Such convenient payment tool as credit cards is used by most adult Americans to pay for their purchases and bills. Convenience made credit cards so popular, as well as made them a generator of trillion national debt. Due to the high interest rates and various fees, all credit card issuers collectively earn more than $ 100 billion each year. Interest rates are gradually increasing, which is good news for lenders, but not for you, as for a borrower. Is it possible to somehow lower the interest rate on credit cards to reduce the burden on your monthly budget?
Guide on 4 effective ways to lower the interest rate on credit cards
Now the good news for credit card holders is that there are several options that can help you reduce your debt burden and make it easier for you to breathe. Here we have prepared a guide on 4 effective ways to lower the interest rate on credit cards so that you can get more freedom in your finances and keep your debt in check.
Make payments more often
To gain more control over something, you first need to understand how it works. Let’s find out what defines how much percent of your debt you will need to pay in excess of the used loan and how the interest rate on the credit card is determined. The variable interest rate set on credit cards varies depending on what daily balance was on your card on average per month.
Thus, it turns out that if you make a payment more than once a month, and for instance pay either once a week or every two weeks, then the average daily balance on your credit card will decrease. By lowering the balance you lower the interest rate on credit cards. Few people from ordinary credit cards users know about this and therefore rarely use it. For many, this way of lowering the interest rate on credit cards comes as a surprise.
The faster you repay the arising debt on your credit cards, the less interest you will have to pay creditors. For example, if you used $ 500 from your credit limit and repaid them in a month, then your average balance will be $ 500. If, for example, you pay half your debt in two weeks, then your average daily balance will be not $ 500, but $ 350, which is the lower interest rate on credit cards for the near future. The ideal option is to start using a credit line shortly before you are ready to pay off the debt, then you will get the top of the effect of this method.
Make a balance transfer
One of the very effective ways to lower the interest rate on credit cards is balance transfer. You immediately benefit from this, if you take into account all the factors and choose the most relevant option in your situation.
Due to the high competition in this market, many credit card issuers are ready to provide new customers with very soft and attractive conditions when transferring to them from other lenders. They can offer a very low interest rate for the first months of use or even a complete lack of interest in the grace period. This can be used to ensure that for several months, and in some cases even a year or more, significantly lower the interest rate on credit cards.
To do this, you will need to apply for a new credit card to a lender. If approved, you get a new credit card and then transfer the balance to it from your old credit card. Along with this, you get an excellent opportunity to pay off your old debt with the lowest interest rate costs.
One has only to remember when the low interest rate period expires and should have time to pay off the debt earlier so as not to make even more debt, since then the lender’s interest can become quite high. At the same time, do not forget that creditors usually charge a fee for balance transfers, which averages about 3% of the amount of debt transferred. In addition, be sure to pay attention to the presence of other commission and fees.
In order for balance transfer to bring you benefits and relief for your personal finances for each month, you will need to consider all of the following components:
- interest rate on your old credit card
- amount of your debt
- balance transfer fee
- introductory interest rate on a new credit card
- promotional period
- interest rate after the end of the promotional period
- other additional fees
If you do everything right and take into account all of the above factors that affect the success of a profitable balance transfer, then it may be a chance for you to get rid of excessive credit card debts.
Try to negotiate with a credit card issuer
Few of the holders of credit cards admit the idea that in order to get lower the interest rate on credit cards they just need to try to agree on this with their lender. As we said above, the credit market is highly competitive and lenders are willing to do a lot to get every new client. At the same time, creditors know that retaining an old customer is much cheaper than attracting a new one.
Gather some preliminary information about the offers of other lenders so that you have weighty arguments in your conversation about lowering the interest rate on credit card with the creditor. Start with the lender with whom you have the longest relationship, if you have several. You are a valuable customer for creditor with whom you have been collaborate for a long time without bad incidents.
Try to stay on low interest
If with the help of one of the effective ways to lower the interest rate on credit cards that we proposed, you successfully managed to do this, then we could congratulate you, but it’s too early to celebrate. Now you need to keep the interest rate bar at the low level that you have achieved.
First, your balance now needs to be kept low. The average daily balance is not desirable to exceed more than 30% of the credit limit established by the lender. Exceeding this threshold shows your increased need for money, which carries great risks for creditors, therefore it lowers your credit score. The lower your credit score, the higher interest rate will be for you.
Do not allow a decrease in your credit rating so as not to receive an increase in the interest rate on a credit card. Many credit cards offer information about changes in your credit score, use this to track them.
Secondly, never allow late payments. Each late payment immediately entails a decline in your credit rating and subsequently negatively affects your credit history. You will be much less likely to get a low APR if there are late payments in your credit history.
Start lower the interest rate on credit cards today
Now you know some effective ways to lower the interest rate on credit cards, about which many do not know. Not all of them are equally easy to implement, especially if you are already in a difficult financial situation with a big debt, but you can start small today.
Using the opportunities offered by competition in the market, as well as abandoning some non-vital expenses, you can begin your progress towards the freedom from heavy credit card debt. You can also use personal credit in order to lower the interest rate on credit cards, just fill out the loan application form on this page.