Tuesday, October 4, 2022

Can Credit Card Companies Reduce Your Interest Rate

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Tips To Help Lower The Interest On Your Credit Cards

How to Lower Credit Card Interest Rates

Although there is nothing you can do to stop the increase that the Federal Reserve will initiate, you are not completely powerless when it comes to your own credit cards. Believe it or not, you can do something to help lower your interest rate. This will minimize the effects of the Federal Reserves action on your own credit accounts.

Here are the 4 ways that you can influence your own credit card accounts so you can lower their respective interest rates.

Raise your credit score.

According to an article from NYTimes.com, consumers seem to be better at taking care of their credit scores lately. This is probably caused by the lessons learned during the Great Recession. Raising your credit score is probably the best way that you can lower your rate without talking to your creditor. A good credit score is an indication that you are a responsible credit borrower. Lenders and creditors impose high interest rates because they want to protect themselves from borrowers who are more likely to run off and leave their debts unpaid. But if you can prove to them that you are a responsible and low-risk borrower, then they do not need to protect themselves through a high-interest rate. They can give you a low rate and still be confident that you will stay true to your credit obligations.

Open an account with a new credit card company.

Enroll in a debt relief program.

Negotiate with the creditor.

Dont Be Afraid To Walk Away

Once you do all your homework and have a few other competing cards that offer great rates and perhaps rewards, call your creditors. If youre a good customer of several years who always pays on time and they still wont negotiate, walk away.

If your creditor wont cooperate, play hard ball, recommends Dvorkin. Simply tell them that you have other options and youll have no problem making monthly payments to them.

Negotiating a lower interest rate with a credit card company isnt hard but it does take diplomacy and some work on your behalf. Just follow Dvorkins tips and you can start paying less on your credit cards this month.

How A Lower Interest Rate Can Help You

Lowering the interest rate on even one credit card may help you pay off debt sooner, which may also increase your credit scores.

It’s important to maintain good credit habits after you’ve lowered your interest rates and paid off debt: Avoid charging more purchases unless there’s an emergencyand even then, an emergency savings account should help you avoid having to use credit cards in the first place.

If your card issuers hold out and won’t lower your rates, be patient and call again to negotiate periodically. Changes in circumstances, available card offers and even different customer service representatives may get you the response you want.

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How To Avoid Paying Interest

There is one tried and true method for avoiding credit card interest altogether. If you only make purchases you can afford to pay off and you pay your credit card bill in its entirety every month, you will never get charged a dime in interest payments. Which means you will never spend more than you need to on your purchases and you wont damage your credit score by making late payments.

Most people know it takes discipline and financial planning to get into a position where you are entirely free of credit card debt. However, the work it takes to get there can be well worth it. Since many credit cards dont have an annual fee, its possible to use credit cards to your advantage and never pay a dime for the privilege.

Want To Get Out Of Debt Learn How To Pay Less Interest On Your Credit Cards

How You Can Lower Rates Of Interest And Settle Card Debts ...

One of the great misconceptions about debt is that the cards themselves are bad. The truth is, they’re really not. Rather, it’s the effect of double-digit interest rates that make them so toxic to our personal finances. The exponential growth of an account balance quickly causes purchases we thought we’d easily pay off over a few months to grow into something that seems like it will take years to knock out.

Luckily, ridiculously high interest rates don’t have to be part of your credit card experience. It’s possible to negotiate to get a lower interest rate if you know whom to talk to and what strings to pull. If you can do a little bit of work to get inside your credit card company’s head and are willing to spend 15 to 20 minutes on the phone, there’s at least a 50% chance you can save yourself a few thousand dollars over the next year.

Recommended Reading: How To Get Credit Card To Stop Charging Interest

Do Understand Your Limits

Every credit card company sets standards on interest rates which are based on your credit history. If you dont qualify for a lower rate, then you cant count on a phone call for a quick fix. Work on building your credit, and then ask again once youre in a better financial position.

If youre running into challenges working with creditors on your own, our free Credit Counseling may be able to help you make progress.

Get Debt Consolidation Offers

If you can get approved for a debt consolidation loan or line of credit, you can use this personal loan or line of credit as a negotiating tactic. Go to the credit card company with your debt consolidation loan offer and see if the credit card company will match it for the loan term.

For example, if you have a 36-month debt consolidation offer at 11.9% and a credit card at 19.9% APR, the card issuer may be willing to offer a rate reduction to 11.9% APR for the next 36 months. As we mentioned, the credit card issuer would prefer to collect some interest charges than none at all.

Read Also: Does Credit Card Debt Die With You

Ask About Qualifying For A Lower Interest Rate

If you are unsuccessful in getting a lower interest rate by asking, you should seek more information. If you’re being denied because of late payments, ask the representative what you can do to qualify for a lower interest rate in the future. You may simply need to wait longer and make payments on time in order to become eligible.

You also can try to call again in a few weeks. It can’t hurt to ask to be reconsidered. You may want to mention that you have a 0% or other low-interest card that you can transfer the money to.

Call Your Card Issuer

How to Lower Your Credit Card Interest Rates

Once youve gathered enough information to argue your case, call your card issuer and politely ask to speak with a representative about lowering the APR on your card. Make sure you have your notes in front of you and be prepared to bring up your research or additional details about your personal experience if a customer service representative is slow to offer you a better deal. If you get a no, dont be afraid to call back another time or ask to speak with someone else. A different representative or supervisor may be more receptive.

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Leveraging Assets For Lower Interest Rates

Borrowing from your assets, usually a home or car, to pay off credit card debt isnt advisable because it turns unsecured debt into secured debt. That means you are putting an asset at risk if you wind up in default.

The upside is that because you are taking out a secured loan , the interest rate will be much lower than what you would get for a personal loan or credit card.

Home equity loans and home equity lines of credit are two option. Borrowing from your 401 is another, but it shouldnt be considered seriously. 401 loans rob you of the benefit of compound interest and put you at risk of penalties. All of that to borrow from an asset that is protected in bankruptcy.

If you arent sure about which option works best for your situation, give the at InCharge Debt Solutions a call. We can evaluate your finances for free and make personalized recommendations.

How To Reduce Your Credit Card Interest Rate

One of the most depressing things about having credit card debt is the fact that the high interest rate can mean that most of your monthly payment goes to paying interest, rather than reducing your principal. This can mean a long, slow slog as you try to pay off debt.

However, you might not have to keep paying that interest rate. In some cases its possible for you to reduce your credit card interest rate just by asking.

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How To Ask Your Credit Card Provider For A Lower Interest Rate

Once you feel ready to ask for a lower rate, the negotiation can begin. Here are four steps you could take to negotiate a lower interest rate.

  • : Contact your credit card issuer and explain why you would like an interest rate reduction. You could start by pointing out your history with the company and mention your good credit or on-time payment history. Now is the time to mention any lower credit card rates you’ve been offered or found in your research.

  • Don’t settle: The credit card company might initially deny your request or offer a minimal reduction — but you don’t have to settle if the resolution doesn’t meet your expectations. You can always ask for more or an explanation of the decision. If you feel like you’re not getting anywhere on your first phone call, be diligent. Call back another time and try your luck with a different representative or ask to speak to a manager and make your case to a higher authority.

  • Ask for a different benefit: If the company refuses to lower your interest rate, ask what else it could do to keep you as a customer reps might offer bonus points or additional incentives.

  • Request a temporary rate reduction: If you’re worried about paying down a balance with your current high-interest rate, ask for a temporary reprieve, which could offer you a lower interest rate for a short period of time.

  • Dont Be Afraid To Negotiate Again In The Future

    3 Ways  How to Get a Lower Interest Rate on Credit Cards ...

    John Rampton, founder of Due, has successfully negotiated lower rates for his credit cards and does so periodically. He says to expect to haggle and recommends you dont give up after one call.

    From his experience, credit card companies seem more willing to offer lower rates when you ask after making consistent payments on your card for at least six months. He follows up with requests every six months to ask for lower rates until he receives a no.

    Also Check: Which Credit Card Companies Give The Highest Limits

    How To Reduce Credit Card Interest

    High interest rates mean higher monthly payments for those with . Fortunately, there are ways to lower your credit card interest rates, including negotiating with the credit card company or consolidating your debt. Consolidation can take on several forms, ranging from a debt management program, to a personal loan to putting everything on one card with a lower interest rate.

    Most high credit card interest rates are tied to a low credit score. Before you work on lowering your interest rate, its important to do your homework, including knowing what your credit score is.

    The average APR for new credit cards was 19.24% at the end of 2019, but, as youll see, the average rate fluctuates depending on the credit score. The higher your score, the lower your interest rate.

    Heres how it breaks down:

    • Fair Credit 22.57%
    • Good Credit 20.31%
    • Excellent Credit 14.41%

    A low score may make it harder to convince your credit card company to cut a deal. .

    There are things you can do to improve your credit score, but that might not be enough and is not a quick solution.

    Everyones situation is different. Take a look at how to negotiate a lower rate, and if that doesnt work for you, there are other options listed below that for reducing your credit card interest rate, so you can pay off your credit card debt faster.

    Whats A Good Interest Rate

    A good interest rate is subjective, and it depends a lot on the credit rating of the individual applying. For example, you may be able to qualify for a lower than the average rate if your FICO score is in the very good range of 740 to 799 or the exceptional range, which includes FICO scores of 800 or higher.

    Most lenders also consider FICO scores in the 670 to 739 range as being good however, other factors can come into play and impact the interest rate youre charged, such as your income or current debt-to-income ratio.

    Because what it means to secure a good interest rate is so subjective, you should aim for one that matches your credit rating and that makes it possible to carry debt without financial hardship. Ideally, youll pay the lowest interest rate you can possibly qualify for.

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    How To Take Out A Personal Loan

    If you decide to take out a personal loan to help reduce how much you pay in credit card interest, follow these four steps:

  • Check your credit. Like with credit cards, personal loan lenders will review your credit to determine your creditworthiness as well as what rates you qualify for. To see what shape your credit is in before you apply, use a site like AnnualCreditReport.com to review your credit reports for free. If you find any errors, dispute them with the appropriate credit bureaus to potentially boost your credit score.
  • Compare lenders and pick a loan option. Be sure to consider as many lenders as possible to find the right loan for your needs. Consider not only interest rates but also repayment terms and any fees charged by the lender. After researching lenders, choose the loan option that works best for you.
  • Complete the application. Once youve picked a personal loan lender, youll need to fill out a full application and submit any required documentation, such as tax returns or pay stubs.
  • Get your funds. If youre approved, the lender will have you sign for the loan so the money can be released to you. The time to fund for a personal loan is usually about one week though some lenders will fund loans as soon as the same or next business day after approval. There are also lenders that will pay your creditors directly if youd prefer.
  • Lender
    All APRs reflect autopay and loyalty discounts where available | LightStream disclosure | Read more about Rates and Terms

    Why Credit Card Interest Rates Change

    How To Lower Your Credit Card Interest Rates

    You can check out our Types of Interest Rates article for a more detailed discussion of credit card interest rate changes, but its important to touch on them briefly here as well because they provide the framework necessary to understand your rights and strategies when it comes to getting a lower interest rate. So, here are a few of the most common reasons that interest rates change:

    • Rates Arent Always Fixed: Variable interest rates change in concurrence with the Prime Rate.
    • Many credit cards offer lower interest rates for the first few months before a regular APR kicks in whether its on balance transfers, new purchases, or both.
    • For Future Transaction, They Just Have to Warn Us: Credit card companies have the right to raise your interest rates on future purchases for any reason, provided they give you 45-days notice of the change taking effect.
    • Rates Rise When We Screw Up: Creditors can begin applying a penalty interest rate to your entire balance if you become 60 days late on a payment.

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    What To Do If You Cant Get A Rate Decrease

    Seriously indebted consumers arent out of options even after striking out on both a balance transfer and debt management. The remaining options arent all that attractive, though, and should only be considered if you absolutely cannot afford even your minimum payments and have exhausted all other potential recourses. They basically boil down to:

    • Debt Settlement: When you choose credit card debt settlement, you withhold payments from your credit card companies, intentionally defaulting on your account. Doing this will destroy your credit score and may also trigger a lawsuit, but its done with the hope that your credit card issuers wont sue and will be willing to settle for much less than what you currently owe them. This may be the most risky option at your disposal due to its uncertainty.
    • Bankruptcy: Bankruptcy should be considered if you find it impossible to make the minimum payments not only on your credit card accounts, but also on other types of debt . If you go this route, remember that bankruptcy will destroy your credit score and will stay on your credit report for up to 10 years.

    What Is A Good Apr For A Credit Card

    As of April 2021, the average interest rate for a credit card is just over 16%. But the average card APR can differ from what a consumer might consider a good APR. For instance, some low-interest credit cards advertise minimum APRs just below 12% and, in rarer instances, less than 10%.

    But a good APR is one that you can afford if you must carry a balance on your credit card. On the other hand, an exorbitant APR can bust your budget and prevent you from getting out of debt in a timely manner, especially if you have a lot of it.

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