08/19/2011 03:51 pm ET Updated Oct 19, 2011

How Do You Get Credit Cards Out Of Your Life?

In my structured settlement business, clients come to me with large lump sums, perhaps received from an inheritance or a settlement from a lawsuit. I tell the ones with credit card debt, "I don't offer any products that will pay you as much in interest as you are paying the credit card companies." I get people to pay off their debts, cut up their cards, and use the money they were paying to the credit card companies for savings or possible investments.

But, most people don't have piles of cash lying around and aren't counting on a big lump sum. Getting out of credit card debt is a slow process where you need to have a long-term goal.

Dave Ramsey and I disagree on several topics, but we agree on the goal of jettisoning credit card debt. I have attended Ramsey's live seminars and watched him explain his "snowball theory" for eliminating credit card debt. It works as follows:

Ramsey says you should pay off your smallest credit card first. Until the balance is eliminated, pay only minimums on other debt while focusing on the one credit card. This creates a momentum in your plan.

To quote Ramsey: "The math seems to lean more toward paying the highest interest debts first, but what I have learned is that personal finance is 20 percent head knowledge and 80 percent behavior. When you start knocking off the easier debts, you will start to see results and you will start to win in debt reduction."

I ran into a childhood friend at my mother's funeral who later told me she was maxed out on several credit cards. She is a clerical worker who doesn't make a lot of money. I told her about the snowball theory, and she followed it. She also cut back on impulse shopping. It took four years, but last year she e-mailed and told me she had paid off all the cards. Not only was it a great financial accomplishment, it dramatically boosted her self-esteem to know she could accomplish a seemingly impossible task.

My friend faced up to her financial dilemma. A lot of people get overextended, fall behind on payments, and start getting calls from credit-card collection companies.

If you have ever had a collection agency call you at work, or while a date is visiting your apartment (I've had both happen), it is a humbling and embarrassing experience. My credit card problems occurred before I had a mobile phone, but I would imagine getting a collection call on your cell phone with others around can't be fun.

People who are being hounded by collectors need to get familiar with the Fair Debt Collection Practices Act. It's been around for a long time but is widely ignored by banks, collectors, and regulators. It provides consumers with real protections when used correctly.

You can find a detailed booklet about the Fair Debt Collection Practices Act at

Few people realize (and collectors will never tell you) that if they want no further contact with a collector, the Fair Debt Collection Practices Act gives them a way to make the calls and letters stop. Collectors cannot communicate with consumers in any way (other than litigation) if the consumer gives written notice that he wishes no further communication or refuses to pay the alleged debt. With or without written notice, collectors can only contact consumers by telephone between 8 a.m. and 9 p.m. local time. Collectors cannot call repeatedly or continuously. Consumers can prevent collectors from contacting them at work simply by telling them not to. The consumer does not have to send a letter.

Collectors cannot contact consumers who are known to be represented by an attorney. Collectors can't use deception, such as implying they are an attorney or law enforcement officer, to collect a debt. They can't threaten arrest. They can't threaten legal action if it is not actually contemplated and they can't use abusive or profane language when speaking to a consumer.

Collectors routinely ignore the Fair Debt Collection Practices Act. They realize that few consumers know the law and fewer will complain. They also realize that the Federal Trade Commission, especially in the years before the 2008 market crash, rarely enforced the law.

I once had a collector (who was looking for a relative who had never lived in my city or household) violate almost every provision of the Fair Debt Collection Practices Act in a profane-laced rant. I documented the conversation in detail, filed a complaint with the Federal Trade Commission, and thought that such a clear-cut violation would get the agency's attention. It didn't. I got a form letter saying it would add my complaint to its files for statistical purposes.

Despite my unhappiness with the enforcement of the law, knowing it and citing it to collectors can often blunt abusive collections practices. Ending a string of harassing phone calls gives consumers time to deal with debts in a rational and well-thought-out manner.

After people get the creditors off their backs, they should sit down and devise a strategy for getting credit cards out of their lives.

Don McNay, CLU, ChFC, MSFS, CSSC of Richmond Kentucky is an award-winning financial columnist. He is the author of the book, Wealth Without Wall Street: A Main Street Guide to Making Money, which will be released on September 20.

McNay founded McNay Settlement Group, a structured settlement and financial consulting firm, in 1983, and Kentucky Guardianship Administrators LLC in 2000.

McNay has Master's Degrees from Vanderbilt and the American College and is in the Hall of Distinguished Alumni of Eastern Kentucky University. McNay is a Quarter Century member of the Million Dollar Round Table and has four professional designations in the financial services.