This article contains 5 Steps to Lower Your Credit Card Interest Rate. Do you want a better Annual Percentage Rate (APR)? If yes, then get ready to pick up your mobile phone to negotiate with your choice of credit card company. But before we begin, you must first know your power as a customer to be able to negotiate appropriately.
You will agree that anyone who’s trying to pay down several credit card debt, their interest rate is usually on the high side.
From research, I know that the average credit card annual percentage rate is now between the ranges of 15% and 23%. (That is according to my personal calculations). But if at the time you got your bank account is when your credit wasn’t that great, you will have more interest to pay. Even though you’ve since improved it while using the account, you could still be paying a higher rate than necessary.
There can be several reasons why your repayment rates are high. But no matter what the reason is, if your interest rate is higher than what you’d like it to be, it’s a good idea to try to lower it to the minimal. You will agree that a lower interest rate means any balance you carry will accumulate less debt each month. Secondly, you can easily pay-off your balance down faster since more of your payments go to the principal instead of interest. Right?
A Guide on How to Lower Your Credit Card Interest Rate
In several cases, people always wonder and ask themselves: Can I negotiate credit card rates with the company? The answer is yes. You can often negotiate your interest rate with the right strategy. Therefore, knowing how to reduce credit card interest rates doesn’t require a lot of time or professional skills. The thing is; you have to be prepared and patient. However, you can take the following steps to try to get your card’s rate reduced to lowest minimal.
1. Do Your Online & Physical Research Perfectly
First, you have to solely understand that you will likely have to negotiate to get your rate lowered. Looking at the bright side, you may even have the upper hand. “In fact, all Credit card companies know that losing a customer is costly mistake for them. So leveraging that knowledge provides you with some room for negotiation,” says Conor Richardson, a certified public accountant and author of “Millennial Money Makeover.”
Furthermore, Mr. Ben Woolsey, who’s a associate editorial director at Investopedia, says before you play hardball, have the great numbers on your side. According to him, you should know your existing balances and how much interest you’ve paid in the last year. This will definitely help you explain why your issuer should offer better than your current rate’s repayment. Also, you can do more research to know which lower-interest cards exist on the market and reference other offers you’ve received online or in the mailbox.
2. Improve Your Chances of having a Reduced Interest Rate
Statistics shows that most credit card issuers will want to hold tight to their best customers. So, if you have an irregular credit history as a cardholder, it might be time to take a step backwards. Review your account and work on making yourself worthy and a more attractive customer.
Your credit score is your financial future and billing trust. One of the factors that can greatly improve your chances of achieving a lower interest rate is a strong credit score. A good credit score report is an indicator that you’ve managed your debts responsibly in the past. This shows that you are likely to continue doing so in the future.
According to Experian PLC, TransUnion, Equifax, Experian and other credit score companies, a FICO score of 670 or higher is considered good credit. Going by this, you it is recommended for you to aim for a score at that level or higher. make sure you have such score before contacting your issuer for a better rate. Generally, the issuer may want to see proofs of a very good or excellent credit score before considering to lower your rate. Therefore, you may need a score of about 740 or even higher to qualify.
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Bear in mind that only a good credit score isn’t enough, nor the only factor your card issuer will consider. Yes! You should also be able to prove beyond every reasonable doubt that you have a long history of making your payments on time. “Just make sure that you are consistently paying off your monthly minimums,” says Richardson. “In fact, this allows you to strongly demonstrate to your credit card company that you are a diligent customer”. This also gives them a reason why it makes business sense to keep doing business with you.”
Sadly, if you have a history of irregular payments, you only reduce your worth. To mitigate this, it can be a good idea to focus on making all of your payments on time. It will go a long way to eliminating some of your balance for up to a full year before attempting to have your rate lowered. Best advise ever.
3. Don’t be Afraid to Negotiate with the Credit Company
After you have successfully brought your credit score back to shape, its time for the next step; negotiation. Get prepared to negotiate. Be confident in your value as a customer. Then, call the customer service number on the back of your credit card and talk to a representative about lowering your rate. make sure you request for the person’s name and direct phone line in case you get disconnected from the call.
Note: be careful of who you call or who you receive calls from regarding your account. Scammers are on the loose and they can target you. See steps to prevent scam. We have also previously written: How to know if it’s Your Bank Contacting You — or an Online Scammer. Look it up now!!!
“Over the years, one thing customers fail to do these days is to call their issuers and ask for their interest rate to be lowered,” Richardson says. A lot of people find this hard to do. ” They do not know that competition is very high among credit card companies.” In the long run, you may discover that make a simple call and asking the representative to have your rate lowered, can take you a long way. You may want to remain “forcefully polite” during that call.
After all, the worst that can happen is the issuer says no. They won’t strangle you. Why don’t you give it a try today.
4. Ask Again & Again with an Application
Rejection can be very frustrating. But even if you get a rejection after making the call, don’t give up. Don’t even think of stopping there. Try again. You never know how it will turn out; maybe positive. it is said that, your success in most cases depends on whom you speak to. So if you can’t persuade the current representative you’re speaking with to lower your rate, hang up politely. Call back and speak with someone else in the support centre. It can also be an added advantage to ask to speak with a manager, who might in the long run have more decision-making power.
Simply say your preference to leave balances in place if the Annual Percentage Rate (APR) can simply be lowered. If reducing your rate means keeping you as a customer, your card issuer may be inclined to grant your request. Trust me.
If after trying all these steps above and your request is still denied, believe me, there’s still room to work out a deal. Let me explain. See this example: you can inquire about temporary or promotional rates that the issuer might be willing to grant you as a customer. According to Woolsey, “a 6-12 month rate reduction could be easier to obtain than a permanent rate adjustment”. You never can tell, this could give you the breathing space you currently require to pay down your balances before the rate readjusts.
5. Final Approach: Apply to Close the Account after Paying off Your Balance
Finally, if your credit card company still refuses to budge to all your hard-work, its time to let go. This is not by force anyways; if you are willing to close your account once your balance is paid off, simply go to a competitor. “It can help to mention specifically where you would go.” Richardson says. Who knows, that might be the final straw that persuades your card issuer to consider you.
At last, if your negotiations are successful (if applicable), it’s a good idea to ask your issuer to send you confirmation of the rate change in writing.
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What to Do if You Can’t Lower Your Interest Rate
In the final analysis, if your credit card company isn’t willing to lower your interest rate at all, it may be best to move on to a better deal.
Make sure to research your options further. “Not all credit cards are the same,” says Richardson. In addition, it pays to take your time in selecting a new card company. Basically, you can make use of several online comparison tools that will let you evaluate multiple credit cards at once depending on the features you desire. Trying to get a better interest rate may be among the reasons you want a different credit card, but thats not all. Also make sure you’re paying close attention to other card factors, including annual fee, rewards and benefits. You can take a look at the Best Low Interest Rate Credit Cards for 6 to 24 months for more details.
Now, if just lowering your interest rate is your major worry, then be sure to look for a card that offers a balance transfer deal for new customers. This alone may allow you to move your balance from your current credit card to a new one. You can can often achieve this with no additional interest during an introductory period. Note that a balance transfer offer could give you some valuable time, often 12 to 18 months. It is to enable you pay down your debt at 0% interest. More interestingly there’s no interest far better than a reduction in your interest rate.
In most cases, a balance transfer usually require a fee/service charge. Over the years, it’s normal to pay 3% to 5% of the balance transferred. For example; if you transferred a $1,000 balance, for example, expect to pay $30 to $50 flat. Despite the added cost, however, paying 0% interest for a year or more could mean the fee to transfer your balance is well worth it. Thats the truth.
How to Avoid Paying Interest on Credit Cards
According to different banks recommendations, the best way to avoid credit card interest is to pay off your closing balance before your statement’s due date without failing. Optionally, if you have a balance transfer, the interest free days payment shown on your statement, just pay it off. Normally, credit cards come with “up-to-44 days” or “up-to-55 days” interest-free on purchases. Check the fine print on your card for more details. In our next post, we will show you How To Use Your Grace Period To Avoid Paying Interest. Just continue reading for now.
Now, even with a lower interest rate, we all know that carrying any type of balance means accruing interest charges and paying more for your purchases than necessary. Thats true, right? So whether or not you were able to negotiate a lower rate, it’s important to avoid paying interest at all if you can. Anyways, some ways to do that include the following:
1. Always Pay off your balance every billing cycle.
First, note that you’re only charged interest if you carry a balance every 30days. Although you’re only required to make the minimum payment on your bill, paying off the entire balance means you won’t pay extra. You also don’t need to wait for your bill to arrive; consider making smaller payments throughout the month to keep your total outstanding debt low and credit score in good shape.
2. Be sure to Understand your card’s grace period.
If you’d like to avoid paying interest on your credit card, you have some options. You can pay off your balance before your grace period ends. During some months, your cash flow can be a bit tighter than usual. Secondly, your payment due date may slip your mind. What do you do? Big question with simple answer. make use of your grace period. Fortunately, most credit cards have a payment grace period. That’s the period of time between the end of your billing cycle and when your payment is due, during which you aren’t charged any interest. Knowing your card’s grace period can help provide a bit of wiggle room in your finances.
3. Activate on Autopay in your Mobile App.
Download your bank app and activate autopay. So, to assure you’re paying your credit card every month, there’s an easy solution: Link a bank account and turn on autopay. The risk in doing this is if you have a large credit card bill one month you might overdraw your linked account. Make sure to maintain an account minimum that will cover any credit card payment.
4. Draw a Payment Plan with a Budget.
Lastly, if you find that you’re struggling to pay off your balance each month, it may be time to put a proper budget in place. Please, don’t worry too much, it’s not as discouraging or limiting as you might have thought. Planing as well as having a budget means you know where every cash is coming from and going to. This can go a long ways to help you better plan your spending and reach your goals.