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Healthy Finances: Get Credit Card Smart

"Credit cards are toxic," says Liz Pulliam Weston, author of Easy Money. Plastic operates on one potent concept: compound interest. This means you're charged interest on your balance and then the next month interest on your balance, new purchases plus last month's interest!

"Unless you pay your balance off monthly, you're guaranteed to spend more for purchases made with your credit card," says Weston. It's a vicious cycle: the balance grows, the interest grows, and paying off the debt becomes harder.

Think you're protected because you have a low interest rate? You're still paying interest on interest—and almost any rate or term can be changed on you with just 15 days notice, says Weston. Avoid the trap by always paying more than the monthly minimum payment. If you have credit card debt, take these five simple steps and commit to paying it off in full.

Nix Credit Card Debt in 5 Steps

1. Know your numbers. First, get your credit score at annualcreditreport.com. Opening new accounts can ding your credit score, says Weston, so your best bet is getting a lower APR (annual percentage rate, or interest rate) on your current card. The better your credit score, the better your negotiating power. "If you have good credit, a 720-plus score, you should pay an APR of 10 percent or less," says Weston.

2. Do a little homework. Before calling your current credit card company to snag a lower rate, compare mail offerings to what's listed at cardratings.com or creditcards.com.

3. Bargain for a lower interest rate. With deals in hand, call the toll-free number on the back of your current card. The front-line phone reps can't reduce your rate, says Weston, so get connected to the customer retention desk. Tell them you're disappointed that other cards are offering better deals and ask them to match the offers.

4. If they won't budge, consider a balance transfer. You're looking for a new card with the lowest APR that lasts the longest (3.99 percent for the life of the balance may top 0 percent for six months, depending on your pay-off timeframe). Beware of balance-transfer fees! They should run no more than 3-4 percent of the total balance and be capped around $90.

5. Set up a free debt-payoff plan at bankrate.com. In minutes, you can calculate what day you will be debt-free. Commit yourself to paying off the debt: Write the debt-free date in marker and make a countdown sign to post on a bulletin board or wall you look at every day. Then, clear your calendar. You're having a party that day—for yourself!