Saturday, March 18, 2023

Do Credit Card Companies Lower Interest Rates

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Understand How Much You Owe

How Do I Get My Credit Card Company to Lower My Interest Rate?

The first step is to assess your credit card debt. If you have multiple credit cards, go through your statements and make an itemized list of how much you owe on each card and the respective interest rate.

Also jot down the customer service phone numbers. Now youll have all this information stored in one place once youre ready to call your credit card companies.

Follow Up And Stay On Track

After a few months of your new payment schedule, check back in with your budget. Make sure that the new monthly payment is working for you, or consider restarting the process and asking again for a lower rate. And in the meantime, be sure to stay on top of your other expenses in your budget to reduce the chances of building up credit card debt again.

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Interest Rates And Minimum Payments

Credit Card Tips: Ask For Lower Interest Rate, Consumer ...

Like with any credit card, youre required to make at least the minimum payment on a low interest credit card on time every month. Minimum payments are usually $10 or 3% of your balance owing and must be paid every 30 days by the date shown on your credit card statement. If you dont, you could temporarily lose the single biggest advantage offered by low interest cards their low rates.

For instance, if you miss two minimum payments on your credit card within a one-year time frame, your annual interest rate could skyrocket by anywhere from 5 to 11 percentage points. Worse yet, you could get stuck with this higher rate for anywhere from 6 to 12 months, during which you must make minimum payments each and every month. Along with a hike in your interest rate, your credit score will get dinged and you could get hit with an additional late fee.

We cant stress enough, you should always make your minimum payments on time. If youre facing new financial pressures due to COVID-19 and cant make at least your monthly minimum payments, you may want to consider not pursuing a new card and instead check with your bank if you could defer payments on your current credit card.

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Check Your Payment History

Look over monthly statements.; Familiarize yourself with what you pay and if you pay on time. You want to have a discussion from a position of knowledge, rather than have the credit card company bring up a payment history youre not aware of. Hardships like unemployment, divorce, an illness, or something else that caused a financial setback and led to missing payments are things to bring up. Stress that youre committed to being a good customer and paying on time.

Lowering Your Interest Rates Through Debt Consolidation

Debt consolidation is a way of taking matters into your own hands and proactively attacking your debt. This is particularly a good solution if you have more than one high-interest credit card. Options range from debt management to other interest-bearing credit solutions. There are upsides and downsides to all of them, and none will eliminate what you owe.

Read Also: Can I Get My Credit Card Debt Forgiven

Improve Your Credit Score

A good way to land an interest rate that you can comfortably afford is to take some steps toward improving your credit score before applying for a new credit card. One of the easiest ways to give your credit rating a boost is to pay your credit card bill early or on time every month. You should also refrain from opening too many new accounts, which leads to multiple hard inquiries on your credit report, and closing accounts, which can lower your . Both moves can negatively impact your credit score, along with other factors.

If you have a lot of debt in relation to your credit limits, you can also improve your credit score by paying off your debt. Most experts recommend keeping your credit utilization rate below 30 percent for the best results, which means maintaining $3,000 or less in revolving balances for every $10,000 in total credit you have.

Consider A Balance Transfer Credit Card Instead

How to negotiate a lower credit card interest rate

Balance transfer cards may provide you an alternative for getting a lower interest rate on your current credit card debt. This may allow you to consolidate your existing balances from multiple cards onto a single, new card.

Youll want to use a credit card with a 0% introductory annual percentage rate, or APR, offer for balance transfers to save money on your debt repayment. Here are some cards to consider.

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Negotiate With Your Credit Card Company

Yes, you can negotiate with your credit card company to reduce your interest rate. Call the customer service line listed on the credit card and explain your desire to lower your interest rate to the representative.

Before calling, though, build a solid case for a reduced interest rate. Some points to highlight in the negotiation process include:

  • Time Youve Been a Customer. If youve been a customer of that credit card company for several years, use the card regularly, and have a great payment history, this can be a good bargaining chip.
  • Recent Credit Score Improvements. If you had a lower credit score when you got the card and have made great strides to reach good or excellent credit, the credit card company may lower your interest rate.
  • Competitive Offers. We all receive countless credit card offers via mail and email. Use these to your advantage particularly balance transfer offers by letting the credit card company know youve received lower interest rate offers from competitors. Credit card companies will often offer a lower interest rate to keep you using their card.
  • Temporary Hardship. Sometimes finances are a little tight, and you need some help. If you let the customer service representative know youre struggling to pay your credit card bill, they may offer to temporarily lower your interest rate.

While negotiating your rate can be rewarding when youre successful, not all credit card companies are willing to negotiate their interest rate.

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The High Cost Of A Higher Interest Rate

A higher APR costs you money in two ways:

  • First, obviously, it increases the amount of;interest charged on your purchases.

  • Second, because you are paying more in interest, you have less money available to pay down the principal the;debt you actually;put on the card. That means you could stay in debt for a longer time.

Let’s walk through an example and see how a higher;APR affects you at every turn.

1. Your interest charges are higher

If you have excellent credit, you might qualify for a credit card with a super-low rate, let’s say 8%. Meanwhile, a person with bad credit or no credit history at all might only qualify for a “starter” card with an APR of 26%. Let’s say each person carries a $1,000 balance from one month to the next:

  • The 8% APR card produces an interest charge of about $6.58;in the first month.

  • The 26% APR card produces an interest charge of about $21.36;in the first month.

2. Your minimum payments are higher

The minimum payment on;a credit card is typically made up of all the accrued interest, plus any fees, plus a percentage of the principal . In this case, let’s say;that percentage is;1.5%.

  • The 8% APR card;will have a minimum payment of;$21.58;in that first month.

  • The 26% APR card has a;minimum payment;of about $36.36;the first month.

3. Your;debt;shrinks more slowly

After just one month, the person with the lower APR is about $15 ahead of the person with the higher APR in the “race” to eliminate their debt.

4. You’re in debt longer and pay more to get out

If You Have Overspent But Arent In Debt

Asking For Lower Interest On Credit Card
Did you know?

If you only paid the minimum payment on an outstanding balance of £2,000 with an APR of 18%, it would take you;34;years to pay it back. You would pay;£3,983;in interest.

If you have been spending more than you should and are juggling two or more types of borrowing, such as credit cards, store cards, personal loans or overdrafts, its a good idea to get things back under control before you get into debt. You need to review how youre using your cards and concentrate on ways to get the balances down.

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Why Might This Happen

If you borrow money on a credit card the credit is:;

  • unsecured because its not linked to your property; and;
  • open ended because the account is not set to last for a specific length of time.;

This means that credit card providers face more risk than for other types of credit products, such as personal loans and mortgages. Also, your financial circumstances can change over time, which means there may be a higher risk that you will not be able to pay back the money you have borrowed.;

Changing the interest rate allows a card provider to respond to:;

  • changes in the economy;;
  • the cost of providing credit; and;
  • their opinion of your financial circumstances.;

If a card provider couldnt adjust interest rates in this way, it might have to take your credit card away, or you may have to pay new charges.;

How Do You Calculate Credit Card Interest

To calculate your interest charge, multiply the outstanding statement balance by your credit card’s interest rate. Remember, you should only apply the interest rate to the statement balanceany purchases since the last statement will not incur interest charges. You’ll also need to turn the interest rate into a number by moving the decimal two spaces to the left. A 20% interest rate, for example, becomes 0.2.

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Is There Anything I Can Do To Avoid Rising Interest Rates And Fees

Although there is no guaranteed way to avoid paying higher interest rates and fees, the following are some steps you can take to try to avoid or resolve skyrocketing rates and fees on credit cards:

  • Contact your credit card company if you notice that your rate has changed and you did you didn’t receive prior notice: ;You may have missed the notice that your credit card company sent you regarding an upcoming change in your credit card terms, or your credit card company may have failed to send you the required notice.; Regardless, call your credit card company as soon as you notice a rate increase, and see if they can resolve the issue for you.

  • If you can’t resolve the issue on your own, file a complaint: If your credit card issuer has the word “national” in its name, or if the name is followed by an “N.A.”, the federal Office of the Comptroller of the Currency regulates these issuers or banks.; For more information, or to file a complaint online, please visit the OCC’s;website.

    If the OCC does not regulate your credit card issuer or bank, you may file a complaint with the Federal Deposit Insurance Corporation .; For more information, or to file a complaint with the FDIC, please visit the FDIC’s website.

    If either of these agencies or websites do not provide you with the information that you need, you may file a complaint with the Michigan Attorney General’s Consumer Protection Division, and we can attempt to mediate your complaint with your credit card company.

  • Find Competing Card Offers

    How to Lower Your Credit Card Interest Rates

    Tell your credit card company that you can get a lower rate from someone else. They dont want to lose your business if youre a good customer. You need actual offers to give this leverage. One place to start looking ;is your mailbox. If you use credit cards, you should be getting competing offers online and by snail mail.

    There are chances you receive some new credit card offers with zero APR introductory rates in your junk mail, Abramson, of OverdraftApps, says. But dont try to bluff your way through make sure to have one of these offers handy in case the agent asks for more details.

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    Tips For Getting A Lower Interest Rate

    The best way to tackle high interest rates depends on the specific nature of your situation.; For starters, if you always pay your credit card bill in full, you dont need to worry about interest rates.; Theyre just inconsequential numbers in your situation so dont let them distract you from your primary objective of minimizing fees while maximizing your rewards earning capabilities.

    If youre carrying a balance from month to month or anticipate incurring debt in the future, your options vary based on your credit standing and level of indebtedness.

    Above-Average Credit:

    If you have good or excellent credit, your first step should always be to compare other available credit cards in order to find one that would better meet your needs and then ask your current creditor if they can match that deal.

    Creditors often grant rate reductions to consumers who have improved their credit standing in recent months or years, especially those whove managed to consistently pay at least the minimum amount required by the due date.;Regardless, you have the upper hand in this situation because your credit profile is attractive enough to warrant improved terms relative to your current card elsewhere on the market.; So dont be content with a simple rate reduction if far more attractive offers are attainable.

    Below-Average Credit:

    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.

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    If Your Monthly Credit Card Payment Rivals Your Mortgage Or Rent Or If High Interest Rates Are Making It Impossible For You To Get Rid Of The Debt It Might Be Time To Negotiate With Your Credit Card Company

    On average, people hold around $3,100 in credit card debt, according to a 2019 Credit Karma analysis. And with a median household income of $61,937, according to;2018 Census Bureau data, most Americans likely use a substantial portion of their earnings to pay down consumer debt.

    But when this debt becomes an unbearable financial burden, what can you do? One option may be to try to negotiate with your credit card company.

    Credit card companies are about collecting the money. Theyre going to size this up and if they say, This is a person who sounds like a good risk and is likely to eventually repay this bill, then theyre likely to make concessions, says Mike Sullivan, a personal finance consultant with Take Charge America, a national nonprofit credit counseling agency.

    If youre drowning in credit card debt, it may take a phone call to your credit card company to devise a workable solution. Dont know where to start? Heres a guide for how to negotiate with your credit card company.

    Understanding Interest Rates And Aprs

    Can Credit Card Companies Lower Your Interest Rates?

    The annual percentage rate, or APR, is the interest rate your credit card issuer charges;on;debt on your card. Some cards charge a single rate for all debt on the card; others charge different rates for different kinds of debt . APRs are listed on your monthly statement.

    Issuers commonly set their rates at a certain number of percentage points above the prime rate, which is the rate big banks charge their best customers. For example, your rate;might be;”prime;+ 12 points.” If;the prime rate was 5.5%, your APR would be 17.5%.;With the exception of introductory 0% or teaser-rate offers, you’re;not going to find a credit card APR lower than the prime rate.

    Although interest rates are expressed in annual terms, they’re usually charged on a daily basis. An annual rate of 17%, for example,;would translate to a daily rate of about 0.0466%. So for every $1,000 in debt, you’d pay about 47 cents a day in interest.

    How to avoid paying credit card interest entirely

    Most credit cards;offer a “grace period” that allows you to avoid paying any interest at all.

    • If you pay your balance in full each month, then you will not;owe any interest on your purchases.

    • If you carry debt over from month to month, then interest will start accruing on purchases as soon as they land on your statement.

    » MORE:

    Whats’s the difference between interest and APR?

    When you’re talking about credit cards, there is no difference between your interest rate and APR.;They’re the same thing.

    » MORE:

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