ArtsAutosBooksBusinessEducationEntertainmentFamilyFashionFoodGamesGenderHealthHolidaysHomeHubPagesPersonal FinancePetsPoliticsReligionSportsTechnologyTravel

Debt Management: How To Do It Right

Updated on January 29, 2011

Copyright: Leo J Quinn, Jr.

Got debt?

Chances are, you're doing what you can to pay it off, as quickly as possible. You want to be debt-free.

A worthy goal, to be sure.

But what do you do in the meantime?

Having a debt management plan is just as important as having a debt reduction plan. It can save you hundreds or thousands of dollars in interest, and maybe even reduce the total amount of time it takes for you to be come debt-free.

Here's how to do it right.

Promise yourself you won't take on any more debt. Put all your credit cards somewhere besides your wallet. One of my favorite spots is the freezer; by the time you thaw the cards to use them, you've probably changed your mind about your purchase. Why so drastic? Because you can't management your debt if you keep adding to it.

Now, you need to make a list of all the debts you have. Creating a chart or spreadsheet is probably the easiest way to sort all the vital information.

List the following:

* Creditor's name

* Principal currently owed

* Minimum payment

* Interest rate

* Contact phone number

* Website address with login information

Next, add any credit lines with zero balances to the above list. (I'll explain why later.) Fill in all the above information, except principal and minimum payment, of course.

Take your list and start calling each of your current credit card companies. Ask what their current offers are for balance transfers. Insinuate that you're closing your account for better offers elsewhere (because you certainly would move your balance in that case, right?).

Take notes on your chart or spreadsheet for each offer. Watch the fine print: ask if there are balance transfer fees, how long the lower rate period lasts, what happens to the transferred balance if you make a late payment, etc.

Be aware that a common gimmick now is to offer a very low rate for transferred balances with no fees, as long as you charge a certain amount each billing period, say $25, which is billed at a higher interest rate than your transferred balance. Since the credit card companies apply your payment to the lowest-rate balance first, you'll accrue the higher interest rate on the monthly charges until your transferred balance is paid off.

For example, say you transfer $5000 at 1.9%. The rate goes up in 6 months unless you charge at least $25 a month by the close of the billing period. Purchases are charged at 11.9%. If you pay $200 a month on the card, it'll take you 25 months to pay off the transferred balance (ignoring finance charges). Meanwhile, for 25 months you're charging $25, which grows to a balance of $625 plus interest of 11.9%.

This gimmick won't hurt you if you can get a low interest rate for purchases (say, less than 9.9%) and you make sure you only charge the amount needed to maintain the low transfer rate. When the transferred balance is paid off, have the cash on hand to pay off the purchases, too.

Okay, back to debt management.

After you're done calling all your credit card companies, choose the one with the best offer. Transfer as many of your balances as you can to that card. If there's not enough room, ask for a credit limit increase, or transfer the rest to the card with the second-best offer.

Note: if you ask the best-offer card to increase your credit limit, it'll show on your credit report, so unless your credit is sterling, be careful.

Figure out when any introductory rates expire and make a note on your calendar. If you won't have your balances paid off by then, back up about six weeks and make a note to search out a new lower rate.

When you're done, you should have all your credit card balances on just one or two cards. Maybe three.

At this point, most experts would recommend you close your other accounts. I disagree, unless it would improve your credit, and you need to make a large purchase soon, such as a mortgage. Put those cards in the freezer instead.

Why not close them? Because if you need to transfer balances again, those credit card companies will be hungry to get your business back. If you've faithfully paid your transferred balances on time, your credit will be in good shape (or at least better than it was) and they'll fall all over themselves to get you to transfer balances back to them.

Another note here: if you can't control your credit card spending, then by all means close the accounts. No debt management strategy is worthwhile if it means you'll only put yourself deeper in debt!

Some folks often ask me if it makes sense to put their credit card debt on a home equity loan or line of credit, as they often have low introductory interest rates. I hesitate to recommend this. Home equity is secured by your primary residence. If you can't pay, the banks foreclose. Why take the chance if there's another way?

Get your debt to the lowest rate possible, keep track of when low rates expire, and pay as much as you can as fast as you can.

Those are the secrets to successful debt management!


    0 of 8192 characters used
    Post Comment

    No comments yet.


    This website uses cookies

    As a user in the EEA, your approval is needed on a few things. To provide a better website experience, uses cookies (and other similar technologies) and may collect, process, and share personal data. Please choose which areas of our service you consent to our doing so.

    For more information on managing or withdrawing consents and how we handle data, visit our Privacy Policy at:

    Show Details
    HubPages Device IDThis is used to identify particular browsers or devices when the access the service, and is used for security reasons.
    LoginThis is necessary to sign in to the HubPages Service.
    Google RecaptchaThis is used to prevent bots and spam. (Privacy Policy)
    AkismetThis is used to detect comment spam. (Privacy Policy)
    HubPages Google AnalyticsThis is used to provide data on traffic to our website, all personally identifyable data is anonymized. (Privacy Policy)
    HubPages Traffic PixelThis is used to collect data on traffic to articles and other pages on our site. Unless you are signed in to a HubPages account, all personally identifiable information is anonymized.
    Amazon Web ServicesThis is a cloud services platform that we used to host our service. (Privacy Policy)
    CloudflareThis is a cloud CDN service that we use to efficiently deliver files required for our service to operate such as javascript, cascading style sheets, images, and videos. (Privacy Policy)
    Google Hosted LibrariesJavascript software libraries such as jQuery are loaded at endpoints on the or domains, for performance and efficiency reasons. (Privacy Policy)
    Google Custom SearchThis is feature allows you to search the site. (Privacy Policy)
    Google MapsSome articles have Google Maps embedded in them. (Privacy Policy)
    Google ChartsThis is used to display charts and graphs on articles and the author center. (Privacy Policy)
    Google AdSense Host APIThis service allows you to sign up for or associate a Google AdSense account with HubPages, so that you can earn money from ads on your articles. No data is shared unless you engage with this feature. (Privacy Policy)
    Google YouTubeSome articles have YouTube videos embedded in them. (Privacy Policy)
    VimeoSome articles have Vimeo videos embedded in them. (Privacy Policy)
    PaypalThis is used for a registered author who enrolls in the HubPages Earnings program and requests to be paid via PayPal. No data is shared with Paypal unless you engage with this feature. (Privacy Policy)
    Facebook LoginYou can use this to streamline signing up for, or signing in to your Hubpages account. No data is shared with Facebook unless you engage with this feature. (Privacy Policy)
    MavenThis supports the Maven widget and search functionality. (Privacy Policy)
    Google AdSenseThis is an ad network. (Privacy Policy)
    Google DoubleClickGoogle provides ad serving technology and runs an ad network. (Privacy Policy)
    Index ExchangeThis is an ad network. (Privacy Policy)
    SovrnThis is an ad network. (Privacy Policy)
    Facebook AdsThis is an ad network. (Privacy Policy)
    Amazon Unified Ad MarketplaceThis is an ad network. (Privacy Policy)
    AppNexusThis is an ad network. (Privacy Policy)
    OpenxThis is an ad network. (Privacy Policy)
    Rubicon ProjectThis is an ad network. (Privacy Policy)
    TripleLiftThis is an ad network. (Privacy Policy)
    Say MediaWe partner with Say Media to deliver ad campaigns on our sites. (Privacy Policy)
    Remarketing PixelsWe may use remarketing pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to advertise the HubPages Service to people that have visited our sites.
    Conversion Tracking PixelsWe may use conversion tracking pixels from advertising networks such as Google AdWords, Bing Ads, and Facebook in order to identify when an advertisement has successfully resulted in the desired action, such as signing up for the HubPages Service or publishing an article on the HubPages Service.
    Author Google AnalyticsThis is used to provide traffic data and reports to the authors of articles on the HubPages Service. (Privacy Policy)
    ComscoreComScore is a media measurement and analytics company providing marketing data and analytics to enterprises, media and advertising agencies, and publishers. Non-consent will result in ComScore only processing obfuscated personal data. (Privacy Policy)
    Amazon Tracking PixelSome articles display amazon products as part of the Amazon Affiliate program, this pixel provides traffic statistics for those products (Privacy Policy)