Rapid Debt Reduction Strategies for Erasing Credit Card Debt

In 2010, CreditCards.com reported the average American household carried nearly $16,000 in credit card debt. The Federal Reserve reported the average annual percentage rate at 14.67 percent for the same period, making the minimum payment on such a balance just under $200 per month. By engaging in a few simple strategies, consumers can eliminate credit card debt faster and regain control of their financial life.

Negotiate the Lowest Rates Possible

Negotiating interest rates to the lowest level possible should be the first step in erasing credit card debt. A few minutes on the phone could reduce monthly finance charges and save hundreds of dollars--especially with a good credit history and solid record of regular on time payments. Shop around and compare your current rates with those of other companies. Give your credit card company the opportunity to match an offer; if it won't, don't be afraid to move on.

People often think they have little or no leeway in bartering when it comes to their interest rates, and legislation has put restrictions on lenders to tighten up unscrupulous business practices; however, the laws haven't eliminated a person's right to attempt to negotiate lower payments. In a June 2010 CNNMoney article, Nick Bourke, director of the Safe Credit Cards Project at The Pew Charitable Trusts, said, "I think [card companies] will be just as willing now as they have been."

Transfer Balances to Lower Interest Cards

In his book "Rapid Debt Reduction Strategies," John Avanzini encourages readers to transfer debt from their highest-rate credit cards to the lowest wherever possible. By moving balances with higher interest to accounts with lower rates, consumers can reduce finance charges and apply the savings toward paying down the principal faster.

When considering this option, it's imperative to read the fine print and take everything, including rates, transfer fees, other expenses, incentives and long-term adjustments into account. Avanzini also notes that lending institutions might be more flexible to cut rates and extend credit to clients who give them considerable amount of business and offer other incentives such as automatic payments.

Pay Off Highest Interest Rate Cards First

People with more than one credit card should review the interest rates on each and work to pay off the account with the highest interest rate (not the highest balance) first. You can accomplish this by making lower payments on all other cards and applying the rest of your monthly credit card budget to the highest rate account. After the first card is paid off, apply the same principle to the card with the next highest rate, and so on.

Suze Orman, author of "The Road to Financial Wealth" and numerous other personal finance books, suggests making minimum monthly payments plus $10 per month on other accounts while using this method. She also states that in order to work quickly and effectively, consumers should cancel or maintain a zero balance on cards paid off and not reduce the total monthly amount budgeted for payments.