At the end of the 1999 hit film “Fight Club”, Edward Norton and Helena Bonham Carter watch as the skyline explodes and credit card giants collapse to the ground, instantly eliminating credit card debt for millions of Americans. While the average credit card debt per American household is a hotly contested issue, my 20 and 30 something friends watched the final credits of “Fight Club” roll (pun unintended) with no shortage of conspiratorial smiles and wistful sighing.


Although the image of a collapsing skyline doesn’t resonate with the same appeal in a post 9-11 world, many Americans, absent the collateral damage, would still be thrilled with the end result. Imagine this — you have just opened your credit card statements and the balances have all plunged to zeroes. And we’re not talking about a series of zeroes prefaced by a really high number.

But even though we can’t blow up buildings, there are solid methods by which we can detonate our debt. In a series of installments, you’ll meet my friend Oliver (not his real name of course). Oliver, now 27, has a well-paying job but can’t pay off his credit cards.

In each installment I’ll show him – and you – how to eliminate your debt step by step . It will be like “Fight Club” all over again if you can imagine that, just without the famous cast, the special effects, the…well, you get the idea.

My friend Oliver fits into the category of the Freshman 15 – the college student who puts on weighty credit card debt – by the time he graduated from college. Oliver’s case was even bigger than your average student’s – by the time he was a senior, Oliver toppled the scale with a hefty Freshman 50K in credit card debt!

A well-paying job and help from his folks helped reduce the burden, but at 27 years old Oliver still owes $17,050 to several credit card companies. He also finds that, in spite of keeping up with his monthly payments, he is making little progress in putting a dent into his debt.

The good news for Oliver — and for my readers — is that my five step program is easy to follow and focuses on things that you can do to save money and reduce your debt without paying a cent to the credit card companies. In fact, only one step directly focuses on paying back your creditors.

So let’s get started:

Calculate Your Debt to the Decimal Point

Before you can you even begin to attack your debt you need to know exactly how much you owe and what your interest rates are. This is difficult, if not impossible, if you don’t have it in a written format. A visual graph illustrating the balance per credit card and your credit cards’ Annual Percentage Rates is imperative.

This month you are going to go through all of your credit card bills and create an Excel spreadsheet that will look something like Oliver’s chart below:

Name of Credit Card Minimum Monthly Payment APR Balance
Credit Card 1 $150.00 18.99% $12,000
Credit Card 2 $85 17.99% $5,000
Credit Card 3 $15 19.99% $50
Total Debt $17,050

Keep in Mind:

  • Twice a month, or whenever there is a major change in your balance, APR or minimum payment, make sure that your spreadsheet is up to date (checkout online finance organizer like
  • Set up reminders for yourself to check your spreadsheet in whichever way works best for you. For instance, you can create a reminder on your Outlook calendar and receive the reminder by automated email reminder twice a month.

Lower Your APRs

In my last installment I introduced you to my friend Oliver, who I am teaching my five step debt reduction strategy to. Oliver – and all of you readers – have diligently followed Step 1 and have created a spreadsheet listing your credit cards, minimum monthly payments, Annual Percentage Rates, balances per card, and total amount of debt.

Now you and Oliver are ready to focus on one of the most critical columns on your spreadsheet – your Annual Percentage Rates . The only thing required to successfully complete this step is a phone and a little bit of confidence.

Compile a list of each of your creditors’ phone numbers, which can be found on the back of your cards or on your monthly statements. Now, one by one, call each number and ask the customer service rep to have the APR lowered on your account. This will ultimately save you hundreds if not thousands of dollars in finance charges.

If you have been paying your bills on time and have a good relationship with the company you will most likely get your APRs lowered. But even the customer rep says no, you can respond that you’ve received better offers from other companies and that you will close your account with them if they don’t give you a better rate. If the answer is still no, ask to speak to a supervisor and reiterate the above.

Plastic Surgery: Quick Credit Card Makeover:

Let’s see what happened when Oliver called each of his creditors:

Creditor 1: 18.99% APR lowered to 14.99%. Balance on card: $12,000

Creditor 2: 17.99%: APR lowered to 12.99% Balance on card: $5,000

Creditor 3: 19.99% APR lowered to 15.99% Balance on card: $50

How much has Oliver saved over a year, assuming that his balances have remained the same?

Total Savings Per Year$722. 

Wouldn’t that be better spent on a trip to Bermuda?

Other Important Things You Should Know:

  • Getting your rate lowered is sometimes like a game of limbo — sometimes the first rate that the credit card company offers you is not as low as they are willing to go. For instance, a certain credit card company was charging a me a really high rate of 20.99% and initially offered to lower the rate to18.99%. I politely but assertively replied that the rate was still too high. Their final offer, while still on the high end at 15.99%, was at least 5% points lower than what I had started out with.


  • Make sure to read the fine print on all of your monthly statements or any correspondence from your creditors. Oliver once had a creditor raise his APR from 9.99% to 19.99% . It took him five months and a lot of payments in finance charges before he figured out what was causing his balance not to go down.

Transfer Balances 
Balance transferring enables you to put more money back in your pocket by transferring balances from a card with a high APR to a card with a 0% introductory APR.

In Step 3, Oliver is going to shop for a credit card that offers a 0% APR on balance transfers and ideally no fee for providing the balance transferring service. Ideally, he would obtain a card with a 0% APR on balance transfers for at least a year and a low APR after the introductory rate of 0% expires.

For instance, Oliver has a card with a $12,000 balance. If he transfers half of that balance he is cutting his finance charges down in half.

Finance Charges Before:

$12,000 on 14.99% APR Card: $1,798.80 a year.

Finance Charges After: 

$6,000 on 14.99 APR card: $899.40 a year.

$6000 on 0% APR card: $0 a year.

Amount Saved: $899.40 a year.

This is an even more dramatic difference than what he saved by lowering all of his APRS combined.

Word to the Wise:

  • Make sure to note on your spreadsheet when the 0% introductory rate on your new card ends and what the new APR will be when once it kicks in. This way you can rethink your payment strategy as the time approaches.
  • Pay your bills on time every month and make sure not to exceed your credit limit. Many credit card companies will kick in a much higher APR if you don’t pay your bills by the monthly due date and/or go a cent above your limit. This will destroy all of your hard work to lower your APRs and save money in the first place!

Attack Your Debt:

Congratulations – if you have been following my strategies you have already saved yourself tons on finance charges by lowering your APRs and taking advantage of balance transfers. So now what? Some financial advisors claim that paying off lower balances first empowers consumers psychologically to continue paying off their debt. But even though it’s a great feeling to see those balances hit zero, you are actually losing money by not paying off the cards with the higher balances and APRs first.

In your spreadsheet, prioritize the cards in the order that you will pay them off. Credit Card 1 is the card with the highest priority level and is listed in the first row of your spreadsheet below the column headers. This card will either have the highest balance, the highest APR or a combination of both. 

The priority in which you pay your cards off will be based on your particular scenario of debt – quite literally, your deck of cards.

Below I have described three common scenarios of debt distribution:

Goliath: The Card With Such A High Balance You Wish It Would Self-Destruct: 

In what I call the “Goliath” scenario, you have one credit card with an extremely high balance compared to your other cards, which have low to moderate balances. Unless you have a 0% APR rate on this card, prioritize paying it off as soon as possible. After creating a budget (see Step 5), you will allocate the majority of your budget reserved for credit card expenses to this high balance card, paying off as much above the minimum monthly payment as possible. When you have paid it off move on to the second credit card that you have prioritized and repeat the same strategy.

Combination Cards: High Balances Versus High APRs

In this situation you have a combination of credit cards with high APRs and moderate balances and other cards with high balances and lower APRs. In this case choose both the card with the highest balance and the card with the highest APR. Move these two cards to the top two spaces in your Excel spreadsheet and prioritize paying off both these cards before moving on to the others.

Even Playing Field

In a situation where your cards have roughly equal balances, prioritize paying off the card with the highest APR, and after paying it off completely move on to the card with the next highest APR.

One Last Tip:

  • While you want to concentrate almost exclusively on paying off your prioritized card or cards, try to pay slightly above the minimum monthly payment on your other cards too. This way all of your monthly payments are not going to interest rates alone and you are slowly but steadily eliminating all of your other debt at once.

How Do I Pay For All Of This?

In my article about the Freshman 15 of credit card debt, I advised this year’s incoming class to spend a month living as they normally have been while carefully keeping track of how much they spend. The same strategy to create a budget can also be used by non-Freshman.

Oliver, who you met in some earlier segments, was shocked when he realized what he was spending each month. I had advised him to spend as he normally does for one month while keeping track of every dollar that left his wallet. At the end of the month, he created an Excel spreadsheet with columns listing different categories of his expenses, such as transportation, dry-cleaning, housing, household items, gym membership, clothing, student loan payments, vacation, entertainment, etc. Then, based on what he had been spending, I asked him to evaluate what he couldn’t live without. He was surprised to see how much he had spent on things he didn’t need or didn’t even really want.

When you follow the same steps, calculate what spending you can cut down on from each category of spending, sum up the numbers and insert that amount into a new column called “Credit Card Expenses.” This will be the total pool from which you draw your credit card payments each month.

Depending on the amount of debt and expenses you have, you may have to work harder to cut corners. More often than not though, people are surprised to see how much they can live without while still living well.

Keep in Mind…:

  • It’s important to be honest with yourself when determining what living expenses to cut. There may be things that your friends see as frivolous but that you can’t live without. If you can’t live without your own, new DVDs or freshly glossed nails, then find something else to cut instead.
  • Sometimes we can still afford the things we love by paying a lot less for them. For instance, you can save money on gyms by looking for holiday deals or buy designer duds online at bargain basement prices.
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