In 30 Minutes, She Cut Her Credit Card Debt by $3,128

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The best part of my job is traveling across the country, helping people save money. Nothing makes me happier than helping someone dump a credit card charging sky-high interest rates.

A few weeks ago, I helped a woman I'll call Anna, who attended a financial seminar hosted by my company, MagnifyMoney.com. During our discussion, she asked if the score on a credit card bill was real. She didn't believe she could have such a high score while feeling so broke. We assured her the score was real and could be used to save her money. In 30 minutes, we were able to cut the cost of her debt by $3,128 over the next two years.

Anna's Story

Anna, a former teacher who lost her job because of school district cost-cutting, spent a year trying to find a new job. Her new position paid 20 percent less than her previous role.

Anna depleted her emergency fund while living without a paycheck and ended up with $12,000 worth of credit card debt and a lower-paying job. She accrued all of her debt with Discover (DFS), who was charging her a whopping 21 percent interest rate. Anna paid $235 on time, every month. About $210 went to interest.

At her current salary, Anna was working 20 hours per month just to cover her interest bill from Discover. If she continued to pay $235 per month, it would take her almost 11 years to pay back the debt. And she would have paid back a total of $30,352.

Anna asked Discover if it would reduce the interest rate. The firm said no. But she started receiving her FICO score on her statement (ironically, a financial education initiative from Discover). She saw that her score was 770 and couldn't believe it. So, she attended our seminar to get questions answered.

Don't Let Money Myths Keep You From Financial Empowerment 

Had Anna not attended our seminar, she would have spent an extra five years of her life working hard just to pay more interest to Discover. But she didn't need to visit us. We didn't work any type of magic. We just gave her the confidence and the information she needed and dispelled seven myths that Anna, like so many people, believe about their credit scores and credit card debt. These myths keep people in bad banking relationships, costing them years of their life.

1. I have to be rich to have a good credit score.
2. I am loyal to my bank, and my bank will be loyal to me.
3. There aren't better deals out there.
4. Applying for new credit kills my credit score.
5. I was rejected before, so I will be rejected again.
6. Balance transfer fees are too high.
7. It takes too long to switch.

Myth 1: I Have to Be Rich to Have a Good Credit Score

Anna could not believe that anyone who lived paycheck to paycheck could have a good score. Credit scores measure your responsibility, not your net worth. The steps for a high credit score are remarkably simple:

1. Pay on time, every month.
2. Don't max out all of your credit cards.
3. Repeat 1 and 2.

Anna did exactly that, and her score was 770. Except she didn't realize the power her 770 score gave her.

Myth 2: I Am Loyal to My Bank, and My Bank Will Be Loyal to Me

When Anna called Discover, she rationally explained how loyal and responsible she had been. Then she asked for help. To which Discover promptly responded: no.

So many personal finance experts encourage you to call your bank and ask for an interest rate reduction. You are probably wasting your time.

I used to run the largest credit card issuer in the U.K, and I will let you in on a little secret: the best deals are usually given to new customers. The longer you have your credit card, the worse it usually gets. The introductory period is like the honeymoon. The bank gives you lots of flowers -- like the 0 percent introductory balance transfer. But, once the honeymoon is over, the magic is gone, the flowers disappear, and the costs just keep getting higher.

That means you need a simple strategy: while paying off your debt, stay in the honeymoon. In Anna's case, a honeymoon meant a balance transfer.