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Credit card debt giving you problems? MainStreet has answers!
MainStreet's resident personal finance expert, and author of You're So Money, Farnoosh Torabi fields your questions on our sister site,
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Today's Topic: Credit counseling.

Dear Farnoosh,
I have two credit cards that have high balances. I pay at least the minimum payment on-time each month, sometimes more when I have extra cash. Unfortunately, the APR [Annual Percentage Rate] has sky rocketed on both of them. This may be because I went over my limit twice this year (due to unexpected medical bills), but even so, is there anything I can do to get Chase and Capital One to lower the APR, one of which is 20%? How am I supposed to reduce the balances and get rid of the cards when the finance charge takes most of the minimum payment? What is your opinion on debt consolidation? Do they have more "pull" with the credit card companies as far as lowering my rates. Will it look bad on my credit report if I use a debt consolidation service?
Any suggestions would be much appreciated!!!

Dear Chrishy76:

I’m going to give you a couple of suggestions, but you have to promise yourself, for the love of your financial freedom, that you will pay down this debt vigilantly –far more than the minimum each month. You need to kick debt in the you-know-what. Sure, there are ways to finagle the APR and give you more wiggle room, but nothing’s a win-win situation until you make paying down debt fast your #1 priority. It will be a pain for just a little while, but then you’ll be 1,000% happier and more capable of building wealth. Something I always did to combat credit card debt – every time I got a windfall of money from work, my parents, a tax return, I put it towards debt first.

That said…

A short-term fix to your APR crisis may be to transfer your balance to a new credit card with a lower interest rate in the single digits. I would suggest this before consolidation. Note that transferring your balance sometimes carries heavy balance-transfer fees and. Other caveats to this: Introductory offers tease "O% APR" but that's only for a limited time and the rate sticks only if you pay far more than the minimum monthly installment, otherwise it could shoot to the double-digit range and you’re back at square one. In general, I don't like advising opening up new credit cards since that can negatively affect your credit rating. You should limit your card holdings to less than three. Two is better. If you do want to close an account, call up your card company and ask that it be recorded as “closed at customer’s request.” Otherwise it may appear the company shut you off due to being a bad borrower.

Next - Do you own a home with equity? Some folks take out a line of credit based on their home equity, which carries a far smaller interest rate than credit cards, and use that loan to help pay off their credit card debt. It carries tax benefits, too. Just make sure you don’t go overboard. Take out only the amount that will relieve your credit card payments and no more. Shop for home equity rates at and at local credit unions.

If you still want to explore debt consolidation, please check out the National Foundation for Credit Counseling at They give free, objective advice.

Keep in mind, too, that if you change nothing, but start paying far more than your minimum balance each month, your good behavior may pay off in the form of a reduced APR down the road. After three months of vigilantly paying down your plastic, give your card company another call to ask for a lower interest rate, maybe even just a reduced rate for the next six to nine months, to give you more room to pay down debt. I’m sure what they told you is that they can’t offer you a lower rate “at this time.” So, take some time to boost your credibility as a borrower – it might just pay off!


Farnoosh's answers all sorts of personal finance questions. If you have any money matters for Farnoosh feel free to email her.

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