Make Multiple Payments Each Month
Say you have a credit card balance of $4,000 and will be able to pay $2,000 this month. If you wait to pay until the end of the billing cycle to pay, your average daily balance will be $4,000. If you pay in the middle of the cycle, your average daily balance will be $3,000 $4,000 for 15 days and $2,000 for 15 days.
The earlier you pay and the more you pay, the lower your average daily balance will be. Consider making a payment each time you get paid and any time you receive a windfall, such as a cash gift or a tax refund.
Dos And Donts Of Negotiating Credit Card Interest Rates
Take Charge Team
Lets take a look at the numbers. If you have $5,000 in credit card debt with a fixed interest rate of 18%, youll end up paying more than $2,900 in interest alone if you only submit the minimum payment each month.
Now, lets say your interest rate is reduced to 13%. In this same scenario, youd pay about $1,800 in interest, which is a difference of $1,100. Better yet, if you have an interest rate of 10%, youll end up paying a little more than $1,200, a difference of $1,700. Thats a significant savings for any household.
Whenever possible, we recommend paying more than the minimum monthly payment. Yet this example gives you an idea of how a few percentage points can impact your total debt amount. We cant guarantee every consumer will be able to lower their interest rates with a phone call, but its certainly worth a shot with thousands of dollars on the line.
In this part of the Take an Interest in Your Interest series, were offering valuable dos and donts for negotiating credit card interest rates.
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.
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Do I Have To Pay Interest On A Closed Credit Card
You likely already know your credit card issuer charges monthly interest on outstanding balances on an open credit card. But what if the account is closed? Will you still have to pay interest?
Interest is charged on credit card balances that aren’t paid in full by the due date. Your credit card issuer won’t stop you from closing your credit card while it still has a balance, but closing the account doesn’t relieve you of interest payments. Once you close an account, you’ll continue to be charged regular interest until you’ve reached a zero balance.
National Bank Syncro Mastercard*
Another contender in the variable rate category is the Syncro card from National Bank, offering prime plus 4% on purchases and prime plus 8% on cash advances and balance transfers. The one caveat is the interest rate wont go lower than 8.90% on purchases and 12.90% on balance transfers or cash advances.
National Banks prime rate is at 2.45% as of this articles updated publication date, which means your interest rate will sit at 8.90% for purchases and 12.90% for cash advances and balance transfers.
- Annual fee: $35
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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.
Ask To Have The Card Interest Rate Lowered
Once you are connected with a representative, this is the time to begin negotiating your rate. You may want to mention your good payment history, your loyalty to the company, or a high , if you have one.
You should be polite when asking for an interest rate change. If you yell or become belligerent, then the customer service representative will not be as willing to help you. Politeness goes a long way in situations like these, though it is important to be persistent.
Keep in mind that you may run into difficulties getting a reduced rate if you have a history of late payments, a low credit score, or a lot of outstanding debt.
Your credit card company wants to continue to make money off of your account, so generally, it will not bring your interest rate down to zero. However, it probably also wants to prevent you from defaulting, so it may decrease your interest rate if you make a good case.
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What Is A Low Rate Credit Card
Low interest rate credit cards mean you can borrow at an APR significantly lower than average, with some cards currently offering representative APRs of less than 8% APR .
The rate you are offered however and even whether you are accepted at all will depend on your credit score, income and personal circumstances.
At ES Money, we carried out some desk research to find the best low rate credit cards on the market, which we have outlined below.
Bear in mind, however, that whats available and just how low providers are prepared to go can change according to market conditions and competition.
Furthermore, not all applicants will qualify for the leading deals.
Things You Should Know
Terms, conditions, fees and charges apply. All information is correct as at 30 September 2020 and is subject to change. Full details available on application. Credit criteria apply. Interest rate and annual fee current at 30 September 2020. Rates and fees are subject to change. Credit provided by Bendigo and Adelaide Bank Limited ABN 11 068 049 178 Australian Credit Licence 237879.
Bendigo Bank Rewards is a registered trade mark owned by Bendigo and Adelaide Bank Limited.
Terms, conditions, fees and charges apply. All information is correct as at 1 November 2021 and is subject to change. Full details available on application. Credit criteria apply. Interest rate and annual fee current at 1 November 2021. Rates and fees are subject to change. Credit provided by Bendigo and Adelaide Bank Limited ABN 11 068 049 178 Australian Credit Licence 237879.
*Low Rate Credit Card Offer
Offer period 1 November 2021 to 28 February 2022:
0.00%p.a. purchase rate for up to 18 months from account opening.
Application must be submitted between 12:01am AEDT 1 November 2021 and 11:59pm AEDT 28 February 2022.
Purchase rate offer
The standard purchase interest rate of the Low Rate Credit Card is currently 11.99% p.a. The cash advance rate of the Low Rate Credit Card is currently 13.99% p.a.
^Platinum Rewards Credit Card Offer
Offer period 1 November 2021 to 28 February 2022
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How Much You Can Save With A Low Interest Card
Seeing that a credit card has a low APR might not make it immediately clear just how much you could stand to save. After all, when it comes to credit card bills, you dont deal with percentages but real dollars.
With that in mind, weve run through a real-world scenario using two different credit cards: The first is a typical rewards credit card and the other is the MBNA True Line Gold Mastercard, which weve ranked as the best low interest credit card in Canada.
Heres the scenario:
This makes it abundantly clear just how much a low interest credit card can help your bottom line. Youd save $286 in interest and pay off your balance two months faster with the MBNA True Line Gold compared to a typical rewards credit card.
Even if we were to assume the rewards credit card in this example has no annual fee, you would still save a whole lot more on interest with the MBNA True Line Gold even when accounting for the fact it has an annual fee of $39. This makes it obvious why you shouldnt dismiss a credit card just because theres an upfront annual fee the cost of admission can be well worth it and help you save in the bigger picture.
Your Script For Seeking A Lower Apr
YOU: Hello. My name is ____, and Ive been a customer for years.
I feel Ive been a good customer over the years, and Id like to keep doing business with you, but my APR seems high and Id like to talk with someone about that. Is that something you have the authority to change?
CUSTOMER SERVICE REPRESENTATIVE: No.
YOU: In that case, could I please speak with a supervisor?
CSR: Just a moment.
YOU: Hi, my name is _____, and Im interested in talking with someone about lowering my interest rate. May I ask whom Im speaking with?
S: This is Jerry.
YOU: And Jerry, whats your last name and direct telephone number?
S: Jerry Smith, and Im at .
YOU: Thank you, Jerry. Heres why I feel my APR should be lowered. Id like a rate closer to 10 percent.
From here, the conversation could go several ways. If they agree to what you want, say thank you, ask for written notification of the change and the date you should expect to receive it, hang up and do a victory dance. If not, know in advance where you want to compromise.
YOU: Well, is there a lower rate that you could give me?
S: Well, let me see what we can do for you. Yes, I could give you an APR of 12.5 percent for the next 12 months.
If they refuse to lower your APR and you and it makes financial sense for you, move to cancel the card.
YOU: Id hoped wed be able to reach an agreement on this, but if you really cant give me a better rate, then Id like to close the account and finish paying off my balance.
Why You Can Trust Bankrate
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Make Multiple Payments Throughout The Month
You dont have to wait till the end of your credit cards monthly billing cycle or for your statement to arrive in the mail to make a payment. In fact, making payments more frequently throughout the month can actually help you reduce the amount of interest you owe.
Thats because interest on most credit cards is calculated based on the average balance you carry every day not your balance at the end of the month.
Let me explain:
If you carry a credit card balance of $1,000 for the entire length of your 30-day billing cycle, you would owe interest on the whole $1,000 by the time your statement period ends.
But if you paid down $500 early halfway through the billing cycle, your average daily balance for the month would fall to $750: $1,000 for your first 15 days and $500 for the remaining 15 days.
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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.
Call Your Card Issuer And Ask
One way to possibly get a lower credit card rate is to simply ask your credit card issuer for a reduction. Generally, credit card issuers are friendlier to these types of requests if you have good credit and are a good customer who pays your bills on time.
When you make the call, a few points to mention include:
- How long youve been with the company
- Your history of on-time payments
- Whether your credit score has gone up
- Whether youve received better offers from other credit card companies
Also keep in mind that your request might not be approved. If this happens, dont be discouraged ask what you need to do to lower your interest rate and when you can request a reduced rate again in the future.
Check Out: How to Get Out of Credit Card Debt
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First Citizen Citi Credit Card
- The First Citizen Citi Credit Card from Citibank is available at a regular interest rate as low as 2.5% pm and a cash advance fee of 2.5%. The card comes with a facility to earn reward points on shopping at exclusive retail stores in India. You also get a fuel surcharge waiver on purchasing fuel at authorised fuel stations in India. The annual fee is also waived off if you spend Rs.30,000 and above on your credit card annually.
You Wont Have To Pay As Much In Credit
Good news for those who racked up lots of charges buying groceries amid the coronavirus outbreak: Credit card interest rates are set to drop.
The Federal Reserves decision to cut interest rates to zero isnt good news for savers or spenders.
The Fed said Sunday that it was cutting its benchmark federal funds rate by 1% to a range of 0% to 0.25%, alongside other measures meant to stimulate the nations economy as it takes a major hit from the coronavirus pandemic. The move caused apprehension among investors, with the Dow Jones Industrial Average DJIA, +0.46% all dropping upwards of 8% in trading Monday.
The last time the Federal Reserve did this was back in 2008, when the global economy sank into a major recession. The Fed kept rates that low until 2015.
Moves like these on the part of the Fed can have a direct impact on peoples financial lives, as banks adjust the interest rates on everything from credits cards to checking accounts to certificates of deposit.
Heres what you need to know about how the Feds rate cut will affect your finances:
The annual percentage rate on credit cards will go down, credit-card experts said, with estimates ranging from a 0.25% decrease to a 1.5% drop.
Checking and savings accounts tend to react less to Fed measures, judging by previous rate hikes or cuts.
Jill Gonzalez, analyst for WalletHub
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Interest Rates And Minimum Payments
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.