a favorite meal. And for those with a penchant for spending, having a credit card in their wallet is too much temptation to bear.
Whatever your biggest temptation is, it’s best to avoid it altogether when you’re paying down debt. When you’re constantly tempted to spend, it can be difficult to avoid new debts, let alone pay off old ones.
So, avoid temptation wherever you can, even if that means taking a different way home, avoiding the Internet, or keeping the fridge stocked so you aren’t tempted to splurge. And if you must, stash those credit cards away in a sock drawer for the time being. You can always bring them back out once you’re debt-free.
It’s easy to continue living in debt if you never have to face the reality of your situation. But when disaster strikes, you can gain a brand new outlook in a hurry. It’s also easy to get sick of the paycheck-to-paycheck lifestyle, and look for ways to get out from under the crushing weight of too many monthly payments.
No matter what type of debt you’re in — whether it’s credit card debt, student loan debt, car loans, or something else — it’s important to know there is a way out. It may not happen overnight, but a debt-free future could be yours if you create a plan — and stick with it long enough.
No matter what that plan is, any one of these strategies can help you get debt faster. And the faster you become debt-free, the quicker you can start living the life you truly want.
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What are some strategies you have used to pay down debt quickly? Have you ever tried anything on this list?
By Monica Steinisch
The Federal Reserve has cut interest rates nine times this year (the last time was on October 2), and many of us are watching as the interest we receive on our passbook savings accounts dwindles to almost nothing. As of October 11, in fact, banks nationwide were paying an average interest rate of just 1.
09 percent on passbook accounts—far below the inflation rate—and some banks have been paying less than that.
Meanwhile, the cautious among us are keeping more of our money the stock market and putting it in interest-bearing investments, so collecting every penny of interest available to us is as important as it's ever been.
Even before interest rates plunged, American savers were missing out on some of their rightful interest income. Last year, the Consumer Federation of America (CFA), a Washington, D.C.—based nonprofit consumer advocacy organization, quantified our loss.
It commissioned a study of Federal Reserve Board data on American saving habits that showed that, as a nation, we are leaving up to $50 billion in potential interest payments on the table every year.
Why? Too often, we are depositing our money in low-yielding savings vehicles, such as passbook or statement savings accounts.
As surprising as it may be to learn that savers-including low- and moderate-income savers who can't afford to walk away from earnings—are missing out on such a huge amount of interest income, the findings of the study are actually quite encouraging. That's because they show that the most common barriers to saving money in higher-yielding accounts are easily overcome.
Obstacles to Higher Yields
Why are savers letting interest income slip through their fingers? In another survey, CFA uncovered some of the reasons. For one, millions of savers are badly informed about the features and yields of different savings options.
They also lack awareness of the dramatically positive effect that even a single point increase in interest can have on their savings over time. Finally, they make their choices habit and not with an eye to getting the best returns.
In short, too many of us think that the interest we can earn on modest savings balances is not significant enough to warrant the time and energy we'd need to research alternatives and shift our money to new accounts. Clearly, many of us have not witnessed the magic of compound interest.
How Much Are You Losing?
While a $50 billion national loss of interest sounds impressive, it may not be convincing to you if you don't think that a few more percentage points will brighten your financial future. To get a handle on what higher yields mean for you and your family, consider these very real numbers:
Value of monthly deposits of $100 at various interest rates, compounded monthly, over varying periods of time
The figures don't lie—interest rates matter. In fact, rate of return and length of time are the two critical factors in making your savings grow for future wealth. That means: Get an early start on saving and keep shopping around for the best returns.
Where to Find Higher Rates
Today, it's easier than ever to track down higher yields. The Internet lets you rate-shop right from your computer. And with phone, mail, and electronic funds transfer, there's no reason to be bound by geography when it comes to opening and maintaining an account.
Although many Web sites offer rate information, www.bankrate.com is probably the single best source of information for the smart saver (or borrower; see “The Savvy Borrower” elsewhere in this issue of the newsletter).
Every week it surveys nearly 4,800 financial institutions in 50 states to provide consumers with up-to-date rate information. Visitors can search by product, geographic area, or simply “highest yields.
” Please check it out for specific examples of the higher-yielding options below, and also look at “Certificates of Deposit/Money Market Funds” on page 7 of this issue of the newsletter.
Where then, will you find higher yields than you can get from the traditional savings accounts offered by your bank?
Money Market Accounts: MMAs offer rates that, while not the highest in the land, are often twice as high as those on savings accounts.
Although there may be penalties for slipping below minimum balance requirements or for exceeding monthly withdrawal limits, there are no time restrictions: You can withdraw your money at any time, without penalty.
Money market accounts usually offer check-writing privileges. As of October 12, the average rate on money market accounts nationwide was 2.47 percent.
Money Market Mutual Funds: Money market funds are low-risk mutual funds that usually offer a higher yield than savings account or money market accounts. What makes them low risk is that they invest in cash- instruments such as Treasury notes and bonds.
Although they're not insured or guaranteed, they're extremely safe. Drawbacks include having to make a higher initial deposit (this can sometimes be avoided by setting up a monthly direct deposit of $50 or $100).
Before investing in a money market fund, you'll need to read the fund prospectus, which will give you information on fees, features, and requirements.
Certificates of Deposit: CDs can be purchased in a variety of maturities, generally from three months to five years, and, at many institutions, for as little as $250. They pay significantly more interest than traditional savings accounts and money market accounts. Average rates as of 10/12: 3-month CD: 2.52 percent; 1-year CD: 3.07 percent; 3-year CD: 3.83 percent.
U.S. Treasury Bills and Savings Bonds: The U.S. government provides a number of ways for you to improve your return without putting your savings at risk.
Series EE or I Savings Bonds can be purchased in eight denominations (ranging from as low as $50 to as high as $10,000) from most banking institutions or (better yet) with no commissions or fees directly from the U.S. Treasury at http://www.publicdebt.treas.gov/.
Though Savings Bonds have a very long maturity (up to 30 years), they can be redeemed anytime after the first six months with only a three-month interest penalty (there is no penalty after a bond is held five years). Series EE savings bond rates (currently 4.
5%) are competitive with CDs and money market accounts (Series I bonds, which are adjusted for inflation, pay a higher rate, currently 5.92%). And there's another advantage: Interest earned on the bonds is not subject to state or local taxation, and federal taxes are deferred until the bonds are cashed. (For more on Savings Bonds, please see The Road to Wealth, pages 429-33, or the ASK SUZE book on Stocks and Bonds, pages 119-25.)
Treasury Bills, or T-Bills, are a short-term investment, available in maturities of 4 weeks (just introduced in July), 13 weeks, or 26 weeks. The minimum investment is $1,000. EE Savings Bonds, they are bought at less than face, or “par,” value and mature at par.
The difference between the purchase price and the face value is the interest you earn.
While rate shoppers might find equivalent rates at some banks, banks can't offer the tax advantages of T-Bills, which are state and local income tax-free, just Savings Bonds are; however, they report interest on an annual basis, so they are not federal income tax-deferred.
(For more on Treasury Bills, please see The Road to Wealth, pages 428-29, or the ASK SUZE book on Stocks and Bonds, pages 105-107.). You can buy T-Bills from your bank or a broker or you can purchase 13-week and 26-week T-Bills at an auction conducted by the Department of the Treasury (Treasury Direct). (Four-week T-Bills are not available direct through auction.)
Savings Bonds (as of October 12)
EE Savings Bonds — 4.5%
I Bonds — 5.92%
(Interest rates on these bonds is adjusted semiannually, on May 1 and November 1.)
Treasury Bills (as of October 5)
4-week T-Bill – 2.20%
13-week T-Bill – 2.21%
26-week T-Bill -2.20%
(To monitor interest rates on T-Bills, visit the treasury's statistical release site (http://www.federalreserve.gov/releases/h15/current), which is updated every Monday.)
Credit Unions: According to the August survey of credit unions, banks and thrifts conducted for Bankrate.com, your can find some of the best rates on savings products at credit unions. In checking the averages, Bankrate.
com found that the average credit union yield for a one-year CD was almost a full percentage point higher than that offered by banks, and nearly a half-percent better than what thrifts are offering. Average yield rates for money market accounts at credit unions was nearly 1.
25 percent better than what banks offer, and more than a half-percent better than the thrift average. In a nutshell, credit union members have an edge when it comes to higher yields.
What About Safety?
If you're reluctant to move your money to higher-yielding accounts because you're worried about easy access or safety, don't be. traditional passbook accounts, money market accounts and CDs are insured by the Federal Deposit Insurance Corporation or the National Credit Union Administration. And U.S. Savings Bonds are fully guaranteed by the federal government.
Concerned about Early Withdrawals?
There are penalties for early withdrawal from CDs and savings bonds, but they're typically only several months' lost interest. And consider the ways you can avoid having to withdraw your money early. You can keep a small emergency fund in a money market account.
Or you can “ladder” your higher-yielding investments so that you've got a CD or bond coming due as often as every month. For example, if you have $1,000 in savings, you could put $250 into a different 3-month CD every month for four months; that way, you would never have to wait longer than a month to gain access to part of your money.
The same is possible with savings bonds. Money market accounts give you instant access to your cash.
Upping the Bottom Line for Savers
There are lots of ways to structure your savings so that you earn higher yields while keeping your money safe and available. Depending on your situation, a combination of options may meet your needs best.
While some savers worry about investing in a product or institution they are unfamiliar with, the biggest danger to their financial well being may be apathy. As Daniel Ray, editor-in-chief of Bankrate.com, says, “Passbook savings accounts are passé.
If you haven't checked your interest rates lately, you're throwing your money away.”
Can You Go to Jail for Debt?
Not being able to meet payment obligations can make anyone feel anxious and worried, but in most cases, you won't have to worry about serving jail time if you are unable to pay off your debts.
You cannot be arrested or go to jail simply for being past-due on credit card debt or student loan debt, for instance. If you've failed to pay taxes or child support, however, you may have reason to be concerned.
There are a couple of instances where it may be possible to serve time as a result of not paying your debts, such as if you've failed to pay your federal taxes or make child support payments.
Deliberately not paying or underpaying federal taxes can lead to a prison sentence, but only if you've been charged with and convicted of a tax-related crime such as filing a fraudulent tax return or not filing a tax return at all. If you do file a return but aren't able to pay your taxes, the federal government won't throw you in prison.
Failure to pay child support also can put you behind bars. Under federal law, you could be sentenced to as much as six months or two years in prison for dodging child support payments, depending on the circumstances. In addition, state laws may let a judge send someone to jail for disobeying a court order to pay child support.
Can You Go to Jail for Not Paying Student Loan Debt?
You can't be arrested or sentenced to time behind bars for not paying student loan debt because student loans are considered “civil” debts. This type of debt includes credit card debt and medical bills, and can't result in an arrest or jail sentence.
However, student loan servicers will pursue various other avenues for collecting past-due debt, including turning over the debt to the U.S. Department of Justice to try to collect the debt via litigation.
In the unly event you're sued for student debt, it's possible to be arrested if you fail to appear in court.
Can a Debt Collector Sue Me?
A debt collector can file a lawsuit against you in order to collect money that you owe. A collector takes this legal action in hopes of getting a judge to issue an order requiring you to pay the debt. If you're notified that you're supposed to appear in court to face the judgment but you ignore the order, a judge could demand that you be arrested for contempt of court.
So, not obeying a court order regarding unpaid debt could put you in handcuffs, but the debt itself can't lead to an arrest.
The statute of limitations on debt collection is the limited period of time debt collectors and creditors are given to sue you over past-due debt.
The federal Fair Debt Collection Practices Act governs the statute of limitations for debt; state laws also may affect this. Therefore, the statute of limitations on collecting a debt varies depending on where you live. Generally, the statute of limitations for debt runs three to six years.
In terms of your credit scores, the statute of limitations expiring on debt doesn't mean the unpaid amount won't show up on your credit report.
That's because the debt itself hasn't expired and its presence on your credit report can continue to affect your credit score.
Negative information an unpaid debt can remain on your credit report for up to seven years, regardless of the debt's statute of limitations.
What Is Time-Barred Debt?
Once the age of a debt surpasses the applicable legal time limits for a creditor or debt collector to file a lawsuit, their claim may be “barred” under the statute of limitations. If you're sued over a debt but it falls outside the statute of limitations, the debt may be considered too old, giving you a potential defense in court.
In some states, the period for the statute of limitations starts when you fail to make a debt payment. Elsewhere, the timer may start going back to when you made your most recent payment. In some states, the clock may restart when you make a partial payment on the disputed debt.
A common misconception is that making a payment on a past-due debt can restart the clock on how long the item can remain on your credit report, but that's not the case. When you made your last payment has no bearing on how long an item can remain on your credit report.
It's smart to be equipped with knowledge about what debt collectors legally can and cannot do when they're seeking a debt payment from you.
Legally, a debt collector can only contact you about household debts credit card bills, auto loans, medical bills, student loans and mortgage payments. A debt collector can reach out to you by phone, email, text message or letter—and, starting in October 2021, via social media.
Within five days of initially contacting you, a debt collector must send you a notice outlining how much money you owe, the name of the creditor to whom the money is owed and what you can do if you believe you don't owe this debt.
Debt collectors are prohibited from harassing you, lying to you or engaging in unfair practices. For instance, a debt collector can't threaten to harm you, falsely claim you'll be arrested or threaten to take your property.
Also, debt collectors can't contact you before 8 a.m. or after 9 p.m.
unless you give them permission, can't reach out to you at work if you're unable to take calls there and can't contact you in most cases if you've asked them by letter to stop contacting you. In addition, a debt collector generally can't talk with anyone about your debt except you or your spouse.
Dealing with debt collectors can be frustrating. But you can avoid that frustration by focusing on getting debt. What are the best ways to do that? Here are five tips.
1. Set Up a Budget
Establishing a budget can help you get a handle on how much money is coming in and going out, and then help you identify how much of that money you can set aside to pay off debt. Once you establish a budget, however, it's important to stick to it as closely as you can and then make modifications as needed once you better understand your income and expenses.
2. Bring in More Money
Extra cash can give you a major boost in abolishing debt. You might start a side hustle, take on extra hours at your job, find a second job or sell unwanted items around the house to generate more money for reducing your debt.
3. Look Into Debt Consolidation
A balance transfer credit card or a debt consolidation loan may help you save hundreds or even thousands of dollars when wiping out debt. The idea here is to exchange higher-interest debt for lower-interest debt. With a balance transfer card, you may even be able to secure a 0% intro APR offer for a year or more.
4. Consider Debt Payment Strategies
Being strategic about paying off debt can simplify a tough process. Two methods to consider are the debt snowball method and debt avalanche method. These methods are typically applied to credit card debt.
With the debt snowball method, you'll make minimum monthly payments on all of your accounts except the one with the smallest balance.
Then, take the money you'd otherwise be paying toward your other debts and put as much as you can toward the smallest debt until it's wiped out.
You'll then move on to the next smallest balance, and repeat the process until you've paid off all of your cards.
The debt avalanche method takes a similar approach, but with a twist. Under this method, you make minimum monthly payments on all of your accounts except the one with the highest interest rate.
You then allocate as much money as you can toward erasing the highest-interest debt. Once that debt is gone, you move to the debt with the next highest interest rate, and so forth.
This method will ly save you more money over the snowball approach, but it can be harder to stay motivated if your highest-interest debt has a high balance.
5. Seek Help
Do you feel you're swimming in debt? If so, it may be time to ask for help.
One of those sources of help could be a credit counseling service. Debt counseling can help you better understand your finances and debt, and work with you to come up with a plan to achieve your goals. The National Foundation for Credit Counseling (NFCC) is a trusted source for finding a reputable credit counselor.
They may suggest a debt management plan, which would have you make a single monthly payment to the credit counseling service that's then distributed to your creditors. Keep in mind that you will still be responsible for making sure all payments are made on time, even if another company is making them on your behalf.
An alternative is debt settlement. A debt settlement company may be able to negotiate paying less than you owe to your creditors.
However, settling your debts for less than the full amounts owed will have a negative impact on your credit scores, especially since debt settlement companies typically require you to stop making payments to your creditors. This should be a last-resort way to decrease debt.
If you're having trouble paying your bills due to financial difficulties, you can also seek financial assistance and access to programs that provide free or subsidized goods and services.
The Bottom Line
While there's no “get jail free” card for getting rid of debt, keep in mind that there are only a few instances when your debt could land you in jail. But if you feel stuck by debt, you can break free by setting in motion a plan to take care of it for good. As part of that plan, you'll want to view your free credit report and scores through Experian.
Credit Card Interest Rate Reduction Scams
Voice mail boxes across the nation are being clogged with prerecorded phone calls from companies that claim to be able to negotiate significantly lower interest rates with your credit card issuers if you just pay them a fee first.
The Federal Trade Commission (FTC), the nation's consumer protection agency, says consumers who get these interest rate reduction robocalls should listen to them with extreme skepticism, and delete them. Many are scams.
The companies behind the sales pitches claim to have special relationships with credit card issuers.
They guarantee that the reduced rates they offer will save you thousands of dollars in interest and finance charges, and will allow you to pay off your credit card debt three to five times faster.
They claim that the lower interest rates are available for a limited time and that you need to act now. Some even use money-back guarantees as further enticement.
The FTC says that the companies behind these robocalls can't do anything for you that you can't do for yourself — for free.
You have just as much clout with your credit card issuer as these companies, and you are just as ly to get turned down for a rate reduction regardless of their promises or supposed efforts to negotiate on your behalf.
Indeed, FTC investigators found that people who pay for these services don't get the touted interest rate reductions, don't save the promised amounts, don't pay off their credit card debt three to five times faster, and struggle to get refunds.
Amendments to the FTC's Telemarketing Sales Rule prohibit companies that sell relief services these rate reduction scams on the phone from charging a fee before they settle or reduce your debt.
If you do business with a debt relief company, you may be required to put money in a dedicated bank account, which will be administered by an independent third party.
The account administrator may charge you a reasonable fee, and is responsible for transferring funds from your account to pay your creditors and the debt settlement company when settlements occur. See Settling Credit Card Debt.
The FTC says that if you’re looking to reduce the interest rate you’re paying on your credit card purchases, your best bet is to handle it yourself for free: call the customer service phone number on the back of your credit card and ask for a reduced rate. Be calm, patient and persistent. And if you are tempted by the promises in a rate reduction robocall, the FTC says hold off — and hang up.
- Don’t give out your credit card information. Once a scammer has your data, they can charge your credit card for their own purchases or sell the information to other scammers.
- Don’t share other personal financial or sensitive information your bank account or Social Security numbers. Scam artists often ask for this information during an unsolicited sales pitch, and then use it to commit other frauds against you.
- Be skeptical of any unsolicited sales calls that are prerecorded, especially if your phone number is on the National Do Not Call Registry. You shouldn’t get recorded sales pitches unless you have specifically agreed to accept such calls, with a few exceptions.
- If your number is on the National Do Not Call Registry, a telemarketer may call you only if you have agreed to accept calls from the company the salesperson works for, if you have bought something from the company within the last 18 months, or if you have asked the company for information within the last three months.
- To report violations of the National Do Not Call Registry or to register your phone number, visit DoNotCall.gov
or call 1-888-382-1222.
File a Complaint
If you think you’ve experienced a credit card interest rate reduction scam, file a complaint with the Federal Trade Commission at ftccomplaintassistant.gov or call toll-free, 1-877-FTC-HELP (1-877-382-4357).
If your credit card has been charged for a service you didn’t order, authorize or receive, and you can’t get a refund, dispute the transaction with your credit card company. First call to try to stop the payment, and then follow up in writing. Under the Fair Credit Billing Act, you have the right to dispute charges for any service you didn’t get or any transaction you didn’t authorize.
This article was previously available as Credit Card Interest Rate Reduction Scams.