A typical wallet holds 8 to 10 credit cards, groaning under 16% interest on some $8,123 in bills. But take heart. I offer this simple, step-by-step, debt-deflating makeover that will soon evaporate those money- siphoning, high interest rates and annual fees. In this three-part series, I’ll arm you for a quick shot at lowering the interest rate and excising the annual fees on the cards you already carry. Then, I’ll teach you how to get an even better rate by transferring your revolving balance to the lowest- rate card you can get. You’ll painlessly pay down your debt at a fast clip, ending up with a no-fee card that you’ll use interest-free.

1. Look Homeward First. Begin your debt diet by putting your cards on the table — each with its most recent statement. See how much you currently pay in fees and interest. Then get a running start on becoming the new, credit-savvy you. I call it:

2. Dialing for Dollars. Each of your statements lists a customer service number. Call, and say the appropriate version of: “You’re charging me a $20 annual fee, plus 19.8% interest. I’m seeing a lot of cards advertised with much lower rates and no annual fees. Will you waive my fee and lower my interest rate?”

If you have at least a one year history of timely payments (even of only the minimum required), the answer will probably be “Yes!” You don’t have anything to lose, and not asking is an automatic “No!”

3. Talk Tough, If Necessary. I’ve called my card companies and have encouraged friends, family, and everyone else to do likewise. Most of our calls eventually result in savings, but we’ve learned not to expect an immediate “delighted to be of service.” You’ll be put on “hold” while your record is reviewed.

If the verdict isn’t to your liking, ask if they would prefer that you trade in their card for a better deal from one of their hungry competitors. And always feel free to take it to a higher authority — ask for a supervisor. Getting an annual fee waived or an interest rate lowered from 19.8% to 15.9% should be relatively easy, but you may need to assert yourself. (When Nancy called her card company, she was passed off to three different operators before she was eventually offered another card – one with a variable interest rate – which has no annual fee and charges even less interest than the “preferred” rate she’d previously been given. Go figure it!)

Note: A variable rate card should pose little risk. Interest rates are at an historic low, and with careful management, you should be well out of debt before rates next go ballistic — at which point it won’t matter to you. But if you’re nervous about future rate hikes, you can always hold on to one fixed rate card. But be aware that lenders can generally up the rate whenever they like if they simply send you written notice 15 days in advance.

4. Stay on Top of Your Victories. To insure that they won’t be fleeting or hollow, monitor your victories. You might get your annual fee waived, but only for the current year. You’ll need to call again in 12 months.

Since I don’t charge more than I can pay off by the end of the grace period, the 19.8% interest rate on a no-fee Chase Visa Gold card I had a while back didn’t really cost me anything. But in the spirit of research, I proudly got Chase to lower my rate — only to find a $50 annual fee on my next bill! When I called to complain, I was told that I could have one or the other — no-fee or a low rate — but not both. Since I have a pocketful of other cards, I promptly canceled this one.

5. Check Your Credit Report. Once you’ve shed an annual fee or two and lightened your interest rate by a few points, it’s time to “refinance” any revolving credit card debts you may carry. How low an interest rate you can get will depend on your credit report.

You can order a copy from any of the three major credit reporting bureaus: Equifax www.equifax.com, (800)-685-1111; Experian www.experian.com, (888)-397-3742; TransUnion www.transunion.com, (800)-888-4213 The cost is typically $8.50 – except in certain states, where the fee (if any) has been set by the legislature.

In case you’re wondering, it doesn’t matter much which bureau you contact. They all operate nationwide and are likely to have similar info on you. However, Equifax has initiated a special online program with Fair Isaacs, the company most lenders turn to for determining our credit scores. Go to www.myfico.com, where for $12.95, you can get your credit report along with your credit score and suggestions for improving that score.

6. Shape Up. When your credit report arrives, take a hard look — 40% of the time there are errors that you should have corrected right away. Naturally, a record of late payments and other delinquencies will hurt your chances for low cost credit.

Even if you’re a model bill payer and you find no errors, there may be problems lurking. For example, if you’re spending more than 28% of your gross income on credit card bills and installment loans, your application could be denied. Similarly, having more than four cards, carrying a balance close to your credit limits, or having too much open credit — even if you’ve never gone up to that limit — makes potential lenders nervous.

Ask your current card companies to lower your credit limits to amounts more in line with your actual spending patterns — and cancel all of your gas and department store cards. With Visa and MasterCard so universally accepted, keep other credit cards only if they offer an extra special convenience or feature. For more on how issuers will rate you, get Slash Your Debt: Save Money and Secure Your Future, which I co-authored with Gerri Detweiler and Nancy Castleman.

7. Lower Isn’t Always Better. How low can you go? Seven percent, or less, is possible, but may not be right, or reachable, for you. Finding your best deal will require carefully attending to the rest of your credit card makeover — and making a bunch of phone calls.

Begin by getting a list of low rate and no annual fee cards. Visit www.cardtrak.com, or send for a monthly report which includes an easy to follow survey ($5 for a hard copy of the current issue – CardTrak, PO Box 1700, Frederick, MD 21702). While helpful, it won’t will tell you a crucial fact — ”The Minimum Percent.” You’ll have to call each card company to find it out.

Table #1 illustrates the effects of this hidden aspect of credit card math. Look at Cards A and B, which both charge 19.8% interest. If you have a $2,000 balance, and pay only the minimum due, Card A would cost $5,047 more in interest than B’s offering. That’s because A requires a monthly minimum payment of only 2.00% ($40, the first month). While B’s is 2.78% ($55.56).

Secret Credit Card Math Based on Paying the Minimum Percent on a $2,000 Balance
Card	Interest Rate	Minimum Percent Payment	Total Interest Cost	Months to Pay Off
A	19.8%	2.00%	$7,636	502
B	19.8%	2.78%	$2,589	207
C	15.9%	2.08%	$2,944	265
D	15.9%	3.00%	$1,427	151
E	12.5%	3.50%	$ 781	113
F	12.0%	2.50%	$1,103	131
G	8.9%	2.80%	$ 651	125

Either deal is nuts, of course, if you can get a lower rate. But if you can’t, by regularly sending Card A 2.78% of your outstanding monthly balance, instead of the required 2.00%, your monthly payments as well as your total cost would equal that on Card B (e.g., $2,000 x 0.02778 = $55.56). You’d save over $5,000, and 24 years of payments!

You’ll notice the same discrepancy between the 15.9% cards. In fact, C’s low minimum means it could be more costly for you than Card B, which charges almost 4 points more interest.

Important: You can easily manage low minimum percent cards to your advantage. Send in as much as you can each month, which will keep your costs down. But if times get tough, you can cut back to preserve your cash flow. You won’t jeopardize your credit if you make certain to pay at least the minimum required payment on time.

8. Other Instant Money-Waste Reducers. As quickly as you can, transfer the balances from your high interest cards to lower interest ones. “Dialing for Dollars” may very well get you a reduced rate. While you seek out still lower rates, it’s well worth the effort to transfer your balance from, say, a 19.8% card to one that charges 15.4% — assuming you make the higher minimum payment of the two. But first find out what the transfer process entails. Some banks provide free transfer checks, while others impose a cash advance fee in addition to interest (which may be 2%-3% higher for cash advances than for purchases).

Credit card issuers seem to be adding new fees left and right these days. Late fees have gone up, as have fees for going over your credit limit. What’s worse, many lenders now also raise the interest rate if you’re late or over your limit. Some lenders are also charging an extra 2% or so if you charge purchases overseas. Watch out!

9. And Now for the Nominees. If you’ve completed the plastic surgery on your current cards and your credit report, reach out for a still lower rate card. Salivate, if you must, over those with rock bottom rates — like 4% on Wells Fargo's Prime Rate card (800-642-4720), or 4.75% on the Pulaski Bank Standard MasterCard (800-980-2265) — but keep in mind that these dream boats carry high annual fees, grant low credit limits, demand a great credit history, and reject at least 70% of applicants. For most, a good next-step card might be one of the no-fee cards being offered by many lenders in the 8.00% to 8.65% range. If you visit www.bankrate.com, you’ll be able to contact many card issuers on line, whether you carry a balance, pay off what you owe monthly, have bad credit, and so on.

Tempted to apply to all these outfits? Don’t. Applying for more than two cards in six months may get some lenders “nervous” about what they’ll see as your sudden need for credit.

Important: If you can or do belong to a credit union, your best card choice may be right there. Go to www.cuna.org for more information.

10. Apply Carefully. If your credit report shows one thing, and your application something else, the bank’s computer may get confused. List every credit account your credit report shows. Make sure addresses match, too, down to the zip code.

Be honest, but not modest. Be sure to show extra sources of income, list your assets at present market values, and give the current balances on loans — not what you originally borrowed. Fill out the application completely and keep a copy. It’ll be the model for your next application. Next month: an easy way to pay off your credit cards.

11. At All Cost, Avoid “MPS.” Scott Burns (www.scottburns.com), a columnist for The Dallas Morning News, coined a wonderful term “MPS — Minimum Payment Syndrome.” Scott describes it as a “deadly” malady, which could afflict you for the rest of your life. Fortunately, the cure for MPS is simple and requires no doctor’s visit: Always pay more than the required minimum.

Table #2 shows the savings that a measly quarter a day — $7.50 — will earn you on each of our sample cards. For example, with Card A’s 19.8% card, you could relocate $4,916 in otherwise wasted interest — from the bank’s bottom line to your own — simply by investing two bits a day.

Adding 25¢ a Day to the Required Payment Dramatically Reduces Your Total Interest Cost Based on a $2,000 Balance
Card	Interest Rate	Cost Without 25¢	Cost With 25¢	Interest Savings	Months Saved
A	19.8%	$7,636	$2,720	$4,916	334
B	19.8%	$2,589	$1,558	$1,031	97
C	15.9%	$ 2,944	$1,553	$1,391	137
D	15.9%	$1,427	$970	$ 457	61
E	12.5%	$781	$582	$199	40
F	12.0%	$1,103	$763	$340	45
G	8.9%	$651	$469	$182	45

12. An Easy Way to Pay Off Credit Cards. Unlike mortgages, card contracts don’t set a repayment term. The banks want you to send in just the minimum, on time, every month — and to keep on charging, happily ever after. To wipe your slate clean, just pick an amount that’s larger than the minimum required this month — and send it in every month, until the loan’s been repaid. The highest minimum among our sample cards is E’s 3.5% — which means $70 on a $2,000 balance.

Table #3 shows what each card would cost if you made a flat $70 payment every month. While it certainly makes sense to go after low rate cards, I hope Tables #2 and #3 convince you that paying more than required — on a regular, but self-managed basis — is the real ticket to financial freedom.

Regular Pre-Payments: Your Quick Ticket to Financial Freedom Based on a $70 Monthly Payment on a $2,000 Balance
Card	Interest Rate	Cost With Minimum	Cost With $70	Interest Saving	Term (Months)
A	19.8%	$7,636	$727	$6,909	39
B	19.8%	$2,589	$727	$1,862	39
C	15.9%	$ 2,944	$529	$2,415	37
D	15.9%	$1,427	$529	$898	37
E	12.5%	$781	$386	$395	35
F	12.0%	$1,103	$367	$736	34
G	8.9%	$651	$255	$396	33

Note: We show the savings possible with pre-payments ranging from $3 to $100 on credit card balances ranging from $1,500 to $50,000, at 11% to 19% in Slash Your Debt: Save Money and Secure Your Future, which I co-authored with Gerri Detweiler and Nancy Castleman. (To order, call 845-657-8245, or visit www.goodadvicepress.com.

13. Yet Another Way to Slice Debt Costs. Another quick way to cut your costs is to get a short term loan from a better-heeled friend, relative, or insurance policy — at a lower rate than your card charges. Then pay at least as much each month towards your new loan as you were sending to the card sharks. You’ll save a bundle, and your benefactor will also profit. When your card balances are wiped out, start paying off your car, college loan, or mortgage. Soon you’ll be totally debt-free, which is the best treatment I know for keeping those ugly worry-lines off your face!

14. When Interest Rates No Longer Matter — Grace Periods Do! While you’re carrying a rollover balance, grace periods are of no benefit. But once you start paying your balance in full every month, the grace period can work to your benefit. (It’s the amount of time you have from the billing date to pay the bill.

With a grace period of 20 to 25 days, you could have a month from when you make a purchase to pay your bill. During this grace period, your money can be earning you interest. Therefore, when you’re finally on a pay-as-you-go basis, get yourself a no-fee card with a 25 day grace period. While the interest rate will no longer matter — because you won’t be paying it — be prudent. Stick with a no-fee, low interest card.

15. Deep-Six Dumb Deals. Be on the lookout for pseudo-personalized offers encouraging you to take advantage of yet another once-in-a-lifetime opportunity to charge your life away. For example, what say you to a “prestigious” Visa Gold Card with a $5,000 credit line, no annual fee, low monthly payments, and a 1% purchase rebate? Plus “at no cost,” all purchases would be protected against fire and theft. You’d also get extended warranties, low monthly payments, free checks, no transaction fees, $500,000 in travel insurance, and collision protection on car rentals. The catch? Accept an immediate cash advance of at least $2,000, at a mere 21.9% in interest. I say, “Thanks, but no,” and hope you’ll do the same.