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Lower Interest Rate On Your Credit Card

How To Lower Interest Rate On Your Credit Card

Credit cards can help you leverage cash flow since it enables you to purchase goods now and pay later. However, credit cards can also come with high interest rates, making carrying balances on your card costly. If you have a balance on your card, you need to request a lower interest rate to avoid incurring more debt.

A lower interest rate means any previous balance you have on your card will accumulate less debt, and you will be able to pay off your balance on time since most of your repayments go to the principal. But how can you lower your card interest rate? Here are ways to lower your credit card interest rate.

Request And Negotiate A Lower Interest Rate

Your credit card company can offer you a lower interest rate if you have done an excellent job managing your account, but you need to ask them first. After all, they’re in the business to make more money, so offering their clients better terms doesn’t drive their bottom line. Here are steps to requesting a lower interest rate from your credit card company.

Assess your current situation

You need to understand your current condition and know what you’re working with before calling your issuer. Ensure you know your credit card terms, including your current balance, the statement due date, and the grace period. By preparing, you are assessing the different options your credit card company might offer.

Reach out to your card issuer

Contact your credit card company. There’s nothing wrong if you are being honest with them and tell your credit card company you are struggling. You can explain to them that you want to make your payments, but you want the company to lower your interest rate. Most issuers are willing to offer you lower rates when you request after making consistent payments. If you have a good track record, they will likely grant your request.

Improve your credit score and try again

It’s time to improve your credit score and try again if your issuer doesn’t approve your request. You need to make sure your credit score looks more creditworthy to the bank if you want to lower the interest rate. If you have a low credit score, you can improve it by keeping your balances low or paying your bills on time. Pay off a sizable part of a huge debt or a smaller balance to push your credit score upwards. Aim for a FICO score of at least 670 before requesting an interest rate reduction.

Consider Alternative Options

Credit Card

It’s time to consider other means of lowering your card interest rate if your credit card issuer doesn’t lower your interest rate. These are temporary solutions while you work your way to pay down your debt.

Debt Consolidation

If negotiating your interest rate doesn’t work out, you should consider debt consolidation to reduce interest rates. You can consolidate debt in different ways, but the overall goal is to reduce your interest rate and combine your debt into one payment. However, you need to keep track of your credit report to know your stand.

Consider a balance transfer

You receive a lower interest rate on your current credit card with a balance transfer. A balance transfer involves taking the debt you’ve built up and transfer it over to another credit card. You then make payments to your new credit card, saving you some money in interest charges. Balance transfer usually offers 0% intro APR on balance transfers for a limited period, usually from 12 to 18 months. Make sure you pay all your debt before the introductory period ends. If not, your introductory rate will likely increase after the promotional period ends.

Get on a debt repayment plan

Create a plan to clear your debt faster. If you have multiple card balances, use the avalanche approach to pay off your debt by making minimum monthly payments on all cards and using any extra money to make a down payment on the card with the highest interest rate. If you’re unable to pay your card balance in full, try to pay as much as possible until they’re all paid off.

How Will A Low Interest Rate Benefit You?

Lowering your credit card interest rate can help you save big on interest charges, free up extra cash flow and repay your debt quicker.

  • Increase your monthly cash flow: A lower interest rate can increase your cash flow while still meeting your personal finance goals.
  • Fast debt repayment: A lower interest rate means fewer fees, which can boost your financial goal.
  • Negotiate your way to savings:  If you’re tired of high interest cards, you can save with a call to your issuer and careful negotiations.