Asking for a reduction in the interest rate on your credit card had to be one of the easiest and fastest ways to help ease the burden of credit card debt. Whilst I am sure that many institutions will not give you a reduction if you just ring them up and ask them ‘Hey, how about you reduce my interest rate.’, if you write to them about your financial position and put your case forward to them that you are possibly in (or about to be in) financial difficulty and would like their assistance in helping you meet your monthly repayments, they will probably be more likely to listen.

Again, some credit/bank institutions will not offer you anything, but some will certainly see that it is better for them in the long run if they help you manage your circumstances. Of course you have nothing to lose by asking, except for a postage stamp and possibly several percentage points to gain if they respond positively.

It is quite often advertised that the way to be debt free is to consolidate your debts. This can be true for some people, but not all. Here are some key points to keep in mind before deciding to consolidate your debts:

Of course if you are so short on cash that you are going further and further into dent, then a consolidation loan would be a great help. However if you can manage your current repayments you will get out of debt faster if you pay off your most expensive debt first (the one with the highest interest rate) and then once this is paid off, use the repayment amount from this debt on your next highest debt.

Continue this cycle through your 3 most expensive debts, and you’ll have the rest of them paid off in no time at all.

Remeber - avoid the temptation to spend your saved repayments on anything other than paying off other debts. This is the key to getting out of debt.

Looking at your interest rates on your debts, you’ll probably see the some of them are around 10% pa (per annum or per year), and others such as store cards go as high as 28% pa. This means that if you have $1000 outstanding on a store card at 28% pa for one year, you’ll pay $280 - nearly 1/3 of the total debt!

Now, this example isn’t totally accurate as you will have made some repayments throughout the year, but hopefully it gives you an idea that the higher the interest rate, the more expensive the debt is - even if you only owe $50.

Store cards in particular can be very nasty. They often quote very low minimum repayments which make them see affordable, but in reality your minimum repayment is mostly going towards paying the interest, and not much off the total balance. In other words, you end up giving more of your money away using these cards than with most other credit cards/loans.

Ok, so now we need to prioritise your debts based on their annual interest rate, not their outstanding balance. The reason for this is that we want to reduce the amount of money being paid on interest as quickly as possible.

Once your list is in order with the highest interest rate at the top, this top item now becomes your number one priority. Any spare money you have (bonuses, tax refunds, gifts of money) need to go against this debt. Whilst doing this, keep your other debts at their minimum repayment levels only to maximize the amount of money you can put against your most expensive debt.