If you’re paying an interest rate on your credit card that’s anywhere near 20%, you might think there’s no way to lower it. But this isn’t true! By applying these 15 tips, you should be able to lower your interest rate at least somewhat, saving you hundreds or even thousands of dollars in the long run.
1) Know your credit score
Your credit score is a number that is calculated by one of the three major credit bureaus, Experian, TransUnion or Equifax. Each bureau has its own scoring system and these numbers are used to predict how much risk you represent for a lender.
A high credit score indicates that you are less likely to default on a loan and as such will be offered better interest rates when applying for financial products such as loans, mortgages and credit cards. The average American has a FICO score in the 650-720 range. If your FICO score is below 620, you may find it difficult or impossible to get approved for new loans at any reasonable rate.
2) Review your credit report
It’s important to review your credit report at least once a year so you can catch any errors or fraudulent activity that might be impacting your interest rate. Reviewing your credit report is the first step in getting started with the process of lowering your interest rate.
You should also make sure you’re aware of all the fees associated with your card, including annual fees and late fees. Finally, try not to carry a balance on your card and use it responsibly!
Make a list of all your credit cards: Next, make a list of all your credit card accounts. This will give you an idea of which accounts you’d like to work on lowering interest rates for.
Start with accounts that carry high balances and pay little in rewards. But be careful: some experts warn against closing old credit card accounts because it can lower your overall credit score. Instead, focus on lowering interest rates on open cards that are likely carrying high balances and low rewards/reward thresholds.
3) Negotiate with your credit card company
If you’re tired of paying a high interest rate on your credit card, it’s time to negotiate with your credit card company. The first step is to call the company and see if they’ll lower your interest rate. You might be surprised at the answer.
Sometimes all you have to do is ask nicely and they’ll cut it in half or more. If that doesn’t work, try asking for a break on your annual fee as well as a lowered interest rate.
If your negotiations still don’t get you anywhere, it’s time to think about switching credit cards. You might be worried about losing points for signing up for new card, but there are ways around that. For example, some credit card companies will transfer your points to a new account after you close out your old one, so don’t worry if you’ve built up a stash of rewards with your current company.
If they won’t do it automatically and you have accumulated a decent amount of points, just keep them in an online account and then apply them when you sign up with a new card.
4) Consider a balance transfer
Balance transfer credit cards offer a reduced interest rate for a set period of time. This can save you money in the long term and it may be worth considering if your card is charging an unusually high interest rate or has a high balance.
Transferring your balance to a lower-interest-rate credit card, even if only for six months, can make sense because it will help you get out of debt faster and save you money in the long term.
If you’re paying a high interest rate, a balance transfer may be worth considering. But remember, they don’t last forever and many charge an origination fee that can add up if you carry a balance for more than a few months. Also, balance transfers often have introductory rates that will eventually expire; there may also be other fees involved.
5) Use a personal loan
It’s not uncommon for individuals to have a hard time managing their credit card debt. If you’re struggling with high-interest rates and want a way out, there are a few options:
Personal loans typically offer the lowest interest rates and the best terms on the market. You can use personal loans to consolidate your other debts, or just apply for one in order to pay off your credit card balance faster.
6) Pay off your debt
You should pay off your debt as quickly as possible. The faster you do this, the more money you’ll save on interest charges. It’s also important that your credit card balances are paid off at the end of every month.
If you don’t know how much money is coming in and going out, it can be difficult to figure out how much money is needed to pay off your balance. You might need a budget or spreadsheet to help keep track of everything.
You can pay off your debt faster by making a larger payment each month. The earlier you get your debt paid off, however, it’s also important to pay more than just minimum payments, which can be tempting if paying off debts is more comfortable and low-pressure compared with budgeting.
While paying less than what you owe is better than nothing, doing so can keep you in debt for longer. Having no money left over at all at month’s end might seem stressful but it’s much better than continuing to rack up interest charges by only paying a little bit of your credit card balance every month. If possible, aim for 15 percent of what you owe each month or more as a way of breaking free from credit card debt quickly.
7) Increase your credit limit
One of the best ways you can lower your credit card interest rate is by increasing your credit limit. If your credit limit is too low, it will only serve as a constant reminder that you cannot afford more money. It’s also beneficial for your credit score because it shows lenders that you are managing your finances responsibly. But don’t increase your limit unless you’re sure you can handle the increased balance.
8) Avoid cash advances
Cash advances are a tempting way out when you’re in need, but this convenience comes with a price. A cash advance is an advance on your credit card balance, which means you’ll be charged interest on the advance right away, making it even more difficult to pay off what you owe. And if you miss a payment or default on your credit card, they may report it as delinquent and send it to collections.
If this happens, all of the good things that come from having a good credit score (like qualifying for better rates on loans) will go down the drain. The bottom line: avoid cash advances at all costs!
9) Use your credit card wisely
If you carry a balance from month to month, don’t get into the habit of using it as an ATM machine or store credit card; instead, only use it for what you need—in other words, buy what you need and pay for it in cash or by check whenever possible so that you can avoid expensive interest charges and keep track of your spending more easily.
As a general rule, if you can’t afford to pay off your balance in full each month, you shouldn’t be using that card. It’s not necessary to put yourself in a financial hole just because you have one of those cards; that’ll only cost you more money and potential headaches down the road. Instead, consider transferring balances from high-interest credit cards onto a 0% balance transfer credit card or open another low-interest account (often with better rewards programs) with your bank and close out your old accounts so that you aren’t tempted to charge them up again. Then begin making regular monthly payments until all your debt is paid off for good and pay at least enough on time each month so that no late fees apply.
10) Monitor your credit score
Monitor your credit score by requesting a free report from all three bureaus every year. You can also set up text, email, and/or phone alerts. If you see any drastic changes in your score or if there are any inquiries on your report that you didn’t initiate, contact the company immediately to dispute these changes.
Having a high credit score can help you lower your interest rates. At minimum, you should always aim for an average credit score that would qualify you for low-interest credit cards with no annual fees and no rewards. If your score is even higher than that, then most of your interest rate options will be in your favor. You could apply for a premium or elite card that offers higher rewards and usually has premium perks as well.
11) Check for errors on your credit report
It’s important to know your credit score and check for errors on your credit report. Doing so can help you identify potential problems with your credit that might lower your interest rate. Here are some things you should look for:
1) Inquire about mistakes on your credit report – Request a copy of your credit report from the three major bureaus, Equifax, Experian, and Transunion. If you find anything erroneous or have any questions, contact the bureau in question directly.
2) Inquire about inquiries not listed on your report – Make sure that all recent inquiries from lenders or other companies appear on your credit report. If not, make sure to contact the company that made the inquiry and ask them for a copy of it.
3) Inquire about multiple addresses listed for you – This can happen if you’ve moved recently, and it will cause your score to go down. If there are any incorrect addresses on your credit report, make sure they are removed.
4) Remove closed accounts from your credit report – If an account was closed due to inactivity, you should try and remove it from your credit report. This can help lower your score slightly, but that’s not necessarily a bad thing.
5) Check for misreported information – If you want to lower your credit score, don’t dispute negative information on your credit report, and instead focus on disputing erroneous and inaccurate information. This is usually more effective than disputing positive info, as it helps maintain a clean credit history while also reducing interest rate.
6) Close or freeze your credit card accounts – Closing or freezing your credit card account will lower your score, but it can also help lower your interest rate. Keep in mind that there are different costs associated with each. Freezing an account means temporarily taking it off all three major credit bureaus, while closing one lowers and removes it from your credit report entirely. The latter is usually more expensive, as creditors often charge a fee to close an account. Check with a creditor before closing an account as you might not be able to open another in the future if you do so.
7) Check for sudden changes in your score – If you check your credit score at different times, you might find that there have been changes made without your knowledge. Before creditors pull a report, they should give you notice by mail. If it’s not a notice of intent to deny but rather just a routine check, your interest rate shouldn’t increase as a result.
In fact, sometimes it can go down if they view you as low-risk based on information provided in their last report. Check with a creditor if you’re concerned about an unexpected change.
12) Consider debt consolidation
One way you can lower your credit card interest rate is by consolidating your debt. Debt consolidation involves taking out a loan and using the funds to pay off all of your existing debt, including high-interest credit cards.
The result is that you’ll only have one payment due each month and will pay less in interest over time. If you’re considering this option, it’s important that you understand the pros and cons of debt consolidation before making any decisions.
13) Take advantage of grace periods
The best way to lower your credit card interest rate is by paying your balance in full each month. If this is not possible, you can also take advantage of the grace periods that most banks offer. Typically, if you pay the entire balance during the grace period (before the due date), your interest rate will be reduced by a certain percentage for a set amount of time.
The length of time varies depending on which bank you are using and which plan you are enrolled in. Lastly, if neither of these options work for you, simply call your credit card company and negotiate with them about lowering your interest rate. This may work better than just asking because they will already be aware that you are having financial difficulties since you called them about lowering it in the first place.
14)Shop around for the best rates
Shop around for the best rates. Find out what the annual percentage rate is, and compare it with your own. Apply for a credit card that has a low interest rate, or that offers some other incentive like cash back or airline miles.
You may also be able to negotiate with your current credit card company for a lower interest rate. If you’re unsure whether you should apply for new credit cards or make an agreement with your current company, consult with a professional financial advisor in person or over the phone.
Conclusion
In conclusion, you have many options for lowering your interest rate. You can apply for a balance transfer card, which will move your credit card debt onto another card with a lower APR. You can also check into balance transfer offers from your current credit card company. By following these tips and taking advantage of the benefits that are available, you should be able to lower your interest rate in no time!