Now, there are indeed times when it’s better to remain silent (and be thought a fool) than to open your mouth and remove all doubt. But this is not one of those times. When it comes to paying high interest rates on your credit card(s), only the fools keep their gobs smacked shut.

If you’re constantly carrying a balance, you really must call your credit card company, open your mouth, and ask for a lower interest rate. Yeah, I’m saying you should negotiate down your APR.

Asking for a lower rate is free. And since most credit cards charge anywhere from 0% to 25% in interest (gobsmacking!), making a simple five minute phone call could save you hundreds, even thousands of bucks in interest charges.

See 5 Ways To Screw Your Credit Card Company for more legal ways to beat the debt game.

Five Steps: How to negotiate with credit card companies

Here’s how to do it:

Step One: Get your wallet

Grab the card you’ve had for a while — your oldest piece of plastic shows you’re a long time customer with an established credit history. Also, you’re more likely to win the war on rates if you’ve never been late with payments.

If you’re late to the payment party every month, I still want you to make the call. But don’t be too disappointed if someone says, No. A big meany ‘No’ doesn’t mean never, or forever impossible. It just means you need to do your best to make at least the minimum payments for several months for future negotiating success.

Step Two: Dial

Call the customer service number located on the flip side of your card. You can do this, so don’t flip out.

Step Three: Speak the script

Take this sample script for a spin. Don’t get tongue-tied or feel silly about reading someone else’s words — customer service agents read from scripts all the dang time. Today is payback, baby!

You: Hello, my name is [], here’s my account [] number.

Clickity clank typing.

Credit Card Agent: How can I help you?

You: I’ve been a good customer over the years. I just got an offer for a new credit card with a rate of 6%. I’d like to stay with you, but I’m paying 19% on my balance. Since I’ve consistently paid the minimum balance I’d like you to lower the interest rate on my credit card.

More clickity clank typing. Yeah, the agent is looking over your payment history. Stay strong.

Credit Card Agent: I’m sorry. This is the best we can do with this rewards credit card. You’re getting our best rate.

You: Please put me through to your supervisor.

Enter annoying elevator music. La, la, blah, blah.

Supervisor: How can I help you?

Repeat the previous script. Be polite. You may not get your uber-low ask, but you could score a rate far lower than your previous number. It’s likely the supervisor will counter with a better rate. If so, take it.

Step Four: Don’t give up

You can’t always get what you want. The Rolling Stones knew this. So if you don’t succeed at first, go ahead and try again. Call back in a few days and hopefully you’ll get a new customer service agent and supervisor to play with. Still no satisfaction? Call back in a month. Keep a record of your calls, and don’t give up.

Step Five: Pay that sucker off

Phone your other creditors and continue to ask for lower rates on all your credit cards. Make the most of this rate relief period by paying off your plastic in full. Keeping up with the minimum balance is nice, but you’ll prolong the paying pain for years, maybe even decades, while forking over piles of cash to your lenders.

Don’t believe me? Try my Credit Card Calculator to see your total interest paid based on your balance and minimum payments. Results WILL SHOCK YOU! Sorry.

Does asking for a lower rate really work?

Yeppers. A national survey conducted by the U.S. Public Interest Research Group (U.S. PIRG) found that a whopping 56% of consumers who called and asked their credit issuers for a lower rate, succeeded. Those who were successful reduced their APRs by around one-third, from an average of 16% to an average of 10.47%. Not too shabby for a five-minute phone call.

Canadian results are similar. In an unscientific experiment, the CBC asked ten mall shoppers to negotiate with their lenders. Six were promised a lower rate by citing a simple script. One shopper cut his rate in half, from 18% to 9%, just by making the call.

Improve your chances

Based on survey numbers, around half of you guys will succeed on the first negotiation call. Here’s how to increase your shot at a credit card rate decrease:

• End your script statements with strength. Don’t ask, “Can you reduce my rate?” Say, “Please reduce my rate.” If you give the agent a little wiggle room, he will take the out and wiggle away. Squirmy suckers.

• Negotiate on older cards. Established customers with credit histories are worth keeping, so creditors are far more likely to respond to rate reduction requests.

• Don’t be close to the max. Ask for a better rate before you’re maxed out or close the limit. Running out of credit room is a red flag for creditors.

• Pay your balance on time. Late payers and those paying less than the minimum balance should work to improve their payment history. Credit card companies are far more likely to give you a rate cut if you’re a proven payer. TIP: Try this nutty trick if you have sticky spending fingers: Curb credit card spending with a jar of peanut butter.

• Be polite. Asking for a better deal is free. But being an a$$hole during the call could cost you. Nice people don’t always finish last, so be strong yet courteous during your call.

Now stop surfing the interwebs and start dialing your phone lines. Moving your molars for a few minutes could save you thousands — you just need to smile and ask.

Love the blog? Get the book: 397 Ways to Save Money

Top Squawks

• How to make a budget (series with downloads)
• How to write a resume (series with downloads)
• Frugalicious Recipes
• 50 Ways to Save $1,000 a Year
• Credit Card Calculator
• Download your free 92-page eBook: The Insider’s Guide To Frugal Food & Fitness

You know what’s nuts? We keep spending. Sure, credit card companies are crafty at finding ways to get you to pay with plastic. Reward programs, cash back gifts, and zero balance transfers are all lip smacking offers designed to get into your psyche and entice you to tap credit.

It’s time to stop being shell-shocked by these trickster ways.

Want to put a lid on your credit card spending? I have a smooth (or crunchy) solution to this gobsmacking problem.

Warning: Results may include tasty savings, and a few nuts.

Ingredients for credit card savings:

• 1 small jar of peanut butter, $1.98 (OR Try my homemade peanut butter recipe)
• 1 strong plastic baggie, $0.02
• All of your credit cards

TOTAL COST: This $2 recipe could save you thousands. Try my Credit Card Calculator to see how much costly interest you’ll save.

Instructions:

Prevent credit card overspending with this nutty trick.

STEP ONE: Be brave. Gather all your credit cards.

STEP TWO: Wrap those pieces of plastic in a strong baggie. Seal shut.

STEP THREE: Submerge that spending mess into a tasty jar of peanut butter.

This is hard, I know. So take a lunch break — munching on a peanut butter and jelly sandwich should do the trick.

You can do it! Keep pushing those pesky credit cards deeper into the nutty butter.

STEP FIVE: Put a lid on it. Twist cap on tight to prevent future spending sprees.

STEP SIX: Refrigerate. An open jar of natural peanut butter needs to be cooled, along with your credit consumption.

Results will vary, but you’d have to be nuts to retrieve that gooey mess for a costly splurge.

Your Turn: How do you curb credit card spending?

Love the blog? Get the book: 397 Ways to Save Money

Top Squawks

• How to make a budget (series with downloads)
• How to write a resume (series with downloads)
• Frugalicious Recipes
• 50 Ways to Save $1,000 a Year
• Credit Card Calculator
• Download your free 92-page eBook: The Insider’s Guide To Frugal Food & Fitness

Signs of the sickness include sore thumbs from excessive texting, interrupted face-to-face conversations from constant cell phone chatting, and a severely whacked wallet from the myriad of costly data plans.

The biggest problem with ‘data plan disease’ is that the eroding effects on your savings are cumulative. Go ahead and add up your family’s cellphone minutes, cable or satellite TV services, high-speed Internet access, Xbox Live or PlayStation fees, Apple iTunes downloads, Netflix use, and your humble land line telephone (if you still have one).

Got that number? Now add in your overage fees, roaming charges, the teenager’s texting plans, system access fees, taxes, and any additional airtime fees (gulp), and you could be on the hook for $500 per month — that’s $6,000 each year — just for data plans! Feeling sick yet?

Reader Polls: We’ve added polls to the site! Go ahead and vote!

The New York Times ran the story As Data Flows In, the Dollars Flow Out and offered these budget busting numbers:

By 2004, the average American spent $770.95 annually on services like cable television, Internet connectivity and video games, according to data from the Census Bureau. By 2008, that number rose to $903, outstripping inflation. By the end of this year, it is expected to have grown to $997.07. Add another $1,000 or more for cellphone service and the average family is spending as much on entertainment over devices as they are on dining out or buying gasoline.

And those government figures do not take into account movies, music and television shows bought through iTunes, or the data plans that are increasingly mandatory for more sophisticated smartphones.

Americans should be a lot annoyed, but not super pi$$ed, by the communication costs they pay — Canadians have it far worse. According to a recent global telecom report from BofA Merrill Lynch (via Wireless North), the country that pays the most for cell phone use per subscriber is Canada, at $55 per month.

I took a good hard look at my own wireless and data plan numbers a while ago and came to the conclusion that my cable TV package had to go. Here are my current data plan digits:

My Data Plan Disease Numbers:

• Kerry’s Cell: $5 / month (7-Eleven SpeakOut Wireless)
• Carl’s Cell: $17 / month (Virgin Mobile Canada)
• Landline: $25 / month (Telus)
• Internet: $69 / month (Rogers Wireless)
• Cable TV: NOTHING! — we canceled that costly beast!

Total: $116 / month

My biggest source of ‘data plan disease’ is of course my Internet connection — living in rural Canada (in the middle of a forest) affords me few options for doing business online. That’s the price I decided to pay, and I cut my cable subscription to stay on budget.

What’s your data disease?

The good news about ‘data plan disease’ is that the ailment is not fatal. You have the choice to cut services, minimize fees, and downgrade data packages to cut costs and save money. Your results will vary, sure, but by adding up your numbers, crunching your monthly spends, and doing the simple math I bet you can minimize this costly sickness.

Heck, I wrote a whole post about cutting back (50 Ways to Save $1,000 a Year), authored a book about saving money (397 Ways To Save Money), and shared my cable story in Breaking up with a cable company is hard to do. I know you can cut back too!

Your Thoughts: Now hop on over to the poll, or share your data disease numbers here! How much are you spending monthly on data plans? And can you cut back?

Love the blog? Get the book: 397 Ways to Save Money

Top Squawks

• How to make a budget (series with downloads)
• How to write a resume (series with downloads)
• Frugalicious Recipes
• 50 Ways to Save $1,000 a Year
• Credit Card Calculator
• Download your free 92-page eBook: The Insider’s Guide To Frugal Food & Fitness

Look at your track record. When you’ve fallen off the financial horse and have drained your budget buying bunk, what did you do to improve?

The tenacious give themselves a kick in the butt and get down to work. They pore over their receipts, dig themselves out of debt, discuss spending habits with their spouses, and build better budgets.

The meek go shopping.

Here’s my saddle. I’ve fallen off this tough piece of bike leather a few times in my life. It hurts. I’ve broken bones. I’ve been laughed at. But it’s my saddle, and I choose to get back up.

Go ahead. Borrow my saddle. You know what to do.

Love the blog? Get the book: 397 Ways to Save Money

Top Squawks

• How to make a budget (series with downloads)
• How to write a resume (series with downloads)
• Frugalicious Recipes
• 50 Ways to Save $1,000 a Year
• Credit Card Calculator
• Download your free 92-page eBook: The Insider’s Guide To Frugal Food & Fitness

But I do want to get a little mean with you. A friendly sort of mean. The type of mean where a good friend would take you out for a drink (or coffee) and chat you up in a concerned, caring way. We’re not squawking about an intervention here, but rather, some serious tough love.

Ready? Here goes … and remember I’m buying you that drink (or coffee) by taking the time to tell you the honest to goodness truth. I’ll stop stalling now … gulp!

If you’re broke, please don’t email me to whine about it. I know money sucks when you’re stretched to the limit. I know buying a house is expensive. I know credit cards can be devices of torture masquerading as shiny pieces of plastic pleasure. I know buying quality foods can cost more than buying processed crap. I know that digging oneself out of a pit of dark debt seems insurmountable. I know that school is expensive and paying back that massive student loan is difficult, especially when your degree pays peanuts. I know life is hard. I know being single is expensive. I know being married is expensive. And there’s no doubt that getting divorced can be a drain too. I don’t have kids, but I hear they ain’t cheap either. Yes, working two (maybe even three) jobs is exhausting. I haven’t been all of these things. Maybe you have. But on the surface all these reasons for being broke are just the result of a much bigger problem. So if you’re ready to stop complaining about life’s circumstance, then here’s the remedy — the real reason why you’re broke.

1. You spend good money on crap.

Are you craptastic? Cool, I’m sure the marketers love you since you’re spending your hard-earned money on crap. And you know the crap I’m squawking about. Crap is the stuff that’s cluttering your home and bursting out of your front door. It’s the disposable, upgradeable, and superfluous stuff you buy in a heart-beat because you’re worth it! But crap costs. Crap consumes your space, can initially make you feel good but can lead to feelings of guilt, and can make you broke. Please, learn to identify crap and end the spending spree – you’re worth it. Smile. See Just say NO to crap! for the craptastic details.

2. You don’t have a budget.

I’m dropping the B-word ’cause I know you don’t have a budget, have little clue about your living costs, and don’t track your spending. Yes, starting a budget can be scary and learning about your true financial situation can be a bummer. Get over it. Please. Do the mathy math for once and for all and find your net worth, add up all your debt, track your spending, and build a budget that reflects your real reality — not the la-la land dream-world you prefer to live in. Only when you face the facts by spending the time to manage your money will you stop being broke.

3. You don’t earn enough.

This is a hard one to swallow, so I’m ordering you a second drink. If you can’t balance your budget after cutting the crap from your spending, then you’re probably not earning enough money. Sorry to be the bearer of bad news. Take a sip.

There was a time in my life when I had three jobs — THREE JOBS — to make ends meet. I worked my tail off to earn enough cash to cover the rent, buy better quality food, and pay off my student debt. You want to know How I Paid Off My Student Debt in Six Months? I worked my arse off with a full-time job plus two oddball gigs evenings and weekends! I didn’t own a car, I didn’t wear fancy clothing, and I didn’t wine and dine on the weekends. I was broke, after all. And I worked most minutes of every day to bring home enough dough to dig myself out. The answer here isn’t easy — you’ll have to find a way to make more money. Check out How To Find a Job for some pavement pounding ideas. Love is tough, I know. Smile.

4. You don’t pay off your debt.

If you don’t have a plan to conquer your debt, then you’re going to be broke forever. Do yourself a solid by downloading the Debt Reduction Spreadsheet to dig yourself out, starting today. While you’re at it, set your financial goals and make your Needs and Wants List — only then can you really tackle that mess you put yourself in.

Once you’re in the know, it’s time to look at ways to increase your minimum payments. Paying just the minimum balance is a sure-fire way to keep the debt hanging around your neck like a noose forever, so dig into that debt by paying it off sooner. Don’t believe me? My handy dandy Credit Card Calculator shows you how many years it will take and how much interest you’ll pay by just paying the minimum. Yes, the results will probably make you cry. So deal with it, already.

5. You don’t save.

If you’re up to your eyeballs in debt there’s no doubt that it’s very very hard to save 10 percent of your take-home pay. I hear ya. But saving even a smidgen of your salary for a rainy day or in an emergency fund is a wise way to get started. I’m a big fan of savings and have tapped my own emergency fund when times got tough in Reasons to Build and Love an Emergency Fund. You may not need surgery like I did, but you never know when tough times happen.

Start a savings plan by taking a good hard look at your spending patterns, your subscriptions and services, and find ways to cut back. For example, downgrading your television package — or canceling it completely — adds up to money that could be put into a high interest savings account. The idea is to be consistent and set up automatic deposits into a specific account set aside for emergencies. Get some ideas in 50 Ways to Save $1,000 a Year. It’s not hard to save — you just have to want to do it.

6. You’re clueless about your investments.

Do you know what you’re invested in, or did you let your financial advisor pick a bunch of posh-sounding investments without asking a single question? It’s your money and you have every right to know your Return on Investment (a calculator), How Much Your Mutual Funds Really Cost (a calculator), and How Long Until Your Investments Recover (another calculator). Not asking these questions or knowing the answers is a smart way to loose your shirt in the market. Not fun.

Getting clued-in to investing is not hard, just follow these steps:

STEP ONE: Learn the basics.

• Ram from Canadian Capitalist links to a Free Download of The Elements of Investing by Burton Malkiel and Charles Ellis. This freebie is fabulous for Americans and Canadians, so go and download it now.

• J.D. Roth from Get Rich Slowly wants you to learn How to Read a Mutual Fund Prospectus. The Devil is in the details, people!

STEP TWO: Learn about financial advice.

• Preet Banerjee from Where Does all My Money Go offers these articles for hiring a financial advisor: Do you need a financial advisor?, Financial Advisor Compensation Options, and Investors Using An Advisor Could Probably Be DIY Investors.

STEP THREE: Become a ‘Couch Potato’ investor?

For Americans:

• Scott Burns from the The Dallas Morning News shares his Recipes for Couch Potato Portfolios. They look tasty to me!

For Canadians:

• Dan Bortolotti from the Canadian Couch Potato answers the question: Should You Use Index Funds or ETFs? and offers these Model Portfolios for Canadians.

There, I said it. So no more whining, hating on my blog, or complaining to me about being broke. If something is broken, then go fix it. I’ll raise a glass to that…

Squawkback: I know I missed a bunch — what are some other reasons why people are broke?

Love the blog? Get the book: 397 Ways to Save Money

Top Squawks

• How to make a budget (series with downloads)
• How to write a resume (series with downloads)
• Frugalicious Recipes
• 50 Ways to Save $1,000 a Year
• Credit Card Calculator
• Download your free 92-page eBook: The Insider’s Guide To Frugal Food & Fitness

It’s time to get down to the business of paying down your debt. Yes, go ahead and call me a meanie and stamp your feet since I’m no fun. I can take it. I’m known across the internets for being a friend of frugal living and a foe to a life of indebted servitude. Debt is not your friend, and you should not be friendly with your debt.

To get started with the Debt Reduction Spreadsheet you’ll need two things. First, you need to be brave and find your sense of debt-hating desire. To dig yourself out of debt you must want to do it, badly. Getting all wishy-washy and whining about your money woes doesn’t do you much good. You must face the facts to deal with this, once and for all.

Second, you’ll need the numbers from your Household Net Worth Spreadsheet — where you listed your debt — and the Budget Spreadsheet — which shows both your income and expenses.

If you’re new to the How to Make a Budget series or have just subscribed to Squawkfox, then go ahead and start from the beginning by reading the introduction. Several thousand new readers have joined since my last budget post, so I don’t want to leave anyone behind. I’m nice like that.

The Debt Reduction Spreadsheet

The Debt Reduction Spreadsheet is not a fancy-dancy tool — I wanted to keep things simple. The idea is to track your creditors, list the balances due, acknowledge the interest rates on your debt, make your monthly payments, and then target one debt using the amount you have available for extra payments. Phew!

Download: Debt Reduction Spreadsheet

Step 1: Download!

Click to download your free copy of the Debt Reduction Spreadsheet.

Step 2: List your creditors.

I want you to take a close look at your debt. Remember when you listed your liabilities (what you owe) in the Household Net Worth Spreadsheet? Now it’s time to pinpoint the juicy, debty details. Start by listing all your creditors in the leftmost column. Easy.

Step 3: Enter the balances due.

For each creditor, enter the total amount owing to each. You’ll probably need all your bills to get this step done right. I’ll still be here by the time you gather all these documents. Promise.

Step 4: Type in your interest rates.

Depending on your interest rates, this can be the hardest step to swallow. If you’ve got credit card debt then you may have rates over 20 percent. Seeing how much you’re paying to keep this debt can be painful, but stick to it. We’re almost there!

• Credit Card Tip: Try the Credit Card Calculator to see how many years it will take to pay off your balance based on your minimum monthly payment. This should fire you up and get you on track to paying off your plastic. The interest you’re paying over the years is insane.

Step 5: List your monthly payments.

Go back to your bills and enter the monthly payment for each. Keeping up with your monthly payments is very important if you want to maintain a good credit score, but to get out of debt you’ll need to increase this amount. I’ll show you how in a bit.

Step 6: Enter the amount of money available.

Go back to your Budget Spreadsheet and find the line where you entered the amounts for Debt Repayment and Credit Card Repayment. Add up these bummers (oops, I mean numbers — typo stays) and enter the total in the Amount Available box in the Debt Reduction Spreadsheet.

Now that all the data is entered, you should see how the numbers add up. In my example above, you’ll see a total debt of $274,987.45 with an average interest rate of 4.50 percent (totaling $1,031.56 in average monthly interest), and a total monthly payment of $2,596.46. In this example, the indebted person has cash available to put against debt — $379.54 to be exact.

For those with little or no money in their budgets for debt repayment, there are two big choices:

1. Cut costs: Cutting back and spending less money on your variable expenses is a surefire way to add additional dollars to your debt repayment plan. Read 50 Ways to Save $1,000 a Year for some stellar ideas.
2. Boost income: I can see you giving me the stink-eye. Boost income? But how? This is where you have to really want to get out of debt. Income boosting tactics I have used include: getting a second job on the evenings or weekends, freelancing, asking for a raise, finding a higher-paying job, and selling crap stuffed in closets. See How to Write a Resume (that gets job interviews) to put some polish on your job application.

In the next step I’ll deal with how to apply the extra repayment against debt.

Step 7: Make extra payments against ONE of your debts.

Which debt do you pay off first? Financial debt gurus all seem to have their own branded methods for helping you get outta debt.

David Ramsey, author of The Total Money Makeover: A Proven Plan for Financial Fitness (also available in Canada), calls his method the Debt Snowball. This where you list your debts (excluding your house) and then focus your efforts on paying off the smallest balance first, regardless of interest rates. On his website, Ramsey says:

“The point of the debt snowball is simply this: You need some quick wins in order to stay pumped up about getting out of debt! Paying off debt is not always about math. It’s about motivation. Personal finance is 20 percent head knowledge and 80 percent behavior. When you start knocking off the easier debts, you will see results and you will stay motivated to dump your debt.”

Ramsey adds that if you have two debts with similar balances, then pay off the debt with the higher interest rate first.

If you’ve ever turned on a television, chances are you’ve encountered the reality show ‘Til Debt Do Us Part with host Gail Vaz-Oxlade. In her #1 selling book, Debt-Free Forever: Take Control of Your Money and Your Life (also available in Canada), Vaz-Oxlade shares her no-nonsense approach to becoming debt-free. Debt advice is also available on her website, where she says:

“…you should start by paying off your highest-interest debt first. If you have a lower-interest loan that is causing you more emotional and mental stress than the higher interest ones (like a personal loan that has stretched family relations), you may want to start with that one instead. If you aren’t given the final say on which loans get paid off first, if something is important to you, you should still fight for it to be paid off in a timely manner.”

Vaz-Oxlade is also a fan of consolidation loans and calling up your creditors to negotiate lower interest rates.

Step 8: Stick with it!

Whether you pick to pay off your smallest balance to start or choose to end the debt with the highest interest rate first, the point is to stick with it! Once you’ve retired one debt, move that payment to your next creditor on your Debt Reduction Spreadsheet.

I used this method successfully when I paid off my $17,000 in student loans over six months. I started with my highest interest loan first, and then snowballed my repayment by tackling the next highest interest debt on my list. You can do it too — you just have to want it bad enough.

Love the blog? Get the book: 397 Ways to Save Money

Top Squawks

• How to make a budget (series with downloads)
• How to write a resume (series with downloads)
• Frugalicious Recipes
• 50 Ways to Save $1,000 a Year
• Credit Card Calculator
• Download your free 92-page eBook: The Insider’s Guide To Frugal Food & Fitness

Besides, many of you got so passionate about your plastic in your emails to me that I figured we’d all get a charge out of kicking around this costly topic again.

Since I’d rather see you kick the habit than kick yourself in the butt (I wanted to write ass) in the New Year, here are 5 MORE Ways To Screw Your Credit Card Company — and again, they’re all legal!

1. Stop staying loyal to “Loyalty Programs”

Years ago I played like a “good dog” and stayed loyal to a credit card loyalty program that really bit. The program appealed to my romantic dreams of flying for free on “points” and seeing the world for a mere annual fee. The problem was, I never seemed to collect enough points to get my gold card off the ground and the annual fee alone could have paid for a plane ticket home! Ouch!

I wrote about this sneaky credit card tactic in my book, 397 Ways To Save Money — and I lived to tell the dog’s tale.

If you think the cost of a “free” reward ticket or loyalty bonus is costing you a small fortune in fees at a higher interest rate, then do yourself a favor by doing some simple math. If the fees paid for your card add up to more than the free reward, then find yourself another credit card with a more attainable rewards program. It makes NO sense to stay loyal to a credit card rewards program that just doesn’t fly. Besides, loyalty is for the dogs.

2. Take a pass on “Convenience Checks”

Oh those credit card companies LOVE to send us stuff in the mail. They offer us 0% balance transfers, extra credit cards, and even offer teaser rates. But when your issuer sends you a little envelope stuffed full of convenience checks then do take a pass.

What are convenience checks? Well, they look like standard checks, but what they actually do is charge against your credit account at even HIGHER rates than regular purchases, and interest is often calculated immediately! PLUS many of these little check gems add extra fees to the mix — so you’re really giving your credit card company a BONUS by signing one of these guys. If you want to keep more moolah for yourself, then don’t sign your name to any of these convenience checks.

3. Stop paying an Annual Fee

Don’t you love that time of year when your credit card company bills that pesky annual fee directly to your statement? Wheeee! If you’re paying an annual fee for the privilege of charging in plastic then maybe it’s time to switch your credit card.

Many “premium” gold and platinum credit cards charge big annual bucks — money that could otherwise be used to pay down debt or saved for something that brings you real value. Since there are several no annual fee credit cards on the market, consider making the switch to save some big cash. After all, you do have the power to stop paying that “annual fee” if you so desire.

4. Don’t ever “Skip a Payment”

It’s that time of year when even modest holiday spending can add to an existing credit card balance, and the credit issuers know we’re a little strapped in January when it’s time to pay the piper! So if your credit card company makes you the offer to “skip a payment” then run for the hills and just say, “NO!”

Skipping a payment may seem like a deal, but think again. Not paying your minimum balance could hit your credit score, increase your interest rate, and most certainly stretches your payments over a longer term thus increasing the amount of interest you pay! Yuck!

Need convincing? Try this simple Credit Card Calculator to see how long it will REALLY take to pay off your balance!

5. Be wary of “Low Introductory” rates

So you’re minding your own business when a letter lands in your mailbox advertising a super low introductory rate on a new credit card. Since you’re carrying a balance on your current credit card with a 19% interest rate, how could this gift from the credit card gods not be a win! Well think again!

Credit card companies love to offer low teaser interest rates on newly issued cards — it’s how they make money after all! If you tend to carry a balance, this kind of offer may save you money. But if you’re not careful, these enticing low “introductory rates” can come with some expensive surprises, for example:

Lose the interest-free period on new purchases by skipping a payment or not paying off the whole balance! Do this and you might pay the regular (or higher) rate!

Add to your balance and see your payments applied to the lower interest rate balance first! It’s true, most credit card companies apply your payments to balance transfers and cash advances before they apply them to new purchases.

So before applying for a “low teaser rate” offer from the credit card gods do look this gift horse in the mouth. Be sure you understand all terms and conditions and ask the credit card company what transactions the introductory rate applies to, when the introductory period ends, and how your payments will be applied to all balances.

Phew! I think I’ve kicked this can enough for today. If you’ve gotten a kick out of this post then feel free to comment. Many of you guys respond to the email updates — and that’s cool! But to get your voice heard don’t be shy, click to the blog and speak up!

Your Two Cents: Got MORE ways to screw your credit card company? Or maybe you’ve got a credit card tip to kick around?

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• How to make a budget (series with downloads)
• How to write a resume (series with downloads)
• Frugalicious Recipes
• 50 Ways to Save $1,000 a Year
• Credit Card Calculator
• Download your free 92-page eBook: The Insider’s Guide To Frugal Food & Fitness

Sure, it’s not hard to get tricked by credit cards. With all the enticing minimum balance payments, high interest rates, and ease of use it’s pretty darn easy to fall prey to the power of plastic.

But unless you love paying the price for plastic, it makes good financial sense to get wise to the credit card game. Using your credit card the smart way and avoiding the common pitfalls will not only save you lots of money but might just screw over your credit card company and prevent them from getting your cash. You won’t feel bad, promise. Here are 5 legal ways to screw your credit card company:

1. Pay More than the Minimum Balance

If you’re stuck for the month and can’t pay off your credit card balance in full, then aim to pay more than the minimum balance. Paying the bare minimum on your monthly balance only prolongs the debt agony and increases the amount of interest you pay to the credit card company — and that’s how to get screwed!

Depending on the size of your debt, you may add thousands to your wallet each year by adding a few more dollars to your monthly payment. For example, on a starting balance of $2,200 with an annual interest rate of 18%, your debt would be paid off in 8 years and 6 months if you paid only the minimum balance of 4% of the initial balance. The total interest paid is a massive $1,193.54 on an initial loan of only $2,200. If you can’t pay your card off in full each month, try to at least double the minimum payment so you’re actually taking a bite out of the principal.

Want to see how much paying the minimum balance is costing you? Check out this handy Credit Card Calculator for the scary results. You might be shocked!

2. Pay Credit Card Balances in Full

Fully paying off your credit card each and every month is a sure fire way to screw the credit card company. With some credit card interest rates well over 18%, it’s easy to lose a bundle by not paying off monthly balances. It just makes good financial sense to keep that money for yourself — you worked hard to earn it after all!

Besides, paying off your credit card balance in full helps you to establish a good credit rating, improve your credit score or FICO score, and build an excellent credit report for lenders to reference if you’re in the market for a mortgage or a loan.

If you need convincing, here’s a 5 Minute Guide to Your Credit Report and Credit Score to get you thinking seriously about paying off your balances.

3. Pay in Cash

Skip plastic altogether by spending what you have, not what you hope to have in the future. By keeping honest with your cash on hand you won’t be borrowing against your future to deal with high interest credit card debt.

Besides, sticking to a planned spend rather then getting seduced by a sexy sales sign is how to win the credit card battle and ultimately win the war against plastic. If you’re feeling the call of plastic over cash, then try posting a sticky note on your card with a reminder not to spend beyond the cash you’ve set aside.

4. Negotiate a Lower Interest Rate

If you’re carrying a balance on your credit card, don’t be afraid to call your issuer and ask for a lower rate. Many lenders will cut you a break if you’ve been paying the minimum balance each month, and they may reduce your monthly interest rate if you ask nicely.

It costs you nothing to pick up the phone and negotiate a lower interest rate with your lender and could help you pay off your credit card sooner. A cut in rate from 22.5% to 15% on a $5,500 balance could save you almost $500 a year!

It’s the new math people — be a kind a courteous bill payer, ask for a better interest rate, and then kindly kill your credit card debt faster.

5. Students — Stay away from Free Frisbees!

Don’t get hit in the head with a piece of flying plastic by signing a new credit card application on campus. Credit card companies love to entice fresh-faced college students with free stuff like T-shirts, food, and Frisbees in exchange for a student credit card. These plastic peddlers often set up booths on campus to get your attention and to get you spending on credit sooner. Do yourself a solid and take a pass on this collegiate debt game play.

If you need a credit card while studying at school, ask your parents for help with finding a good lender and get an education in paying off the balance. There’s no sense in getting schooled by debt and getting taught a lesson in credit when you’re just looking for a way to pay for tuition.

There must be countless ways to win the war on credit cards so I might just add to this list in a later post.

UPDATE: Read Part Two: 5 MORE Ways To Screw Your Credit Card Company

Penny for your thoughts? Got another way to politely screw your credit card company and pay off your plastic debt sooner?

Love the blog? Get the book: 397 Ways to Save Money

Top Squawks

• How to make a budget (series with downloads)
• How to write a resume (series with downloads)
• Frugalicious Recipes
• 50 Ways to Save $1,000 a Year
• Credit Card Calculator
• Download your free 92-page eBook: The Insider’s Guide To Frugal Food & Fitness

Credit card companies love it when you pay only the minimum balance since they earn a lot of interest while you spend years trying to pay off your credit card debt. Many credit card bills outline this minimum balance in bold just to highlight how little you need to pay back to stay in good standing.

But I want you to beat the minimum balance game. So I created the Credit Card Calculator to show you how many years it takes and how much interest you pay by sticking with minimum balance payments. So go grab your credit card statement, find your annual interest rate, and spare yourself from getting “the sads” while time is still on your side.

How to use the Credit Card Calculator:

Step 1: Open the Credit Card Calculator.

Step 2: Credit Card Balance: Enter the total amount you owe to the credit card issuer.

Step 3: Annual Interest Rate (APR): Enter the annual interest rate charged by your credit card issuer on your balance.

Step 4: Minimum Monthly Amount, Minimum Monthly Percentage: These are the minimum amounts you must pay each month on your credit card. The minimum payment is the greater of these two amounts:

• A fixed amount (for example, $15), or
• a percentage (for example, 4%) of the balance you owe.

Check your credit card agreement to see what formula your credit card issuer uses to calculate the minimum monthly payment you are required to pay on your credit card.

Step 5: Click Calculate. The Credit Card Payment Report displays below. Find out how many years it really takes to pay off a credit card when only the minimum balance is paid. You may just be shocked by how much total interest you’re paying. Hugs.

Use the Credit Card Calculator Payment Report to better understand the true impact of only paying the minimum balance on your credit cards. I’d love to see you beat those credit card companies by increasing your payments by just a bit and thus reducing your credit card debt faster!

More Credit Card Calculator Help:

• 5 Ways To Screw Your Credit Card Company
• 5 MORE Ways To Screw Your Credit Card Company

Got a credit card balance story to share? Have you beaten your credit card debt by increasing your payments? Ever used a credit card calculator to reduce your debt faster?

Love the blog? Get the book: 397 Ways to Save Money

Top Squawks

• How to make a budget (series with downloads)
• How to write a resume (series with downloads)
• Frugalicious Recipes
• 50 Ways to Save $1,000 a Year
• Credit Card Calculator
• Download your free 92-page eBook: The Insider’s Guide To Frugal Food & Fitness

A mortgage meltdown is what happens to nice people when the dream roof over their heads costs more than they can afford. Now I’m not squawking about that whole subprime lending mortgage mess, but rather the case when well-intentioned folk go to the bank to get a regular mortgage and fail to add up all the real costs before moving in.

For most of us, our mortgage represents our biggest debt and the only kind financial experts consider good debt. But an over-your-head mortgage is one of the quickest routes to serious financial trouble, or even bankruptcy!

So before looking at current mortgage rates or shopping for that perfect home, perhaps take a second, chill out, and consider these 6 surefire ways to avoid a property with a mortage that leaves you in the poor house. Avoiding a mortgage meltdown and living in a home you can afford is preferable.

1. Crunch ALL the numbers.

It pays to crunch ALL the numbers and know ALL the costs before viewing homes and falling in love with a property. A too-high mortgage coupled with unaccounted for monthly costs could leave you resorting to credit cards and lines of credit to pay everyday expenses – a downward spiral that could cost you thousands in interest. And forgetting to add up all the costs of property ownership could leave you scrambling for extra cash.

So before setting foot in any property find out all the costs, even hidden fees, and do the math with a simple Mortgage Calculator.

Don’t Forget These Costs or Fees:

• Buyer’s or seller’s taxes
• Property taxes
• Paperwork filing fees
• Lawyer, realtor, banker, or land transfer fees
• Condo fees
• Maintenance costs
• Utility costs
• Parking costs

Also, don’t be afraid to see the impact that various mortgage rates have on your monthly costs by using the Mortgage Calculator. You’re less likely to feel the chill of a mortgage meltdown if you face the financial facts and crunch the numbers.

2. Practice Your Mortgage

Knowing what you can afford could spare you financial catastrophe in the future. An excellent way to see how a mortgage feels, and to know if you can truly afford it, is to practice paying it before you buy. Seriously.

How to practice your mortgage:

Pay your landlord your rent, and then take the difference between that amount and your anticipated mortgage cost and put this additional money into a high- interest savings account to use later for your down payment.

If you can’t come up with this additional monthly cash, then you know the mortgage price is too steep and you need to either continue saving for a bigger down payment or look at lower-priced homes.

3. Get a Home Inspection

Getting a home inspection done before you make an offer on a home may be the best money you ever spend. A home inspection costs around $500 and uncovers unseen problems that may cost you thousands of dollars down the road. A home inspection also serves as a negotiation tool with sellers, as they may fix flagged issues or reduce their selling price. Take the time to find the right home inspector, and be aware that it might not be the one your real estate agent recommends. Check references, ideally from homeowners who have been in their home for a few years so that any potential troubles have surfaced.

4. Don’t Buy Someone Else’s Renovation

Falling in love with the seemingly fresh look of paint, new flooring, or a freshly planted garden can be a financial disaster if the structure of the home is not sound. The previous homeowner may be trying to disguise something that really needs an expensive repair underneath. Be sure to look past a new bathroom or kitchen renovation and learn what lurks beneath the surface. You may discover that new plaster and paint are a facade disguising mold, water damage issues, or a cracked foundation. These repairs could cost you thousands and make your dream home a nightmare.

5. Buy a Smaller Home

Palatial palaces cost big bucks in terms of buyer’s fees, down payment size, mortgage interest, home maintenance (don’t forget lawn care), and utilities. Buying a smaller home can reduce all of these costs. For example, let’s assume you pass on a $300,000 mortgage in favor of a less expensive $275,000 loan. The mortgage price difference of $25,000 is substantial indeed. Assuming a 25-year mortgage at a 5% interest rate, your monthly payment is around $150 less, saving you a total of $18,844.26 in interest over 25 years, compounded monthly. Add it all up, and a $25,000-less-expensive home saves you $43,844.26 in interest plus principal on the mortgage. And this calculation doesn’t even include closing fees and maintenance costs! With all this saved money why not retire a year sooner? This is the new math, people. Need more incentive to play with the numbers? Try the Mortgage Calculator!

6. Negotiate Your Mortgage

Don’t be afraid to shop around and ASK for a better deal. Asking for a better mortgage rate is free and could save tens of thousands of dollars over the years you live in your home.

But before sitting down with a prospective mortgage lender, get your credit score so you know where you stand. You can find your score online for around $25 at Equifax or TransUnion or write in and get mailed your credit report for free. If you have a good credit score then be set to bargain. Ask lenders for a better mortgage rate, shop around, and play multiple offers off each other. A half a percent rate reduction could save you thousands over the span of your mortgage, so it’s well worth your time.

If a lender offers you perks like gift certificates for furniture, loyalty card points or a trip, take a pass. These so-called perks come at the cost of a higher rate. If the banks are not budging on their offer, consult with a mortgage broker. Mortgage brokers are paid finder’s fees by banks and these fees generally do not differ from bank to bank, so the broker has limited incentive to act outside your best interest, thus finding you the best deal possible.

Final Thoughts

These six surefire steps spared Carl and me from buying a toooooo expensive property while living in the uber expensive Canadian city of Vancouver, B.C. years ago. In fact, after running ALL the numbers and crunching the hard financial facts we opted against home ownership and continued renting our affordable apartment. This single decision was heart breaking since we both wanted to own our home and had a solid downpayment – but the math just didn’t work in our favor. In hindsight I’m relieved we continued along the renting path and saved more money until we were in a better position to buy in another, less expensive, city. For us, putting emotion aside and letting the numbers keep us sane saved us from a mortgage meltdown.

Got some additional tips for avoiding a mortgage meltdown? Got a mortgage story?

Love the blog? Get the book: 397 Ways to Save Money

Top Squawks

• How to make a budget (series with downloads)
• How to write a resume (series with downloads)
• Frugalicious Recipes
• 50 Ways to Save $1,000 a Year
• Credit Card Calculator
• Download your free 92-page eBook: The Insider’s Guide To Frugal Food & Fitness