Dear Opening Credits,

I owe $2,000 on my Home Depot card. I contacted them due to financial hardship. The interest rate is over 26 percent. I asked if they would close my account and lower the interest rate so I could have a plan to pay it off. I don't have any late payments. They said they don't deal with individuals -- that I have to use a consumer counseling agency. They charge $50 a month. Do I have any options?

 -- Wells

Dear Wells,

Sometimes a credit counseling agency's debt management plan (DMP) is the right move; other times it isn't. Before discounting it, though, book an appointment at a reputable credit counseling agency (affiliated with either the National Foundation for Credit Counseling or the Association of Independent Consumer Credit Counseling Agencies) and find out. The sessions are free and can be quite illuminating. In an hour or so, the counselor will review your financial situation in detail and propose several reasonable ways in which you can resolve your problems.

One of the options the counselor may present is that debt management plan. These arrangements allow you to make payments to the agency, which they then disburse to the accounts on the plan. Many of the participating creditors lower their interest rates only for people on the plan -- but not, as you found out, for cardholders directly. While it's true that the agencies add a monthly administration fee (and some even charge to set it up as well), in certain hardship cases, those fees may be waived.

Speaking of interest rates, I gather your main concern is the one on that Home Depot card. Understandably so; it's high. To find out what the annual percentage rate (APR) one of these organizations can offer you instead, I put a call in to my old haunt, Consumer Credit Counseling Service of San Francisco. Rate reductions are negotiated on a national scale, so they should be the same no matter which office you go through. And what did I find? That they may be able to get it down to 9.9 percent -- less than half of what you're currently being charged.

However, I'm not convinced that a DMP is best for you, even with a slashed interest rate. If this is your only liability and your situation is temporary, I'd say that it probably isn't. You see, while you're on the plan, you'd have to close the account. It sounds like you're open to that, but if it's one you've had for years and have a decent payment history with, doing so could lower your credit score. This is not to say that preserving a score trumps money saved, but it is a consideration.

Also, your debt is pretty low. I know that the $2,000 balance feels overwhelming, but if you break it down to affordable fixed payments (which is what you'd have to do on a credit counseling agencies plan anyway), you may find that you'll be in the black faster than you think. For example, if you can manage $135 every month, you'll be debt-free in a year and a half. Plug the numbers into a good online calculator and see what's manageable.

In the mean time, you may still be able to get that interest rate down, enabling the maximum amount of your payment to go toward the principal. If you have a credit card with a lower APR and plenty of charging room (if the new balance would get you close to the limit, forget it), a balance transfer is worth exploring. You'll have to pay a transfer fee, but it still could work to your financial advantage. Again, you can do the math using an online calculator.

What else can you do? Take stock of what you own, and if you have anything you can part with, sell it and apply the proceeds to the balance. The less you owe, the less you'll pay in interest -- no matter what rate the creditor is assessing.

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