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Follow some easy steps to spring yourself from debt trap

By Kerry Hannon, Special for USA TODAY

The debt trap is scary — a stomach-churning kind of fear and anxiety that's hard to ignore or forget.

You feel hopeless, out of control. You stop answering the phone, which makes it worse. You run up debt on one credit card to pay the minimum due on another.

Jean Chatzky's shtick in Pay It Down! is that if you can save just $10 a day, you can pare your debt and even begin to save. Although it is tight and to the point, this simple guide doesn't reveal a lot of new strategies. You've heard the tips before.

That said, it's worth being reminded. Chatzky is financial editor for NBC's Today show and is a columnist for Time magazine and USA Weekend magazine (published by USA TODAY parent Gannett).

Chatzky has a crisp and fast-paced style. Her personal tone makes it all seem doable somehow.

Her goal is for you to be out of debt in three years. Her debt-free-on-$10-a-day plan begins with helping you understand how you got into trouble in the first place. Did you lose a job? Not get a raise you expected? Lose your health insurance? A combination of factors?

Then she asks the big question: How much debt do you have? Most people squirm at the notion of adding it all up. You must. She gives you a worksheet to help.

Chatzky spends the biggest chunk of the book on ways to wipe out your most expensive debts: credit cards. She doesn't fail, however, to mention the boost you can get from a successful garage sale or taking a second job for a time.

To help you better understand how credit works, she walks you through the arcane world of credit reports and credit scores. Both concepts are essential to grasp if you are going to emerge into the debt-free zone unscathed. She gives you tips on how to boost your credit score, which can help you land a lower rate on loans. For instance, Chatzky counterintuitively advises you not to cancel credit cards right before you apply for a home, auto or other big loan: "Instead, lock your cards away where you won't be tempted to touch them. After you get that loan, then call and cancel."

Also, don't accept every offer for instant credit when you go shopping, even if they lure you with a 10% discount on your purchase. Multiple credit card inquires are not good in the eyes of credit card companies and could hurt your creditworthiness.

Meantime, pay heed to the chestnuts for credit cards:

  • Always pay more than the minimum.
  • Always pay on time. One late payment can send your interest rate soaring.

Tracking your spending also is a must-do in your money makeover. She suggests carrying a notebook with you at all times to jot down every expenditure, even at the vending machine, so that you can see at the end of each day where you spent your money.

Chatzky offers good pointers on how to negotiate with a credit card customer service rep to lower your interest rate (56% of the time this works) and how to compare credit card offers. Grace periods and annual fees are key.

Other tips:

  • Refinance a car loan, which most car owners don't consider. "It's much easier than refinancing your mortgage," she writes.
  • Net a significant discount on homeowners and auto insurance by buying both policies from a single carrier.
  • Buy the generic prescription drug, rather than the name brand.




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