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Image: MasterCard and VISA credit cards
BOBBY YIP  /  Reuters
One possible way to reduce the pain of credit-card debt is to transfer your balance to a card with a lower interest rate. Be sure to pay attention to the balance transfer fee, though.
By Laura T. Coffey
TODAY contributor
updated 1/5/2011 7:36:25 AM ET 2011-01-05T12:36:25

Aaarrrrgggghhh, credit-card debt be a pernicious foe. Yes, that’s my best pirate voice. It just feels like an appropriate voice to use when gearing up for a fight.

In her new book “The Real Cost of Living: Making the Best Choices for You, Your Life, and Your Money,” personal finance expert Carmen Wong Ulrich provides a startling wake-up call about the insidious nature of credit-card debt. Ulrich notes that the average American owes $3,700 on credit cards at an interest rate of 14.9 percent.

By just making the minimum payments on that debt, a consumer gets hit with $758 in interest payments — bringing the total price tag up to a whopping $4,458.

This stinks, of course, and it’s certainly a scenario to avoid at all costs. Most of us know we’re supposed to make more than the minimum payments due on our credit cards whenever humanly possible. But when money’s tight and jobs are scarce, it’s easy to get stuck treading water — sometimes for months in a row. It can be awfully difficult to navigate a path out of minimum-payment purgatory.

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That’s where a site like LowCards.com can be helpful. The site rigorously compares credit cards’ interest rates and other features and acts as an advocate for consumers, helping people see what to do first, second and third so they can avoid or climb out of unpleasant credit-card traps.

Here are some tips provided by LowCards.com about how to attain that most elusive of New Year’s resolutions — reducing personal debt in 2011:

1. Know how much you owe. Collect each of your bills with outstanding debts including all credit cards, mortgage, student loans, auto loans, personal loans, and bank loans. Create a list of all the creditors with monthly payment amount, balance, interest rate, and credit limit for each. Verify the payment due dates and the status of the account.

2. Prioritize which bills to pay first. If you can’t pay off all your monthly bills, first pay the bills that are a necessity for health, shelter, basic groceries and basic transportation. Then pay the secured loans such as your car loan. Payments on unsecured loans, such as most credit cards, should come last in these critical situations.

3. Obtain a free copy of your credit report and review it. It may  contain an error that is creating a lower credit score that is leading to higher interest rates on your loans. If correcting the error results in a higher credit score, contact your creditors to make sure they know  about your improved score.

4. Contact your creditors to negotiate lower rates. The less money you pay in interest, the more money you have to pay off your bills. If you are in danger of missing a payment, contact your creditors as soon as you realize you have a problem. They may be willing to work out a payment plan, lower your rate, or lower your monthly payment. Explain that you are in debt, the steps you are taking to repay it, and what you can pay today. If you request a lower interest rate and get turned down, politely ask to speak to the supervisor and ask again. Document all conversations, including whom you spoke with, and the date, time, and the results.

5. Pay more than your minimum. Your minimum payment is usually only 2 percent to 5 percent of your balance. At this rate, it will take many years to pay off your debt. In fact, your credit card bill now shows exactly how long it will take. You may be surprised about how much you will pay in interest payments by paying just the minimum payment each month.

6. If you have multiple credit cards with outstanding balances, focus onpaying off the card with the highest interest rate first. Continue to pay the minimum on your other cards until the card with the highest rate is paid off, then focus your effort on the card with the next highest interest rate. Keep your oldest credit card accounts open and occasionally use them to buy a magazine or a movie ticket — just pay it off each month. This may help improve your credit score.

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7. Check into transferring your balance to a card with a lower interest rate. If your rate is above 15 percent, it could pay to transfer the balance for that card to one that offers 0 percent APR for at least 12 months for balance transfers. Citi Platinum Select currently offers a 0 percent rate for at least 21 months. To take full advantage of this 0 percent interest, pay as much as you can above the monthly minimum. Only use this card for the balance transfer, not additional purchases. Pay attention to the balance transfer fee. At the beginning of 2009, the industry standard for a balance transfer fee was 3 percent; now several issuers have increased that fee to 4 percent.

To read more tips about reducing debt in the new year from LowCards.com, click here.

Related story: Real cost of living with obesity? $6,454 a year

Need a Coffey break? Friend TODAYshow.com writer Laura T. Coffey on Facebook, follow her on Twitter or check out her blog posts on Life Inc.

© 2013 NBCNews.com  Reprints

Video: Financial habits to break in 2011

  1. Transcript of: Financial habits to break in 2011

    NATALIE MORALES, anchor: This morning on TODAY'S MONEY , financial habits to break in 2011 . It's time to break your New Year's resolutions . And if saving money is high on your list, well, we've got some expert help for you this morning. Carmen Wong Ulrich is a personal finance expert and author of "The Real Cost of Living." Carmen , good morning.

    Ms. CARMEN WONG ULRICH (Author, "The Real Cost of Living"): Good morning, Natalie .

    MORALES: A lot of us set our resolutions now, and a big one of course is not only your health, but also saving money . And here's there sort of the combination because you say you can save a lot of money , and there's a financial opportunity in kicking some of those bad habits , right?

    Ms. ULRICH: Oh, absolutely. There's a lot of decisions that we make in life, and this is -- the book covers all these decisions we make, from going to college, graduate school, staying home to take care of kids that have a cost associated with them. But we all want more reward.

    MORALES: Mm-hmm.

    Ms. ULRICH: And that goes for bad habits , as well. A lot of the habits that we have actually cost us a lot of money . So not just do we feel it physically in terms of our health, but also it costs us, it really impacts our wallet a lot.

    MORALES: All right, so speaking of those few pounds that you want to drop, that you make that resolution that you're going to do every year. And there are costs associated with being overweight . What are they?

    Ms. ULRICH: Absolutely. And we're talking technically overweight or obese...

    MORALES: Mm-hmm.

    Ms. ULRICH: ...with a body mass index above 25 and obesity above 30. Huge health care costs . There are two types of costs here, direct costs , the health care costs and complications...

    MORALES: Right.

    Ms. ULRICH: ...of things such as, you know, strokes and hypertension, high blood pressure , colon cancers...

    MORALES: Any diseases can happen as a result.

    Ms. ULRICH: ...all these diseases and complications. Diabetes, incredibly expensive.

    MORALES: Mm-hmm.

    Ms. ULRICH: So you're going to spend, on average in one year, over $ 1400 in direct health care costs being obese or overweight .

    Ms. ULRICH: Now, in terms of indirect costs , wage discrimination. Now, this is something that a lot of folks don't really talk about, but all the studies come out and show that in general, if you have two job applicants, they'd always rather take, an employer, the person who is not overweight than one who is. And in general, you lose about $1.25 an hour in terms of pay over the year if you are obese or overweight .

    MORALES: Wow.

    Ms. ULRICH: So that also has an impact on your wallet, as well. And other things, lifestyle costs , like clothing, for example, you can't find your size. There's that discrimination.

    MORALES: Mm-hmm.

    Ms. ULRICH: And travel costs . Engineering researchers have found that we spend over 300 million more gallons of gas in terms of transport.

    MORALES: Wow.

    Ms. ULRICH: Airlines, too, you'll also pay more of a premium for airline tickets.

    MORALES: Right.

    Ms. ULRICH: So if you add up all of the indirect and direct costs , on average in one year, you're talking about over $6,000 it's costing you to be overweight or obese.

    MORALES: Not to mention the major impact on your health.

    Ms. ULRICH: On your health, exactly.

    MORALES: Exactly. It's -- same thing can be said for smoking, as well. Obviously a pack of cigarettes, approaching, I think 10 -- I don't know what they are because I've never smoked, but $10 a pack or something like that?

    Ms. ULRICH: Yeah, I had to research this one, too.

    MORALES: Yeah.

    Ms. ULRICH: Because it -- boy, have times changed.

    MORALES: Yeah.

    Ms. ULRICH: You know, looking at the New York City prices, of course, and with a lot of added taxes here, we know that smoking is a huge killer. We know that.

    MORALES: Right.

    Ms. ULRICH: But if that can't keep you from stop smoking , look at how much money you're spending and wasting on smoking.

    MORALES: Mm-hmm.

    Ms. ULRICH: If you just go a pack a day -- so that works out over $3,000 of the year, that's a ton of money -- look at life insurance premiums. What insurers know is that you have twice the chance of dying young...

    MORALES: Wow.

    Ms. ULRICH: ...and you lose 11 minutes of life for every cigarette you smoke. So you're going to pay twice as much in life insurance premiums.

    Ms. ULRICH: And also lifestyle costs . For example, my husband and I , we bought our current home from a smoker. We paid about 10 percent less on the value of the home because it didn't show well...

    MORALES: Oh, interesting.

    Ms. ULRICH: ...it was covered with tar and nicotine. So there's all these other lifestyle costs ...

    MORALES: You can't get rid of that smell of smoke, yeah.

    Ms. ULRICH: ...your car, the dentist. Add those all up, again, over $6,000 a year.

    MORALES: All right. And that's money you could be investing wisely.

    Ms. ULRICH: Exactly. Exactly.

    MORALES: OK, next is carrying credit card debt , and we're talking about more than just the interest rates which you're paying, which ares significant enough.

    Ms. ULRICH: Again, this idea of direct and indirect costs and what real costs are are all of those costs . So you really need to look at it that way.

    MORALES: Mm-hmm.

    Ms. ULRICH: Let's say if you carry the average per-person credit card balance of $3700, if you only pay the minimum, it's about, you know, over -- almost $800 a year in interest that you're paying.

    MORALES: Right.

    Ms. ULRICH: Now, fees -- in general now, fees are through the stratosphere, right? You've got annual fees, underbalance fees, low balance fees, monthly fees, and those add up to about $74 a year. Now, what if you had taken the interest that you paid plus the $3700, you hadn't owed it at all...

    MORALES: Right. Invested it.

    Ms. ULRICH: ...and you invested it. Over 20 years, averaging around 7 percent, you would have quadrupled your money and you would have earned almost three times as much in interest. So the real total cost of that credit card debt is tremendous. It's over $10,000.

    MORALES: Absolutely. Now, you know, what's staggering here is we consider that employers may penalize you for being overweight , smoking and carrying debt.

    Ms. ULRICH: Mm-hmm.

    MORALES: I mean, it sounds like this is illegal practices going on.

    Ms. ULRICH: Well, in half of the states in this country, it is actually illegal to discriminate in terms of your personal choices like smoking or like being overweight .

    MORALES: Right.

    Ms. ULRICH: But in the other half of the country it's not. And there are some companies who up front will not hire you if you are a smoker or if you're unhealthy and overweight because it adds costs to them.

    MORALES: Mm-hmm.

    Ms. ULRICH: So it's really important to realize that there are ways that you're being affected by your habits in terms of how you make your money and terms of credit card debt , as well. Your credit rating , your credit score still can really affect if you can be employed.

    MORALES: All right, Carmen Wong Ulrich , great information, as always.

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