How To Obtain Lower Interest Rates On Credit Cards
Credit card interest rates are all over the place.
New card holders often enjoy a low introductory rate, sometimes at 0 percent for six months to a year. Some consumers enjoy a permanent rate in the single digits while others are charged anywhere from 10 to 24 percent or more.
Those higher rates can be a financial disaster — look closely at your credit card statement and you’ll see that more than half of your payment goes toward servicing your interest with very little credited toward reducing your principal. Debt accumulated years ago could still be weighing heavily on your shoulders, a financial calamity if you’re trying to get ahead in life.
One way to get out of debt sooner is not to accumulate additional debt. Another way is to have your credit card interest rates lowered, a move that can save you plenty of money if you stay disciplined by working toward paying off what you owe.
Let’s examine some ways you can get a lower interest rate on credit cards:
Call your creditors — Review your credit card statements closely to determine what your interest charges currently are. You’ll see as many as three categories: balance transfers, cash advances and purchases. Look for the customer service number on your statement, call them and ask for a lower interest rate. They’ll either agree or refuse — nothing ventured, nothing gained. But if you venture, you may obtain a lower interest rate.
Call other card issuers — If you already have a MasterCard or a Visa card, you can get additional cards through other card providers. Shop around for a lower rate credit card, look for one offering a low, introductory rate and willing to allow you to transfer your balance to the new card. If you’re paying 18 percent on your current card and the new card charges 4.9 percent on your transfer, you’ll save a bundle in interest payments.
Now let’s look at how to get out of debt faster with that new card:
Keep your payments the same — The temptation for some consumers when they secure a better interest rate is to lower their monthly payments. Big mistake! If you want to get out of debt, you need to keep your monthly payment the same or pay a bit more each month.
Let’s compare the interest rates on $15,000 worth of credit card debt:
- At 18 percent and making a payment of $150 each month, it would take you 120 payments or 10 years to pay off your debt. During that time, you’d pay out $11,983 in interest.
- At 4.9 percent and making a payment of $150 each month, it would take you 78 payments of 6.5 years to pay off your debt. Importantly, you’d pay out $1,961 in interest.
Your net savings with the lower interest rate would be $10,032! Do you think you could find a better purpose for that money instead of servicing debt? You bet!
Clearly, if your current credit card provider refuses to lower your interest rate, then it is in your best interest to shop around. Don’t rack up additional debt, but do come up with a plan to pay off your credit card debt as soon as possible.