Keep Your Credit Card Usage Rates Level
As we said earlier, you actually might not want to zero out all of your credit card accounts each month and instead focus on keeping your usage rate to roughly 25%-30%.
Once youve gotten your credit limits to this level, youll then need to put measures in place to keep them there.
A few examples:
- Revisiting the expenses charged to each account on a regular basis
- Adjusting your plans for paying off each card moving forward
- Doing some cost/benefit analysis in terms of points and rewards
Generally speaking, its better to avoid making larger, out-of-the-ordinary purchases via credit card . If you absolutely must charge a larger purchase, paying at least some amount upfront can help you keep your credit usage to a minimum while still getting the financial help you need.
Beware Of Debt Settlement Scams
Some companies offering debt settlement programs may engage in deception and fail to deliver on the promises they make for example, promises or guarantees to settle all your credit card debts for, say, 30 to 60 percent of the amount you owe. Other companies may try to collect their own fees from you before they have settled any of your debts a practice prohibited under the FTCs Telemarketing Sales Rule for companies engaged in telemarketing these services. Some fail to explain the risks associated with their programs: for example, that many consumers drop out without settling their debts, that consumers credit reports may suffer, or that debt collectors may continue to call you.
Avoid doing business with any company that promises to settle your debt if the company:
- charges any fees before it settles your debts
- touts a “new government program” to bail out personal credit card debt
- guarantees it can make your unsecured debt go away
- tells you to stop communicating with your creditors, but doesnt explain the serious consequences
- tells you it can stop all debt collection calls and lawsuits
- guarantees that your unsecured debts can be paid off for pennies on the dollar
Proven Ways To Lower Credit Card Interest
A lot of people pay way too much interest on their credit cards. Although this applies to everyone, it creates a serious problem for individuals who have little to no credit. It also poses a risk to those with poor credit. While the goal is to use credit cards to become financially established, all cardholders can lower credit card interest simply by knowing how.
For instance, say you went through a tough financial period. As a result, your credit rating dropped substantially, putting you in the poor or fair category. That makes it hard to get a credit card. However, if you find a company willing to issue one, you can anticipate paying interest anywhere from 20 percent to 30 percent or sometimes even higher.
Heres the problem. If you charge $1,000 on the card but only pay the minimum amount due each month, itll take you years to pay off the debt. The reason is that a chunk of your money goes toward interest rather than the principal amount. If youre not careful, you could end up in a worse financial situation than before.
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Requesting A Lower Rate
There are several things you can do to alleviate your credit card debt before it becomes an even larger burden. If you have a high interest rate that is making repayment difficult, one option to consider is requesting a lower rate from your lender. Credit card interest rates arent necessarily set in stone, so you may get a lower rate just by asking. A poll found that almost two-thirds of cardholders succeed this way.
If your financial situation has improved since you opened the card but your interest rate hasnt dropped, you may have a good case for a rate reduction. A history of regular use of the card and on-time payments also works in your favor.
Before you make the call, gather information that supports your request. Be sure the person youre speaking to has the authority to lower your rateyou may need to ask to speak with a supervisor. Finally, if your lender agrees to a lower rate, ask for confirmation in writing and the date you should expect to receive it.
Lower Interest Rates By Consolidating Credit Card Payments
If negotiating your interest rate doesnt work out, you can look to debt consolidation to lower interest rates. There are several different ways to consolidate debt, but the overall goal is to lower high interest and combine your debt into one easy-to-manage payment.
Its always important to keep track of your credit report to see where you stand and if some debt consolidation methods, like applying for a credit card to consolidate the other cards onto, is lowering your score.
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Take Stock Of Your Situation
Before you approach your card issuers to ask for lower interest rates, you’ll want to take stock of the rates you’re currently paying. You can find them listed on your statement, in the top rows of the table known as the “Schumer box.” The entry for “Annual Percentage Rate for Purchases,” which affects daily charges and related balances, is the one to focus on when seeking rate reductions. Note this figure for all of your open credit card accounts.
In addition, if there’s urgency in your desire for lower interest ratesif you’re unexpectedly unemployed, for example, or have experienced a medical emergency or other circumstances that create a financial hardship, you can include that information along with your request for an interest rate reduction. Be prepared to explain the situation clearly, briefly and in a matter-of-fact fashion.
It’s also helpful to take a look at your financial situation with a mind toward the way credit card issuers do business and the reasoning they apply when setting interest rates. Credit scores are designed to predict the likelihood you’ll fail to pay back your debts, with lower scores corresponding to a greater likelihood of payment failure. Lenders tend to view customers with lower credit scores as riskier to work with, and they charge them higher interest rates to compensate for the extra risk. So if you’re looking for lower interest rates, one way to make a case for them is to show you’ve increased your credit score.
Take Out A Personal Loan
Another option is taking out a personal loan to pay off your credit card debt a process known as debt consolidation. Personal loans often have lower credit card interest rates than credit cards, which means you could save money on interest charges while repaying your debt.
If youre struggling to get approved, consider applying with a cosigner. Not all lenders allow cosigners on personal loans, but some do. Even if you dont need a cosigner to qualify, having one could get you a lower interest rate than youd get on your own.
If you decide to take out a personal loan, its important to think about how much that loan will cost you. This way, you can be prepared for any added expenses. You can estimate how much youll pay for a loan using our personal loan calculator below.
Enter your loan information to calculate how much you could pay
Checking rates wont affect your credit score.
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How Long Will It Take To Pay Off Your Balance
Want to know how long it will take to pay off your balance if you only pay the minimum? Check the most recent copy of your credit card billing statement. Credit card issuers are required to let you know the amount of time and the total amount you’ll pay if you only make the minimum payment. Your statement will also include the amount you’ll have to pay each month to pay off your balance in three years.
Tackling high credit card balances isn’t easy, but if you’re diligent and consistent about paying more than the minimum, you can pay off your credit card balance for good. Once you’ve paid off your balance, make a habit of paying your credit card balance in full each month and you’ll avoid getting stuck with another high credit card balance.
Increase The Length Of Your Credit History
The longer you have a credit account open and in use, the better it is for your score. Your credit score may be lower if you have credit accounts that are relatively new.
If you transfer an older account to a new account, the new account is considered new credit.
For example, some credit card offers come with a low introductory interest rate for balance transfers. This means you can transfer your current balance to this new product. The new product is considered new credit.
Consider keeping an older account open even if you don’t need it. Use it from time to time to keep it active. Make sure there is no fee if the account is open but you don’t use it. Check your credit agreement to find out if there is a fee.
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Other Debt Relief Options
Working with a debt settlement company is just one option for dealing with your debt. You also could: negotiate directly with your credit card company, work with a credit counselor, or consider bankruptcy.
Talk with your credit card company, even if you have been turned down before. Rather than pay a company to talk to your creditor on your behalf, remember that you can do it yourself for free. You can find the telephone number on your card or your statement. Be persistent and polite. Keep good records of your debts, so that when you do reach the credit card company, you can explain your situation. Your goal is to work out a modified payment plan that reduces your payments to a level you can manage.
If you don’t pay on your debt for 180 days, your creditor will write your debt off as a loss your credit score will take a big hit, and you still will owe the debt. Creditors often are willing to negotiate with you even after they write your debt off as a loss.
Contact a credit counselor. Reputable can advise you on managing your money and debts, help you develop a budget, and offer free educational materials and workshops. Their counselors are certified and trained in consumer credit, money and debt management, and budgeting. Counselors discuss your entire financial situation with you, and help you develop a personalized plan to solve your money problems. An initial counseling session typically lasts an hour, with an offer of follow-up sessions.
Reduce Interest Rates With A Debt Management Program
Debt management programs, offered by nonprofit credit counseling agencies, can lower interest rates to a fixed rate around 8%-9%.
If a credit counseling agency recommends a debt management program, the agency acts as the intermediary between you and the credit card companies. That means you dont have to negotiate with credit card companies. Credit counseling agencies have agreements with major card companies to reduce rates for those enrolled in their program. The counselor will offer you the lower rate, and you can decide if it works for you. You would make one monthly payment to the credit counseling agency, and the agency disburses the money to each credit card company in agreed upon amounts.
This comes with a small monthly fee, but the reduced interest rate should more than make up the difference.
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Find Competing Card Offers
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.
How To Lower Your Apr
There are a number of ways to lower your APR. Shop around and see if credit card issuers offer 0% introductory that you may be able to qualify for. If you qualify for some of these promotions, you could transfer a balance for a fee and avoid paying interest entirely by paying down the debt before the end of the low introductory APR period.
If you dont directly qualify for 0% introductory cards or frequently carry balances, you may want to see if there are lower interest cards available with your lender or financial institution. Alternatively, home equity lines of credit, personal loans or other financial products may offer better rates than a credit card for managing your debt.
You may also reach out to a credit card company directly and negotiate a lower rate. Be sure to evaluate your credit history and your lenders perspective beforehandit may give you a better idea of what types of offers your lender will present to you and better prepare you to negotiate yourself a better rate.
The best way to lower your APR is to improve your credit score. A better credit score will give you more opportunities to qualify for 0% introductory promotions or low-interest cards and also put you in a better position to negotiate for a better rate with your credit card company. You can improve your credit score by paying your bills on time, only applying for credit that you actually need, improving your credit utilization ratio and being responsible with your credit card management.
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What Is The Best Use Of A Credit Card
The best way to use credit cards is using it only when you need it and ex* charging only what you know you can comfortably afford to pay back In this way, a credit card is a convenient way to pay for daily expenses and helps you build credit, earn rewards, pay off debts, or fund purchases that you can pay over time.
Pay Off Your Cards In Order Of Their Interest Rates
If you have credit card debt on multiple cards, some personal finance experts recommend paying them off according to the size of the balance, starting with the smallest. The idea is that the quick wins will give you momentum and motivation. However, it will save you the most money to pay your cards off in order of their interest rates, starting with the highest-rate card and moving to the lowest.
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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.
How To Get Lower Interest Rates On Credit Cards
Interest can make credit card debt feel inescapable, and your interest rate plays a big role in how much you have to pay. Credit card interest rates determine at what rate you have to repay your issuer if you do not pay off your credit card debt in full each month. Lets say your credit card has an interest rate of 17%, and you dont pay off your credit card balance by the due date. Youll have to start paying your credit card issuer interest on top of your current account balance at a rate of 17%. Each consumer credit card has its own interest rate, and a low-interest card isnt always possible. While it may seem like a definitive number, there are actually ways that you can get a lower interest rate no matter what type of card you have, which will help you save money and do wonders for your financial planning.
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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.