Balance Transfer As An Alternative To A Lower Rate
For credit cardholders facing carried balances with high interest rates, a balance transfer card option may help reduce a rate or, with the right account, provide a few months of reprieve from interest altogether. A balance transfer moves a balance to a new cardideally with a lower interest rate. There is often a balance transfer fee from a new card issuer, but many issuers offer 0% introductory APRs on balance transfer for a few months to attract customers trying to dig themselves out of debt. To learn more about how to do a balance transfer, read our guide.
Also check out our list of the best balance transfer cards.
What Does Annual Percentage Rate Mean
Annual Percentage Rate, or APR, determines the cost of credit for a year and is the interest rate you pay on a loan as it relates to credit cards, mortgages, auto loans, etc. APR is commonly used to compare individual products like a credit card from various lenders before you make your decision. APR can be fixed or variable. Most credit card issuers base their variable rate on the U.S. Prime Rate with an additional margin applied. There are also various types of APRs for credit cards like purchase APR, cash advance APR, or balance transfer APR. Learn more about what APR is and what it means to 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.
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Understand What A Good Apr Is
, or annual percentage rate, is the interest rate that reflects all the costs of a loan over a year. You should know your current APR, but you should also understand what a good APR is and why it makes a difference. According to the Federal Reserve, the average APR on credit card accounts that charge interest as of February 2021 was 15.91%.
A good APR depends on the type of you have since some categories, like rewards credit cards, typically come with higher interest rates than others.
Do some research to determine what similar credit cards offer to new cardholders. This is often listed on the bank’s website on the sales pages of their credit cards. Each card will typically have a range of APRs a new cardholder can expect to qualify for.
How To Negotiate A Lower Credit Card Interest Rate In 7 Steps
Negotiating a lower interest rate is almost an art form. It takes finesse, knowledge and patience. But its worth mastering this art form, especially since the reward is a lower interest rate and monthly payment. It can also reduce the amount of time it takes for you to pay off the creditor.
Dvorkin has mastered this art and provided us with these 10 top tips.
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Debt Consolidation Loans Beat Credit Card Rates
Personal loans, also known as debt consolidation loans, are another strategy to lower your credit card interest rate. Banks offer lower rates on personal loans than on credit cards, but again, this will depend on your credit score.
If you can qualify for a loan, you can use the money to pay off your credit card balances. That leaves with you just the debt consolidation loan to pay off.
Dont Be Afraid To Negotiate Again In The Future
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.
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Open A Credit Card With An Introductory 0% Deal
One way to bring down the interest rate on your credit balance is to transfer it to a card with an introductory 0% promotion. If your credit is good enough to qualify for one of these offers, you could end up dodging finance charges for a long time.
But keep in mind that there are a few things to watch out for with balance transfers. The first is fees most credit cards charge a 3% fee for transferring a balance. This could significantly cut into the overall amount youre saving.
TIP: Check out our tool to figure out the true cost of your balance transfer.
Be mindful of making your payments on time. Missing even one could cause your introductory deal to be canceled, and interest may start accruing right away. Also, you should make your best effort to pay off your balance before the 0% period ends. Again, interest will eventually start accumulating if you carry a balance beyond that point.
Want To Get Out Of Debt Learn How To Pay Less Interest On Your Credit Cards
Thomas J Catalano is a CFP and Registered Investment Adviser with the state of South Carolina, where he launched his own financial advisory firm in 2018. Thomas’ experience gives him expertise in a variety of areas including investments, retirement, insurance, and financial planning.
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 chance you can save yourself some dollars over the next year.
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Make Multiple Payments Throughout The Month
You donât have to wait till the end of your credit cardâs 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.
Thatâs because interest on most credit cards is calculated based on the average balance you carry every day â 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.
Improve Your Credit Score To Qualify For Lower Rates
While not necessarily the easiest method and hardly the fastest the surest way to consistently receive lower interest rates on your credit cards is to build up your credit score. Interest rates are based on financial risk, and your financial risk is determined based on your credit report and score. Those with excellent credit will consistently receive the lowest interest rates.
Since credit is so individualized, the exact actions you take to improve your score will depend on your particular credit situation. In general, however, the most effective way to improve your credit score is to address each factor that goes into the calculation. The two main scoring models, FICO and VantageScore, both use the same factors, albeit with different weights, to calculate your score.
Your payment history is the most important factor in both models, and it counts for a full 35% of your FICO score. This factor looks at whether you pay your debts as agreed, and can be damaged by late payments, missed payments, and account defaults. Always make on-time payments to ensure you are scoring well in this category.
Another important aspect of your credit score is your total debt and utilization. This looks at how much total debt you have, how much each of your individual debts total, and what portion of your available credit you are using. You can do well here by only taking on necessary debt and keeping your card balances low.
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How To Get A Lower Apr On Your Credit Card
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The best way to avoid getting hit with charges is to pay your balance in full every month. But if you end up carrying debt, there are a few ways you should consider lowering your APR.
Sign Up For An Introductory 0% Apr Credit Card Offer
No matter what interest rate your current cards are charging, the chances are pretty good that zero is a fair sight better. Credit cards that come with introductory 0% APR offers allow you to carry a balance interest-free for the length of the introductory period. This means that every penny you pay will actually go toward your balance not your interest fees saving you a bundle and helping you get debt-free faster.
Additionally, the vast majority of rewards credit cards with 0% APR intro offers also allow you to earn rewards on your purchases while still enjoying interest-free payments. To really experience a savings trifecta, pair great rewards and a killer intro APR offer with no annual fee. The best introductory offers, including our top-rated picks, have rates good for a year or more.
Always keep in mind that your introductory interest rate will revert to the default purchase APR listed on your cardholder agreement after the introductory period has ended. The specific rate youre charged after your intro offer expires will depend on your credit score but will, more than likely, be in the double digits, so its in your best interest to pay off your complete balance before your offer ends to avoid interest fees.
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Take An Inventory Of Your Financial Health And Credit Standing
Your best path forward will depend on your monthly income and budget, your , your total amount of debt and your lenders credit card policies.
If you havent done so already, check your credit score to gauge how lenders view your financial health. Your credit history is critical to determining what options are available to you. So dont move forward until you know where you stand.
Its also a good idea to pull a free copy of your credit report from AnnualCreditReport.com. That way, you can check to make sure or unauthorized accounts arent dragging down your score.
Finally, look over your credit card statements and tally all of your balances. Then check the APRs for each open card. The debt on your highest rate card is the most dangerous to your budget, and so thats the card APR and balance you should ideally tackle first.
Here Are The Discover Card Interest Rates:
- Discover it® Cash Back: 11.99% – 22.99% Variable regular APR. Intro APRs of 0% for 14 months on purchases and 0% for 14 months on balance transfers. 3% intro balance transfer fee, up to 5% fee on future balance transfers *.
- Discover it® chrome: 11.99% – 22.99% Variable regular APR. Intro APRs of 0% for 14 months on purchases and 0% for 14 months on balance transfers. 3% intro balance transfer fee, up to 5% fee on future balance transfers *.
- Discover it® Miles: 11.99% – 22.99% Variable regular APR. Intro APRs of 0% for 14 months on purchases and 10.99% for 14 months on balance transfers. 3% intro balance transfer fee, up to 5% fee on future balance transfers *.
- Discover it® Student Cash Back: 12.99% – 21.99% Variable regular APR. Intro APRs of 0% for 6 months on purchases and 10.99% for 6 months on balance transfers. 3% intro balance transfer fee, up to 5% fee on future balance transfers *.
- Discover it® Student chrome: 12.99% – 21.99% Variable regular APR. Intro APRs of 0% for 6 months on purchases and 10.99% for 6 months on balance transfers. 3% intro balance transfer fee, up to 5% fee on future balance transfers *.
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Learn How To Reduce Or Avoid Interest Charges Altogether
If you pay your balance off in full by the due date every month, you can avoid paying interest on new purchases. Even if you canât pay off the entire balance, making more than the minimum payment can still help you reduce how much interest you pay.
One way to pay more than the minimum is to make multiple payments throughout your billing cycleâinstead of waiting until you receive the bill. But check with your bank first to be sure thatâs allowedâand that there are no fees or penalties for doing so. After you hit the minimum, those extra payments will help decrease your balance. And that can help you reduce how much interest is charged over time.
Consolidate Your Debt Onto A Balance Transfer Credit Card
One of the best ways to access lower interest rates is by signing up for a balance transfer credit card and consolidating your debt. The idea of getting a new credit card may sound like a weird solution but hear me out.
The best balance transfer credit cards come with rock-bottom promotional interest rates for a limited time . By moving your debt on your current credit card to a balance transfer card, youâll have access to these ultra-low rates and can pay down your debt considerably faster.
Think of it like youâre using one credit card to pay off another.
Hereâs a simplified example of what would happen if you kept a $3,000 debt on a typical credit card versus if you moved it over to a balance transfer card with a 0% offer for ten months, while making payments of $300 each month:
|Balance transfer card|
|Interest owed after 10 months||$0||$309|
Once the promotional period ends, the interest rate on the balance transfer credit card will go back to its normal levels. So, youâll want to look into both the balance transfer cardâs promotional rate as well as its regular interest rate.
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Submit A Request Through Your Credit Issuer
Depending on your credit card issuer, if you ask for a lower interest rate, a customer service specialist can submit a request on your behalf. Keep in mind that not every credit card issuer or bank accepts these requests and there is no guarantee that this request will be accepted. There are regulations that your bank or credit card company has to follow before they can increase/reduce your APR, but it wouldn’t hurt to find out if you qualify for a reduced rate.
Understand How Apr Works
Before trying to lower your APR, it helps to know how credit card interest works. When it comes to credit cards, the Consumer Financial Protection Bureau says interest rates are typically expressed as a yearly rate. Thatâs the APR. And itâs the price you pay to borrow money.
Itâs also important to know that the way you use your card can affect your APR. For example, there may be different rates for standard purchases and cash advances. The rates for 0% APR cards are usually temporary. And missing payments could lead to penalty APRs, which may be higher than the standard APR.
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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.
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.
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