Do You Need a Lower Interest Rate on Your Credit Cards?
Are you sick of carrying a huge balance on your credit cards, and never seeing the numbers go down? Are interest payments taking a huge scoop out of your budget? There are several ways to save money on your credit cards, ranging from the quick to the complex.
The simplest method is to add a little extra money to your monthly credit card payments. If your balance is $7,000 and you are paying 14% interest, a $150 monthly payment will cancel your debt in 68 months, and you will pay $10,200 total. That amounts to $3,200 extra in interest payments. Just $25 per month added to your payments will reduce the payoff time by over a year, to 54 months, and the final sum you will pay will be $9,450. That’s $750 in savings.
“If I could afford to pay extra, I would already have paid my credit card off!” you say. That’s reasonable. Most of us aren’t interested in saving money on our credit cards over time; what we want is lower monthly payments. To drop the amount of your monthly payment, you need to get a lower interest rate. There are a few ways you can accomplish this:
* Roll your debt onto a card with a lower interest rate. Take into account the rollover fees, which can be substantial, and find a balance transfer offer that waives the fees, if you can. The best way to roll over a balance is to find a card that offers a very low interest rate on balances rolled over or charged to the card during an introductory grace period, then maintains the low interest rate for that balance until you have paid it off.
* Call and ask your current credit card company for a lower interest rate. This works best if you have been with the company for at least a year or two, have a good credit history, and have a couple of credit card offers in hand that offer markedly lower interest rates. Tell the customer service representatives that other companies are offering you better deals, and you are considering transferring to them. Often, the representative will be able to negotiate a better deal with you. (If the first representative who answers isn’t able to help you, politely thank them, and call again at a different time. Other representatives may have more leeway or may know a loophole in the regulations that the first representative didn’t know about.) In the worst case scenario, the credit card company cannot lower your rates, so you simply go on paying them as before and find a better card to switch to.
* Ask your credit card company for help. If you are in an extremely difficult financial situation and you intend to pay off your credit card, but you can’t make the full payments right now, you may be able to work out an emergency deal with your credit card issuer in which you pay a lower amount per month for a set time. This is solely for use in dire emergency. The credit card company may penalize you by lowering your credit limit or refusing you new credit, and you will have a black mark on your credit rating. However, it’s preferable to defaulting on your loan, and can get you through a tough time.
Saving money on your credit cards will take a little time, patience, and persistence. However, once you have a better deal, you will be on your way to greater savings, more financial stability, and renewed peace of mind.