Were you lured by a 0% introductory offer for a credit card? Did your interest rate jump to 25% after the first year? It’s okay, you can admit it.
Having a 0% rate when you open a credit card isn’t really as good as it sounds. After all, you don’t have any debt on a new card. But after a year, the credit card company is banking on you carrying a balance. That’s when they’ll hit you with a big increase in your interest rate.
Rather than cancel the card and potentially hurt your credit score, there is a way to break out of this debt hole. Here are 5 tips for lowering your credit card interest rates.
See If You Deserve A Lower Rate
Do you have a good credit score? If so, this can put you in a great position for bargaining with your credit card company.
If you have a credit score of 720 or higher, you can expect a rate of 10% – 14%. A score of 680 to 720 can get you between a 14%-20% interest rate. When your rate falls in the 620 to 680 range, your interest rate will be about 20-23%. With a score of less than 620, your interest rates could reach as high as 30%.
Study The Competition
Before you can work towards lowering your rate, you will need to know what the market looks like. How does your card stack up against the competition?
Often times credit cards run promotions to attract new customers. In the open market, more competition drives prices lower. If other cards are offering better rates you’re going to have a better shot at lowering your interest rate with your credit card company.
Try To Make A Deal
The easiest thing you can do is often times the most effective. Simply pick up the phone and call the credit card company to ask for a lower rate. You may need to do a little negotiating though, so it helps if you have a good credit score, pay your bills on time and have been with the company for a long time.
Don’t worry if you don’t meet all of those points though. Calling and asking never hurts no matter what your situation is. The agent on the phone will check your account and may even give you an answer on the spot.
Sometimes being nice really pays off and just being courteous to whoever you get on the phone can go a long way in getting your rate cut. If the first person you speak with on the phone won’t budge and give you a lower rate, even a temporary one, ask to speak to their supervisor and calmly explain your situation again while pleading your case.
Transfer Your Balance
While it’s not the credit boom of the early 2000’s, there are still plenty of card companies that are willing to give customers low introductory rates to get their business.
If your credit card company refuses to budge on their exorbitant interest rate, transfer your balance to another card. Find a card with a zero percent introductory offer. Then, do your best to pay off (or at least pay down) the balance during that year without paying any interest on the balance.
Be careful to read the fine print so you’re not in a situation where your rate skyrockets even higher than your current credit card after the introductory period. This is especially important if you’re not completely sure you can pay the balance off during the introductory period.
Restructure Your Debt
If all else fails, there is one last resort – restructuring your debt. If the credit card company agrees to restructure your debt they can reduce your rate as low as 0% for 1 year, lower your minimum payment and suspend any fees.
This all sounds great, but there is a catch. This may be reported to the credit bureaus which will undoubtedly hurt your credit score.