HOW TO LOWER THE INTEREST RATE ON YOUR CREDIT CARDS
Dealing with credit card debt is hard enough, but did you know that the average U.S.
household with revolving credit card debt incurs interest charges of $904 per year?
There’s only one way to completely eliminate interest and that is by paying your
balances in full each month. Rest assured that if you can’t pay down your debt in full
each month, there are steps that you can take to lower your interest rates that will
save you hundreds of dollars each year.
1. Pay off your cards with higher interest rates first
Pay off the balance of your cards with the highest interest rate in order to save the
most money. Then, continue moving down the list until you reach the card with the
lowest interest rate. For example, paying an extra $100 toward a credit card with an
annual interest rate of 24% will be more beneficial than paying the same amount
toward a credit card with 19% interest rate. Don’t be discouraged if your card with
the highest interest rate is also the one with the highest balance. Remember, your
goal is to save money long run.
2. Make more than one payment each month
Did you know that interest is based in your average daily balance? Not the balance
that you have at the end of each month! If you make at least two payments each
month, you will lower your average daily balance, which will lower your interest
charges. Try making a payment each time you get paid, or every two weeks! Don’t
wait until the due date to apply the payment.
3. Try to avoid putting medical expenses on a credit card
Oh goodness - the dreaded medical bills! I think we can all agree that medical
expenses, especially those that are unexpected, totally suck! But, putting them on
your credit card is not the answer. If you owe a lot of money, you will end up paying
hundreds of dollars in interest. Always speak with your doctor or the hospital billing
department to learn more about your options. Ask about an interest-free payment
plan and try to make monthly payments instead.
4. Negotiate a lower interest rate
If you didn’t know this was an option - now you know!!! Keep in mind, before
calling the customer service number on the back of the card, make sure have been
paying your bill on time and take note of how much you’ve been spending each
month. Do your research too! Shop around to see if you find better deals with
competing credit card companies. You can use this as leverage during your phone
call and maybe they can agree to match the rate of the competitors. Also, make sure
to call your oldest card first as companies want to make sure their loyal customers
are happy! ;)
Here’s an awesome script from thesimpledollar.com you can use in case you need a
little help finding the right words to say:
“Hello, my name is _____. I’ve been a customer of _____ bank since ___, and I’m
interested in securing a lower interest rate. I’ve made an effort to make ontime
payments, and I funnel ___ dollars per [month/year] through this card.
I’ve recently been offered a new credit card with [competing credit card
company]. It has a similar structure to yours, but they offer ___% interest rates.
I’d like to stay with you based on our history, but the new offer is compelling.
Would you be willing to match that offer?”
Your conversation can go several ways: they can agree to the interest rate
requested, they can compromise with another amount, or they will flat out say no.
If you do get approved for a lower interest rate, ask for written notification of this
change and a date you should expect to receive it. If they say no, be persistent and
try again in the future. You know what they say, the squeaky wheel gets the oil.
Either way, always remember to be polite to your customer service representative!
5. Transfer your balance to a 0% interest card
This should be your last option. A balance transfer card will move your debt from
one card to another. Ideally, you want to look for one with 0% interest rate during
an introductory period that can range anywhere from 12 to 21 months. However,
there is usually a 3 to 5 percent fee when you transfer balances from one card to
another. Plan to pay off your debt during the 0% introductory period so you can
avoid paying interest. You can learn more about balance transfer cards and some of
the best balance transfer cards of 2018 here:
If you’re tired of spending hundreds of dollars in credit card interest each year,
make sure to follow these steps to start saving yourself that extra cash! You can also
check out Ray and Justo from Keeping it Real with Credit talk more about lowering
the interest rate on credit cards by checking out the video below!