To Get Out of Debt, Get on the Phone Three easy ways to trim your borrowing costs
By Jean Chatzky Additional reporting by Carolyn Bigda

(MONEY Magazine) – Highway robbery. That's what Jill King thought every time she made a payment on her credit card. The interest rate had started out at 9.9%, then jumped to 23.9%. With a balance close to $7,000, that hike was costing King, a stay-at-home mother of two in Philadelphia, an extra $81 a month--nearly $1,000 a year. "I would make what seemed like really big payments," King says, "and it didn't seem to have any effect at all." Then she happened upon a book called Talk Your Way Out of Credit Card Debt by Scott Bilker. It was easy, Bilker wrote, to call your card company and ask for a lower rate. So King did just that: "I said, 'I can't afford this. I'm going to have to cancel the card.'" The rep told her she'd still have to pay the bill. "I know that," King responded. "But I'm not going to use it anymore." Three minutes later, her rate was 8.9%.

Chances are, many of your monthly expenses are borrowing costs, from your mortgage to your credit cards. So lower--and lock in--those rates before they go up. Here's how to do it.

Ask for a break

First, note the rates you're now paying on your cards, whether the rates are fixed or variable, how long you've been a customer, how much you charge and whether you pay on time. Then pull out any attractive pre-approved balance transfer offers you've received and call customer service to ask for a lower rate. Respondents to a 2002 Public Interest Research Group survey reported success 56% of the time. The average savings: more than 30%.

Not sure what to say? Try Bilker's script: "I have the following card with you and my interest rate is X%. I got another offer in the mail from such and such bank for Y%, but before I took it, I wanted to see if you could lower my interest rate."

If the rep says she's not authorized to do that, say: "You and I both know that if I transfer my balance today, next week your bank is going to send me an offer to come back at an even lower rate. Why don't you just save the bank the effort by giving me several points today?" No luck? Ask for the supervisor and repeat your request.


If your mortgage is 7.5% or higher and you'll stay in the house long enough to recoup transaction costs, refinancing may be something to consider. Refinancing a car loan is even easier--and nearly free. You're eligible, typically, if your car is less than five years old and you owe more than $7,500. You'll really benefit if your credit rating has improved since you bought your home or your car. Finally, refinancing your student loans may free up cash at no cost. Shop around for the best discounts. Many lenders will give you a 1% break after you've paid on time for 36 or 48 months.


Finally, you could consolidate your loans via a fixed-rate home-equity loan (now averaging 6.92%). But many people who consolidate just pile on more credit-card debt. Consolidation is a good move only if you can resist temptation.