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Learn how to reduce your credit card interest rates.
How To Reduce Your Credit Card Interest Rates. If no one tells you - and you haven't found it yourself - credit card debt can be expensive. And, the longer you carry the debt, the more expensive it can be obtained.For example, on cards with a typical annual percentage rate of 17% (or April), a $500 purchase can cost you almost $100 in additional interest costs - and can take almost two years to pay off - if you only make a minimum payment. That means the big suit that sells for $ 500 can actually cost $600 when it's paid off.
At the same time, you might not realize how much credit card purchases burden you if you don't bother counting. Fortunately, there is an easy solution for high interest costs: pay off your entire balance every month.
Avoid Interest - Paying in Full
Without question, the best way to manage your credit card is to pay off your balance every month. If you always pay your balance in full, your interest rate becomes irrelevant. Actually, I don't know what the interest rate is on my credit card because I don't carry the balance.That's because the grace period offered by most credit cards allows you to skip interest altogether by paying your balance in full each reporting period. In other words, as long as you pay your balance in full before the due date for the billing cycle, you will not be charged interest on that balance.
The credit card grace period that you hold can also be found in your cardholder agreement or terms and documentation requirements.
Of course, if your credit card debt is out of control, then you need to worry about interest rates. In this scenario, a higher interest rate means more money from your pocket - and goes into the pocket of your credit card issuer.
If possible, it's a good idea to reduce your interest costs and reduce your costs. If you are looking for ways to reduce your credit card interest rates, here are two options that can help.
#1: Ask for Reduction of Your Card for Deduction
It sounds almost too good to be true, but you can sometimes print a lower interest rate on a credit card simply by asking for one. Before you pick up the phone to call your card issuer, it's a good idea to do a little preparation ahead.- Check your report and credit score. Your credit card interest rates are usually based, at least in part, on the condition of your credit report and credit score. When you have good credit, you represent a lower risk for lenders. As a result, lenders are generally willing to offer you better rates and requirements. Don't negotiate with your card issuer if you have bad credit because you will have lower leverage and are less worthy of lower value.
- You can claim a free copy of your three credit reports every 12 months at AnnualCreditReport.com. When checking your report, make sure all information reported about you is accurate. If there is an error on your credit report, it can reduce your score.
- Increase your credit (if you can). Whatever you can do to increase your credit before submitting a request for a higher limit can help. For example, if you pay a portion of your credit card balance, you can reduce your balance ratio to limit your credit report. A lower ratio is good for your credit score. Even if you are only able to reduce the ratio by a few points, that might be enough to increase your credit score, which means more leverage for you.
- Search for your payment history. Look at your credit card payment history before you contact the publisher. Do you always make payments on time? If so, make sure to display your perfect history as a selling point every time you call your card issuer and negotiate a lower interest rate. If you continue to lose payments, your publisher may be more interested in closing your account than reducing your interest rate.
- Review your current rates and fees. Before you call your card issuer, review your latest statement. You want to write down the interest rate in your account and any fees that are currently charged. Knowing this information can help in two ways. First, if you don't know what you are currently paying for, then what will you ask for? Second, if your card issuer offers you a reduction in interest rates, you will be better off understanding what new savings opportunities are, which can be given by lower interest rates.
- Compare offers from competitors and be realistic. It may be useful to find out what your card issuing competitor has to offer before you reach out to lower interest rates. If you find a card that is similar to a lower interest rate, you should mention that you know a better deal during your call.
You also have to be realistic about your expectations. The card issuer is not obliged to change the terms of your account. And, you have no obligation to continue to be a customer. Your business is portable and you must always remember it.
#2: Apply for a New Credit Card
Regardless of your best efforts, you cannot force your card issuer to change the terms of your agreement. No matter how ready you are before making a call, it is possible that your card issuer will refuse your request for a lower rate. If this happens, you might want to consider opening an alternative credit card and taking your business elsewhere.Depending on your credit conditions, you might be able to qualify for a balance transfer credit card with a low-interest introductory offer. For those who have good credit, a balance transfer offer can provide April 0% of the balance transferred for one year or more.
In part, the introductory offer will only apply to one type of transaction, such as only new purchases or balance transfers.
Be sure to enter potential costs when performing calculations for balance transfers. For example, many cards charge a balance transfer fee that can run between 3% and 5% of the total balance transferred.
If you qualify for a balance transfer offer, consider combining your lower new value with an aggressive debt cancellation plan. By using these two strategies together, you may eventually be able to eliminate your credit card debt once and for all.
Remember, you don't need to close your existing credit card account when opening a new one. If you pay off your full balance, a higher interest rate on your old account will not cost you extra money. You only need to worry about credit card interest fees every time you bring a balance to your account.
In addition, closing your old account can backfire and increase your overall balance to limit the ratio on your credit report. The result can be a lower credit score. Leave the existing account open. Who knows? Card issuers can finally return and offer you lower rates now after they see a decrease in your usage and their income is eliminated.
The main exceptions are in terms of annual fees; if your existing card charges an annual fee, consider whether the card is worth maintaining after your debt has been repaid.