Did you know that you can lower credit card interest rates? According to reports, the average interest rate today is almost 18%. It is quite high considering we only had a 12% rate ten years ago. If you think that is not too bad, wait until you understand how the interest rate goes through compounding.
When we say that the interest rate compounds, it means you will be paying a lot more than the average interest rate. That means the 18% APR of a $1,000 credit card debt is not $180. It is actually closer to $195 thanks to the way the interest compounds.
It only gets worse if you only meet the minimum payment requirement. If you owe $1,000 on your credit card and you only pay the minimum of your card, the whole debt will cost you approximately $923.18 on interest alone. That means your debt will almost double because of the high-interest rate.
Does this mean you should get rid of your credit cards? Not exactly. You can always regulate the use of your credit cards so it will not accumulate too much balance. For the existing balance that you owe, you can always find ways to lower credit card interest rates. That way, you do not have to pay a lot of money on the overall debt.
How to lower credit card interest rates
Some people may not be aware that they do not have to suffer the high-interest rates for long. You have the right to have the rates changed if you want to minimize the amount that you will pay for the overall debt. According to reports, Americans paid a total of $113 billion in credit card interest alone. This was in 2018 when the interest rate was still more than 16%. Now that it has grown, it is expected that the amount will be bigger for this year.
The question is, how can you lower credit card interest rates? While it may seem like an intimidating task, the steps that you need to follow are actually quite simple.
Look at your statements and review the terms
Start by reading through your statements. To be specific, you want to look for the current rates and fees that you are paying. This will help you understand what the credit card debt is actually costing you. While you are at it, read through the terms and conditions. This will help you figure out how you can minimize the extra fees that you have to pay on your card. It will also refresh your memory when it comes to penalties and charges. That way, you will not incur these extra charges by mistake. These will just make your payments unnecessarily bigger.
Request for a lower interest rate
Once you have understood the interest rate and terms of the credit card, you can now try to negotiate and request for lower credit card interest rates. Some people do not know that they have the right to request a lower rate from their creditors. This is one of the debt negotiation strategies that you can do to make your debts easier to pay off.
Just pick up the phone and give them a call. Provide the information that they will request so they can verify your account and identity. Once they have your records, you can directly ask them to lower your rate. Of course, you need to give them a reason to agree. If you had been paying your dues on time, they might relent. If another credit card company came to you with an offer for a lower rate, you can also use that as an excuse. You can tell them that you got the offer but you would rather stay with your current creditor – but to do that, it would be nice if they can lower your rates. Believe it or not, this can sometimes work. But you will never know unless you ask.
Find out how to qualify for a lower rate
In case the creditor does not give in, that is okay. The next thing that you should do is to ask them what it would take for you to lower credit card interest rates. Do you need to completely pay off your balance? Do you need to open a new credit card account? Or maybe you need to improve your credit score? You can directly ask the creditor so you will know what to do. Make sure to get the name of the person you are talking and the reference number of the call. That way, when you renegotiate in the future, you can use the conversation as a reference point.
Pay your debts as usual
While you are trying to improve your chances of lowering your debts, you need to continue to pay your debts as usual. Stick to your debt repayment plan to avoid adding unnecessary charges. Late payments and other penalties can make your debt worse. Not only that, it can negatively affect your credit score. You do not want to make your situation worse than it already is. Make sure to keep your payments on time. If you can pay more than the minimum, that would help you progress better toward debt freedom.
Try to negotiate a lower rate again
If you think that you have improved your chances to lower credit card interest rates, it is time to try again. Wait a few months after your last call. Be ready with your new information – like your credit score, balance, and payment history. If you have a new offer from another credit card company, have the details ready as well. All of these can help you get approval for a lower interest rate. When you are talking to the creditors, be honest about your situation. Tell them that you want to pay off what you owe but the high-interest rate is making it difficult for you to meet your obligations. Sometimes, if they can feel that you are sincere, they will relent. If not, then you can try again after a few months.
Tips to succeed at lowering your credit card interest rates
Lowering the credit card interest rates can really help you save a lot of money on your debts. This is especially helpful if you have maxed out your credit cards. One survey revealed that half of their respondents admitted that they maxed out their credit cards. This can quickly make a turn for the worse if you are not careful. It can put them in a deep financial crisis.
If you want to avoid making your debts worse, try to lower credit card interest rates. Here are additional tips that will help you accomplish this.
- Be persistent. For some people, it takes several tries to get approval for a lower rate. Just be patient and keep improving your credit reputation.
- Aim to have a good credit score. Most of the time, creditors reward people who have good credit standing. It is an indication that they are responsible credit holders that can be trusted with a lower interest rate.
- Keep a polite and friendly tone. If the creditor does not give in to your request, do not get angry or frustrated. Be respectful always because it usually gives you better results.
Use debt consolidation as a way out of debt. You have a lot of options. One is a 0% balance transfer card. This will allow you to really lower the interest on your debt. You might have to pay a balance transfer fee. But if it will help you save on interest, it might just be worth paying for. Other options include a debt consolidation loan and debt management. These will not just lower your interest rates. It will also simplify your debt payments to make it easier for you to manage your credit obligations.