In 2017, Americans with credit cards paid $104 billion in interest and fees. And this number just keeps climbing. As interest rates continue to climb and Americans get deeper and deeper into debt, is there any way out?
One of the best things you can do to get control of your debt is to learn how to lower interest rates on credit cards. Read on for our top 5 tips on how to lower credit card interest.
1. Ask for a Lower Interest Rate on Credit Cards
People are often surprised to learn that one of the best ways you can lower interest rates on credit cards is to simply ask.
It’s easier to negotiate with your credit card company than you think. Remember, you are a valued customer that the company wants to keep. This is especially true if you’ve been a customer for a long time.
Before you call, do some research. Shop around for current deals by competing credit card companies. Then you can use this intel to negotiate with your provider to match the competitor’s rate.
Start with your oldest credit card if you have more than one. When you call, ask to speak to the customer service manager.
If your credit company says no, don’t be discouraged. You can always try again in six months. Or, if you want to move quicker, you can choose to do a balance transfer.
2. Try for a Balance Transfer
A balance transfer on a credit card is how to lower credit card interest instantly.
Basically, that means that you apply for a new credit card account with a lower interest rate. Often, credit card companies offer a very low introductory interest rate for balance transfers. Sometimes, even 0% APR.
Once you get approved for the new card, you just transfer your debt from your old card to the new lower rate one.
Just make sure you read the fine print. Some cards offer the low-interest rate for a limited time, usually 12-18 months. After the promotional period, the interest rate may be higher than your original credit card.
But, a year of no interest rate may be enough time for you to buckle down and pay off your debt without paying another cent of interest.
Always read the fine print about credit card fees and charges. Many credit cards will charge you around 3% of your balance to do the transfer. But based on how much interest you will be saving, it may be worth it.
Also, you can’t transfer balances from the same issuer such as from one Chase card to another Chase card.
3. Make Multiple Payments Every Month
An unexpected way you can lower credit card interest is to make multiple payments each month.
Your credit card charges you interest based on your average daily balance. So if you make a payment every two weeks when you get paid, you will lower your average daily balance.
Let’s say your current credit card balance is $2000 and you can put $1000 towards your debt this month. If you wait to pay it when you get the bill, your daily balance will be $2000.
But, if you pay in the middle of the billing cycle, your average daily balance will be $2000 for 15 days and $1000 for 15 days.
Over time, this will help you lower your interest charges. The sooner in the billing cycle that you make a payment, the lower your average daily balance.
4. Pay on Time, Every Time
You are more likely to get lower interest rates on credit cards if you pay your bills on time. If you miss payments or are late in making payments, this will affect your credit score.
Having a low credit score makes you less likely to get approved for credit cards with low-interest rates. It also means you are less likely to get approved for a lower interest rate when you call and ask for a rate reduction.
Also, if you pay your full balance before the due date, you won’t be charged any interest at all. When you pay your balance off in full each month, you also help boost your credit score. Win-win!
5. Keep Your Low-Interest Rate Low
Once you’ve managed to get into a low-interest rate, you can’t kick up your feet just yet.
Your interest rate is subject to some variables that you need to work at to keep low.
It’s wise to keep your credit balance lower than 30% of your credit limit. It’s not actually how much credit you have available, but how much you use that matters.
The ratio of how much you use versus how much you have available impacts your credit score. And as we already discussed, your credit score plays a role in the interest rates you are eligible for.
Maxing out your credit card will negatively impact your credit score. And as a result, you may have to say goodbye to your low-interest rate.
It’s a good idea to get into the habit of checking your credit score once a year. This way you can spot issues like identity theft, low credit or other problems.
Final Thoughts on How to Lower Interest Rates on Credit Cards
We hope these five tips on how to lower interest rates on credit cards help you enjoy lots of money on saved interest. Remember, smart people earn interest, they don’t pay it.
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